Article - July 30, 2008 - Bloomberg

Athenahealth to Supply Software to Wal-Mart Clinics

By Tim Mullaney

July 30 (Bloomberg) -- Athenahealth Inc., the Internet health-care company run by President George W. Bush's cousin, won a contract to supply medical-billing software and services to health clinics in Wal-Mart stores.

The deal between Athenahealth and Houston-based RediClinic LLC, which is opening as many as 200 clinics in Wal-Mart stores by 2010, is the second such agreement Watertown, Massachusetts- based Athenahealth has announced this year, Chief Executive Officer Jonathan Bush said in an interview.

Along with a contract to serve 510 clinics in CVS pharmacies, announced in May, the deal will help Athenahealth beat the 30 percent annual sales growth it promised before going public last year, said Bush, 39. Agreements with RediClinic, Wayne State University in Detroit and CVS aren't included in most profit estimates by analysts, Bush added.

"A chain of 500 or 600 stores is a major thing for us," Bush said. "The second quarter will be expensive for us as we lay in infrastructure. The fourth quarter will be better than we thought as we use that infrastructure" to serve new clients.

Athenahealth, which went public at $18 a share last September, has 12,723 clients who use its services to automate insurance claims. Until the recent contracts, most clients came from small practices, often with 10 or fewer providers.

Large Chains

The deals with the two retail chains ensure Athenahealth will meet Wall Street targets for new customers, Boston-based JMP Securities Inc. analyst Constantine Davides said. Before Wal-Mart's announcement, other large deals promised 3,400 new providers to Athenahealth's client list by early 2009, ahead of his forecast of 3,300 total new clients. Any sales to small practices would make it beat forecasts, he said.

"The momentum is there across all of their business segments," said Davides, who recommends Athenahealth and doesn't own the shares.

The company built and manages Web-based software that memorizes payment rules from different insurance companies and helps doctors file reimbursement claims, Bush said.

The company saves doctors money because the average claim gets paid 30 percent faster, and doctors see revenue rise 7 percent because the system catches coding errors that lead to under-billing, Athenahealth said in regulatory filings.

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