Reorganization and restructuring awaits athenahealth

Company sees $100M in cost savings to boost share value, reinvest in growing lines.

A strategic review is underway at athenahealth, which is seeking to achieve millions of dollars in cost savings while restructuring its top leadership roles.

Watertown, Mass.-based athenahealth, a provider of network-enabled clinical information systems for both hospitals and physician groups, hopes to increase profit margins.

While the moves primarily are focused on profit growth and value creation for athenahealth shareholders, the company says it expects the effort will enable it to reinvest cost savings in highest value growth areas, particularly its hospital and network services businesses.

An announcement by the company says it’s targeting $100 million in cost savings that it hopes to achieve through improved internal performance. The company’s board and management team is working with an unidentified consulting firm to review its operations, cost structure and capital allocation.

In a statement, athenahealth said the review will involve all aspects of its business, including sales and marketing, research and development, general and administrative services, service operations, as well as product portfolio and organizational structure.

The company says its review is underway, and it expects to report on the details of new strategic initiatives during the third quarter of the year; profit-enhancing moves from the review are expected to occur in 2018 and thereafter.

“The Board and management team are also working to preserve and build upon the company’s culture of innovation, while ensuring that resources and talent are appropriately aligned with growth and the significant upside opportunities,” the announcement said.

Also See: Athenahealth plans to acquire Praxify Technology for $63M

Simultaneously, the company is looking to add to its executive muscle, announcing it will add the role of president, who will be responsible for the execution of its business operations. The new position will report to Jonathan Bush, current CEO who’s been in leadership with the company since its inception.

“We have enjoyed 20 years of remarkable and rapid growth,” Bush says. “To continue executing on this mission, we are announcing changes intended to achieve greater levels of profitable growth and unlock value.”

“Given the growth of the company and our increased scale and scope, we believe there is an opportunity to target current spending to drive enhanced, sustainable value for all athenahealth shareholders,” says Brandon Hull, lead director of the company’s board.

The company also plans to recruit an independent chairman and an additional independent director.

The vendor is currently looking for a CFO to replace Karl Stubelis, who left the company last month.

Canaccord Genuity, an investment banking firm, terms the moves a “restructuring of the company’s operations with a focus on improved profitability” and says it expects that the moves could enable athenahealth to “deliver long-term returns for shareholders.”

“It appears that the company will continue to make investments in the hospital and network services initiatives; we are eager to hear how the investments in these newer growth initiatives will differ from the previous strategic growth plan,” a report from Canaccord Genuity notes. “We believe a review of athenahealth's operational structure is positive and warranted given the company is currently evolving from a younger high-growth company to a more mature growth company.”

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