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Will AthenaHealth sale alter customer service, consultant wonders

AthenaHealth announces it is set to be purchased for $5.7 billion by two private equity firms. One consultant plans to watch the new company's customer service levels.

After years of discussion, the AthenaHealth sale is pending, and it's hard to imagine changes aren't coming for the cloud EHR seller's customers.

The vendor is set to be purchased for $5.7 billion by Veritas Capital and Evergreen Coast Capital, two private equity firms, according to an AthenaHealth news release posted on Monday. The move will take AthenaHealth off the stock market. Following the AthenaHealth sale, Veritas and Evergreen plan to combine AthenaHealth with Virence Health, a value-based care group Veritas acquired from GE Healthcare earlier this year.

If and how the firms go about improving operational efficiency will be something for customers to watch, said Lonnie Hirsch, CEO at Hirsch Healthcare Consulting. Improving such efficiency almost always means cutting costs, Hirsch said, which could impact current customers' expectations with AthenaHealth.

Lonnie Hirsch, healthcare consultant, Hirsch Healthcare ConsultingLonnie Hirsch

"While that's understandable if you're going to take a company private, there has to be an end game to either improve the margins and then take it public again or sell it to a strategic partner at some point down the road," Hirsch said.

Evergreen Coast Capital is a subsidiary of Elliott Management Corporation, a large investor in AthenaHealth that attempted to buy the company earlier this year. Evergreen will retain a minority investment stake in the new company.

Watch human customer service aspects, consultant says

Hirsch said AthenaHealth carved out a niche based on combining technology with a significant amount of human customer service, something he said could be put on the chopping block to improve operational efficiency.

"If that happens, I would be interested to see how it affects AthenaHealth customers who have come to rely on and appreciate this service support aspect of what AthenaHealth has traditionally done," Hirsch said. "If that starts to create any kind of issues with customer satisfaction, then not only could it potentially threaten the customer base, but it can actually change the value proposition of what makes AthenaHealth different from its competitors."

Combined, AthenaHealth and Virence are expected to operate under the AthenaHealth brand in Watertown, Mass., as a privately held health IT company. The company will be led by Bob Segert, Virence chairman and CEO. Hirsch said he will watch to see if Segert continues the same mindset about the company's value proposition after the AthenaHealth sale or if Virence is simply borrowing the AthenaHealth brand name and substantially changing the product delivery.

AthenaHealth's 2017 annual revenues were $1.2 billion.

"My curiosity is are they just going to try to make it a software business and even try to put the service aspect of it away from the human capital cost and somehow automate that as well, and if it does, how successful will they be at that," Hirsch said.

Virence declined to comment on the pending partnership with AthenaHealth, but Segert said in the news release that the AthenaHealth sale will allow the new company to become stronger in the health IT market.

Veritas and Evergreen's purchase of AthenaHealth is expected to close in the first quarter of 2019, pending approval of the holders of a majority of AthenaHealth's shares, the release said. The AthenaHealth board of directors unanimously approved the merger agreement.

AthenaHealth was co-founded in 1997 by Jonathan Bush, who served as its CEO until he resigned in 2018. The company's 2017 annual revenues were $1.2 billion.

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