A CFO Does Her Part to Reinvent Health Care

Kristi Matus of Athenahealth is on a mission to help medical practices and hospitals recast the way care is delivered.
David McCannMay 20, 2015

One thing there’s no shortage of these days is efforts to reinvent the U.S. health-care sector. The search for a better way is teeming with innovation, from the Affordable Care Act to the rise of accountable care organizations to a host of potentially revolutionary ideas from individual companies.

Among the latter, arguably none is more ambitious than Athenahealth, an 18-year-old company whose sights are set on no less of a goal than becoming the Amazon or Google of the health-care industry. That’s the vision of co-founder and CEO Jonathan Bush, an offbeat nephew of one U.S. president and first cousin of another.

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Kristi Matus, CFO, Athenahealth

Kristi Matus, CFO, Athenahealth

Outsiders don’t necessarily share that vision. Kristi Matus, the CFO of Athenahealth for the past 10 months, interviewed for the job just two days after hedge fund leader and notorious short seller David Einhorn publicly scoffed at the company’s valuation. At the time, when its stock was trading around $125, Einhorn was saying he expected it to fall to at least $50 and perhaps as low as $14.

Matus, buying Bush’s vision, wasn’t deterred. “I watched all the media interviews after that and how Jonathan responded, and I still decided to join the company,” she says. So far so good: A year after Einhorn’s initial attack, the stock was still at $120 Wednesday morning, though Einhorn was reportedly still short.

The current mission of Athenahealth is to improve and wring waste out of health care. It’s attacking the problem through cloud-based software and other services that help medical practices and hospitals collect payments from patients, manage their electronic health records, and automate their interactions with facilities like laboratories and radiology centers.

The idea is that taking on those burdens makes the company’s clients more efficient and more fully focused on care. It’s an idea that may appeal to the many medical practices and hospitals that are straining to serve patients’ needs during a time when the ACA has resulted in millions more Americans having health insurance. Athenahealth is expecting revenue to hit $900 million this year, Matus says, which would be up from $753 million in 2014 and $422 million in 2012.

Athenahealth is the leader in cloud-based back-office software for the medical market, but it’s still only a bit player compared to titans Epic Systems and Cerner, which provide software that’s hosted at medical practices and hospitals. Athena’s business model differs as well from cloud-software firms generally in that it charges nothing for the software, instead taking a portion of savings and incremental collections that it generates.

Matus, formerly CFO of insurer USAA, came to Athenahealth from Aetna, where as executive vice president of government services she ran the insurer’s Medicare, Medicaid, Public & Labor, and Federal Employee Health Plan businesses. CFO recently spoke with her about Athenahealth, her role, and the health-care industry. An edited version of the conversation follows.

So, your boss sounds like a character.

Indeed he is. Everyone asks me what it’s like to work for Jonathan Bush. He’s very charismatic and a little bit crazy in terms of things he does. I think there’s some hyperbole about him in the press, but it sells, it’s interesting, and it brings attention to the company.

But everything I’ve seen him do is for a purpose, and it’s all about the company. He’s a really good businessman. He founded Athena out of business school in 1997, and it’s hard to find many CEOs who have been able to last that long with sustained growth. He’s also a really good listener. When we disagree on things, he’s never shut me down without listening. I don’t always get what I want, but we can find a good middle ground.

What attracted you to Athenahealth?

I made the journey from financial services to health care when I went to Aetna in 2012. I felt like health care was at an inflection point and that there was a lot that could be done to improve care and drive efficiency. What really drove me to Athena was the energy and the mission drive. I’m not playing late-night flip cup [as Bush has done with other executives and investors], that’s not my style, but there’s a real belief that we can improve outcomes in health care. It’s important to my life to work for a company that wants to do well while doing good.

Also, I’ve spent about half of my career doing financial work and half running operations, and at Athena in addition to being CFO I’m the chief administrative officer. I’ve got legal, facilities, HR, and operations. That’s a nice combination for me.

What were your biggest initial challenges?

The first challenge when you go into any company is learning about the people. Besides that, we needed to make changes in our employee health-care plan so that as a group of employees we’d be walking the talk. So we put in more high deductibles and tools to help people shop for affordable care with the right providers.

And then there’s our journey of growth. Over time Athena has grown an average of 30% year over year, although it’s getting a little different as we go into big hospital systems. It’s the law of large numbers. If you add the largest hospital system in the country one year, it’s hard to accelerate 30% growth the next year.

Tell us about your unusual revenue model.

We get paid if we provide results. If our practices get better, we make money. We help them be more efficient, collect more money, and drive patient volume.

How do you drive patient volume?

In two ways: by wicking away non-clinical work so doctors can see more patients, and by running outreach programs to bring in patients who qualify for or are in need of care, such as flu-vaccine outreach, Medicare wellness visits, colonoscopy reminders, etc.

The average physician in the United States still receives 1,000 faxes per month. Can you imagine that? It’s crazy — email and text aren’t HIPAA-compliant channels, but fax is. So we’ll take over a doctor’s fax machine, make sure the faxes get into patients’ records in the right places. And we can look across all of our 64,000 providers and determine [where lots of faxes are coming from] and build interfaces to those locations so we can do straight-through processing. We’ve built 170,000-plus interfaces. Think of them as communication channels across the care continuum that are fully secure and HIPPA compliant and help us to streamline the flow of information.

Our total automation rate is still only about 51%. That’s the amount of automated work relative to manual work.

As the CFO and head of admin, what’s your role in helping the company achieve the efficiencies that you profit from?

Each individual product has to show improved margin every year. I’ll take about half of that money and reinvest it back in our workflows. Perhaps we’ll buy more up-to-date data-scanning or mail-processing equipment, or new computers, or hire more or different staff. We are precision experts at the things we do and naturally do them better than our clients can. Our revenue model depends on us being as efficient as we can.

And then I’ll put about half of the rest of the gain into product R&D so we can continue to automate and improve health care, and a little bit into marketing and sales.

What were your impressions of David Einhorn?

I got a call last May on a Thursday about this job, Einhorn happened the next Monday, and I interviewed on Wednesday. Since I’ve been hired I haven’t been part of any conversation with him, but it was interesting to see how Jonathan handled that. I’ve worked for CEOs who would have been — well, you can imagine the words that would have been flowing. But this conversation didn’t go like that. Jonathan’s approach was, “We obviously don’t agree, but I want to understand your perspective.”

Einhorn actually likes Athenahealth, he just thinks we’re overvalued. But the nugget that we got out of listening instead of being belligerent is that he fundamentally doesn’t understand what the company is. He looks at it and values it like it’s a [business process outsourcing] company, but it’s not. It’s more like Amazon’s model — software, service, and knowledge, and you get paid for providing results, not just for providing an activity.

Well, that’s a new model. He probably doesn’t think it’s mature enough to warrant the valuation.

It’s a fair point. He is welcome to have his opinions, but we don’t give him much credence. When you have an activist investor, you have to ask yourself a couple for questions. First, how widely are his statements able to impact the company in a negative way? And we kind of said, no. And then, how much do you want to combat that? When you get to be a company of a certain size, and we’re almost $1 billion, people say things about you all the time. It doesn’t mean they’re true. Our board didn’t get all up in arms about it, and there wasn’t any big media campaign to combat him.

Our model is incredibly sticky. You can release your back-office staff, we’re going to improve your collections and your days in accounts receivable, and your cash flow will improve. Independent doctor practices need to have very predictable cash flow. Why would you ever leave us?

Well, you do have competitors.

They sell hosted software. You buy the software and the licenses, you stand it up in your data center, you run it, and once it’s all set they wave good-bye. They got all their money up front. We stay with the practice and continually figure out ways to help it be more effective.

And we’re always current. For example, when the CDC released new rules about ebola, everyone on our network had them within an hour. If you’re on a hosted system, you’ve got to go back to your data center, find coders, get them scheduled, give them the specifications, have them go in and rewrite the code wherever it exists in the system, and maybe in two weeks to a month they’ve got it done, with some opportunity cost.

The mid-range challenge for us is that health care moves extraordinarily slowly compared with other industries. Doctors still use clipboards. We may be a little ahead of our time in trying to move them to the cloud. We have a 7% market share in revenue-cycle management and 4% in electronic health records, where our largest competitor has maybe a 50% share. So our challenge is to keep the growth engine going and make sure people understand the power of the cloud. I think there will come a tipping point, I don’t know when, maybe five years, like when people went from Blackberries to iPhones and never looked back.

Jonathan likes to say, “You know this Internet thing in health care? I think it’s going to be big.” It’s hysterical, because in every other industry that was so 20 years ago.

What’s your view of the Affordable Care Act?

I think it’s very tall. If you printed out the pages, it might be taller than me.

I don’t think anyone really knows what the intended and unintended consequences of the ACA will be for some time. There are a number of good things in there regarding outcome-centered care, but it’s really hard to legislate outcomes.

Do you think the entire ACA will be toast if the Supreme Court rules in favor of the plaintiffs in King v. Burwell?

I don’t think so. It’s not just one pony. There’s 50 ponies, and 27 of them are already out of the barn. Insuring children on your policy until they’re 26 isn’t going away. It would be incredibly difficult to roll back Medicare expansion in states that have done it. Let’s wait and see. A lot of things are changing in health care.

The health-care system more than anything needs stability right now. I don’t think we need any more regulation, or regulation to change or roll things back. We need a time of stability during which we can figure out where we’re going to cut costs and take better care of patients. There’s something new to deal with almost every month, and no industry can operate in that type of an environment indefinitely.