Yesterday, we announced our entry into a definitive agreement to acquire Healthcare Data Services (HDS), a cloud-based provider of clinical tools for accountable care organizations (ACO). We’ve known the folks at HDS for some time, and we’ll be thrilled to have them on the team. This purchase would represent a critical advancement in our pursuit of being best in the world at getting medical care givers paid for doing the right thing.

If you haven’t been in complete denial, you know that health care payment models are changing. Provider organizations are increasingly adopting risk-based contracts as a means to drive top-line revenue through better care, better coordination and sensible reductions in utilization. (“Sensible,” by the way, means “don’t reduce patients’ utilization of your services until you’ve reduced utilization of your competitors’ services first.”)

While we have yet to see an actual decrease in fee-for-service collections, it is clear that a significant proportion of future provider revenue will be tied to value. According to estimates by the management consultants at Oliver Wyman, up 80% of hospital-employed physicians will be in some type of value-based contract by 2020, up from only 20% today. While one can argue with their numbers, it is clear that health care provider organizations all over the country risk declining income (if not financial death) unless they can capture revenue under new payment models, including population-based quality incentives, bundled payments, shared savings, and commercial risk-based contracts. HDS would immediately provide us with outstanding capabilities in all of these areas, allowing health care organizations to align clinical performance with financial goals and succeed under any payment scenario.

HDS gathers data from claims (hospital, laboratory, radiology, medication), health plan administrative data (authorization and referrals, daily inpatient census, member rolls), and clinical data (EHR, laboratory, radiology); combines it into a single data asset; and delivers administrators, physicians, and care managers the data they need to coordinate care, reduce utilization, and address gaps in care across their patient population. Sound familiar? While it might seem simple, not everyone has proven they can do it well. What caught our eye was that HDS evolved their data model over years of working closely with some of the most sophisticated managed care teams in the U.S. and they got it right. Here’s a true story: When they sold to me at my old health system, they had no sales pitch—not even a PowerPoint deck. They just asked for two months’ worth of claims data and demonstrated a functional system about ten days later.

Based in Boston, HDS was founded in 2004 by Jonathan Porter and Bridget Buckley, who together bring years of managed care experience and a tremendous record of client service and performance.

While we’re just getting started, we’ve got some grand plans for them. The capabilities of HDS would immediately allow us to provide our clients with a complete picture of cost and quality, and support their clinical transformation to new delivery models. In combination with our Anodyne services, HDS would create a single business intelligence (BI) solution for medical group success under any payment model. The mashup of HDS data into the workflow of our other services—for electronic health records, care coordination and patient communication—would provide unsurpassed transparency at the point of care, further enhancing our ability to drive success for our clients.

Ultimately, embedding HDS’s models and competencies fully into athenaNet® would allow us to present clients with a novel set of services to support the long overdue shift from maximizing the number of episodes of care (and keeping inpatient beds filled) to profiting through optimal care delivery.

Forward-Looking Statements

This post contains forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding the anticipated benefits of the integration of the HDS service offerings with those of athenahealth, the nature of prospective markets for those offerings, and the anticipated completion of the acquisition of HDS. These statements are neither promises nor guarantees, and are subject to a variety of risks and uncertainties, many of which are beyond athenahealth’s control, which could cause actual results to differ materially from those contemplated in these forward-looking statements. In particular, the risks and uncertainties include, among other things: difficulties in integrating HDS’s services with athenahealth’s; inability to capitalize on cross-sell opportunities between the HDS and athenahealth customer bases; errors or omissions included in athenahealth’s payer and clinical intelligence rules engine and database; the risk that athenahealth’s service offerings will not operate in the manner that it expects due to design flaws, security breaches, or otherwise; potential interruptions or delays in athenahealth’s internet-based service offerings; athenahealth’s reliance upon third parties, such as computer hardware, software, data-hosting, and internet infrastructure providers, which reliance may result in failures or disruptions in its service offerings; and the evolving and complex government regulatory compliance environment in which athenahealth and its clients operate. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. athenahealth undertakes no obligation to update or revise the information contained in this post, whether as a result of new information, future events or circumstances, or otherwise. For additional disclosure regarding these and other risks faced by athenahealth, please see the disclosure contained in its public filings with the Securities and Exchange Commission, available on the Investors section of athenahealth’s website at http://www.athenahealth.com and on the SEC’s website at http://www.sec.gov.