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Tickers in this Article: CERN, MSFT, ATHN, MDRX, QSII
Leading vendor of cloud-based services for physician practices and inpatient facilities Athenahealth (ATHN) recently revealed that it will engage with MedChi, The Maryland State Medical Society. The purpose of working together will be to make it easier for physicians in Maryland to derive advantage from cloud-based facilities.

MedChi will invite its members to avail of a simplified route and implement Athenahealth's set of cloud based services at a discount. These offerings include athenaCollector, athenaClinical and athenaCommunicator. In addition, participating doctors stand to gain from the experience of the company's network of 35,000 physicians.    

The Maryland State Medical Society (MedChi) is the biggest non-profit association for physicians in Maryland. It represents a resource for physicians in the state.  

Athenahealth's web-based deployment provides a low-cost scalable service while its flexible rules engine leads to higher efficiency in claims settlement. The Software-as-a-Service (SaaS)-based approach allows for a more flexible delivery mechanism that is expected to help Athenahealth win deals. The company has traditionally enjoyed high customer satisfaction rates, which facilitates a larger number of referrals.

Athenahealth's unique business model makes it a strong provider of RCM services (athenaCollector) designed for small physician practices. Its EHR product (athenaClinical) is a key player in ambulatory settings.

We believe that sales of athenaClinical are likely to remain robust. In addition, the company will harness its newer products, namely athenaCommunicator and athenaCoordinator.

The company should benefit from its extensive athenaCollector client base, as only a minority of its subscriber base also utilizes athenaClinical. Cross selling represents a real growth opportunity in the near term. In this regard, Athenahealth has made rapid strides in capturing the EHR business of physician practices. However, this segment is shrinking, as hospitals increasingly absorb physician's medical practices.

Athenahealth is geared to enter the enterprise segment through its strategic alliance with Microsoft (MSFT) and the acquisition of Proxsys, both completed in 2011. The company has recently signed on, and executed several enterprise-sized deals, which provide it with a credible and referenceable client base.

Though the federal stimulus will gradually wind down, the replacement market has been growing. Competition is fierce and larger competitors may benefit from the incumbency factor. Industry stalwarts such as Cerner (CERN) offer long-standing seamless products integrating inpatient and ambulatory-care systems. Quality Systems (QSII) and Allscripts Healthcare Solutions (MDRX) are two other well-known competitors in a crowded field.

We have a long-term Neutral recommendation on Athenahealth.

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