Athenahealth to cut 9% of workforce in reaction to changing market
- Athenahealth announced in its third quarter results Thursday and said it it would reduce its workforce by 9%.
- The company will close offices in San Francisco and Princeton, New Jersey. The layoffs involve more than 400 people, and security officers were escorting people out of the Watertown, Massachusetts, headquarters Thursday morning, the Boston Business Journal reported.
- Athenahealth disclosed a 10% revenue growth for the quarter over the previous year. In a separate announcement, the company touted its community hospital market achievements, stating hospital clients live on athenaNet for a full year are achieving on average cash collections of 5% over baseline.
The news cycle following the earnings disclosure will most likely focus on the workforce reduction and the continued organizational restructuring following Elliot Management's disclosure that it owns a 9.2% stake in the company.
That news in May garnered a lot of attention. Shortly after the Elliott disclosure, athenahealth acquired Praxify Technologies for $63 million and later augmented its senior management structure. In August, the company stated it was looking at over $100 million in cost-saving opportunities.
“Today, athenahealth benefits from a solid operating foundation. We are the most universally connected healthcare network in the country. The value we offer to our clients is as strong as ever,” CEO Jonathan Bush said in a prepared statement. “At the same time, the market in which we operate is changing. The actions we are announcing today follow a comprehensive review of our operations and cost structure, and are designed to ensure that we are best positioned to drive continued success and profitable growth in this new environment. We are changing the way we work to become a more nimble and efficient organization while directing investments to our greatest return opportunities.”
Athenahealth's stock since the Elliott disclosure had been increasing off and on. It peaked in July and has since been declining, closing at $116.41 on Thursday (above the price of $98.01 per stock posted on April 28).
Total revenue for the three months ended Sept. 30 was $304.6 million, compared to $276.7 million in the same period last year, an increase of 10%.
Athena's reaction to change is not a surprise. CEO Jonathan Bush in February outlined to Healthcare Dive how he wanted the company to shift to a more networked approach in the face of a changing health IT landscape. And he's not the only one. Other "new legacy" health IT vendors like Epic have recently been vocal about switching operations as well; Epic CEO Judy Faulkner recently mentioned she wanted EHRs to become CHRs. These actions aren't in a vacuum. The old disrupters of health IT are sensing a shifting tide and are look to change their businesses and products as needed to stay competitive.
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