The stock price of revenue cycle management vendor athenahealth Inc. dropped 14% in early, heavy trading on Feb. 26 after the company announced it would postpone releasing its fourth quarter and 2009 financial reports. At least two investment firms downgraded the stock.

Athenahealth is delaying the financial reports because of an internal review of how it accounts for deferred implementation revenue. Most of the company's business comes from its outsourced billing services, which is bundled with vendor-hosted practice management and electronic health records software. The implementation revenue at issue accounted for less than 6 percent of revenue during the first nine months of 2009.

Asked what triggered the internal review, a company spokesperson noted athenahealth in January appointed a new chief financial officer. Timothy Adams succeeded the retiring Carl Byers, who served since athenahealth's founding in 1997. Asked if Adams determined a review was necessary, the spokesperson said "of course" the CFO played a role in the determination, but declined to detail the reasons.

The company records implementation fees as deferred revenue until the implementation service is complete and ongoing services commence, according to a company statement. At that time, the fees are amortized, or recognized ratably, on a monthly basis over the expected performance period. Clients usually purchase one-year contracts that renew automatically. The company has been determining the expected performance period to be equal to the initial contract period. Now, the company is reviewing whether the period of amortization for deferred implementation revenue should be extended.

If an accounting change is necessary and the financial effect is material to previously reported financial performance, athenahealth will restate prior financial statements for an undetermined period. Any such restatement, according to the company, would not affect its cash flow, but would change previously reported revenue and net income or loss.

--Joseph Goedert

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