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Takeaway: We are removing athenahealth (ATHN) from our Best Idea List, but staying long in the Position Monitor.

ATHN | REMOVING FROM BEST IDEA LIST - 20160520 PositionMonitor

removing from best idea list; less conviction 

We are removing athenahealth (ATHN) from our Best Idea List, but staying long in the Position Monitor.  The recent CFO and other high-level employee departures, combined with negative anecdotes related to the Streamlined rollout and what looks like an early slowdown in our tracker reduces our conviction over the intermediate term.  Over the long-term, we continue to believe athenahealth is well positioned to take share in ambulatory and the recently entered inpatient market.  What will get us out of the position completely, and possibly pivot short, is if the athena-Tracker continues to slow over an extended period.  

The other high-level employee departures include Senior Financial Officer, Parth Mehrotra, who left in March 2016 for a COO position at Brighton Health Group and Director of Enterprise Sales, Ian Ha, who left in December 2015 for a similar role at Flatiron Health.  We suspect that the Florida Cancer chargeback was related to Ian Ha's departure, as Florida Cancer currently uses Flatiron for their Oncology EMR solution.

streamlined concerns; NPS worse before it gets better

We are becoming increasingly concerned about the disruption that the Streamlined rollout is having on users. We have observed a growing outcry of dissatisfaction both from our outreach using the tracker data, and through various social media and software review websites.  We also witnessed several users discussing their dissatisfaction with Streamlined at the New England HIMSS conference earlier this month.  The reviews are fairly consistent, complaining about "too-many clicks", poor workflow design and lack of responsiveness from account managers, with some even comparing the new EMR to Allscripts.  While we understand that docs don't like change, we would be remiss to ignore the negative and potentially lasting impact this type of disruption can have in such a highly referential industry. As a result, we expect the Net Promoter Score (NPS) to get worse before it gets better and continue to be a headwind to small and group bookings as the Streamlined rollout continues through year-end. 

ATHN | REMOVING FROM BEST IDEA LIST - 20160520 Streamlined Reviews 

cfo departure is for the best; repairing damage to culture

While it is never a good sign to see a CFO leave, in this situation, we believe it is for the right reasons and a net positive for the company. As we had expected, the departure was the result of Jonathan Bush needing to step back in as the direct report to oversee and manage the culture, which had been changing for the worse under Kristi Matus's leadership and the dual CFAO role.  The management change is in response to employee comments, such as those on glassdoor.com, as well as a struggle to balance rapid growth and maintain the important employee culture.  This is an issue they have been dealing with for some time and a decision that was not made in haste, but came to in a mutual realization recently (Jonathan Bush/Board and Kristi Matus) that they needed to separate roles and Jonathan Bush, CEO, needed to step back in.  As there was not another suitable EVP level position available, Kristi Matus decided it was best to leave for other opportunities.  

Karl Stubelis, CFO and previously Controller for 3-years, reiterated 2016 guidance, and both he and Jonathan Bush emphasized that Kristi Matus's departure was not due to financial or accounting misconduct. 

ATHN | REMOVING FROM BEST IDEA LIST - 20160520 Glassdor

Please call or e-mail with any questions.

Thomas Tobin
Managing Director 

@HedgeyeHC

Andrew Freedman

Analyst

@HedgeyeHIT