15 February 2017
Initial Takeaways from PHM Vendor 2016 Financial Results
Written by Alex Green
Many of the larger EHR vendors that are active in population health management have recently released their Q4 2016 and full year results, with more to follow shortly. Signify Research examines what we can take away so far.
- Q4 2016: Revenue up 7% on Q4 2015
- Full year 2016: Revenue grew 8% compared to 2015 to $4.8 billion
- Population Health: Revenue grew 13% in 2016 compared to 2015
The top level: For a relatively mature company, 8% growth for the year would seem healthy. However, it is much less than the 30% revenue growth seen in 2015 and it was also down on the double-digit guidance the that company gave at the start of the financial year.
Much of this short fall was a result of a decline in Cerner’s Systems Sales, which fell from $1.28 billion in 2015 to $1.27 billion in 2016, with licensed software and technology resale taking the brunt of the decline. However, this was partially offset by a 30% increase in SaaS software sales.
PHM driving SaaS Growth: The biggest driver of the increase in Cerner’s SaaS business was population health management (PHM). Overall the PHM business of Cerner was up 13% on the 2015 figure of $214 million. Some good news but it also isn’t without caution.
The PHM business grew at a significantly faster rate for Cerner in 2015 (21%) and as a share of the overall business, PHM remains at 5%, unchanged for the last three years and in fact slightly down on the 2014 figure.
Time to deliver on long term PHM strategy: In its investor communiques during 2016, Cerner continued to push the message that it saw PHM as a significant growth driver for its overall business in the medium term, targeting PHM driving approximately 20% of revenues in 2025. If this is to remain realistic it needs to see an upturn in its PHM business growth soon.
The company does believe that the market is approaching an inflection point for population health, as the transition from fee-for-service to at-risk models accelerates, a view that Signify Research agrees strongly with. One ingredient that has been lacking in the Cerner PHM strategy so far has been a strong advisory portfolio to address client implementation and process reengineering demands that accompany a PHM rollout. Some of its competitors, particularly those not from an EHR background such as Health Catalyst, have done a better initial job of this. Therefore, the company’s recent commitment to expand this area of its solution should certainly assist with growth towards the longer-term target for PHM.
- Q4 2016: Revenue up 12% on Q4 2015
- Full year 2016: Revenue grew 17% compared to 2015 to $1.08 billion
- Population Health: 2.2 million lives covered with population health solution
- Patient Engagement: 57,861 providers using patient engagement solution
Core business: Athena Health achieved overall revenues of $1.08 billion in 2016, up from $925 million in 2015. This represents 17% growth, down a little on the previous year and at the bottom end of the guidance given out at the start of 2016.
Most of the company’s revenues are from its core ambulatory EHR & revenue cycle management businesses, both of which grew strongly in terms of provider customers. In 2016 its athenaCollector revenue cycle management user base grew 16% to 87,691 providers and its althenaClinicals EHR user base grew 26% to 41,340 providers. However, for both products, the growth rate was lower than 2015, re-enforcing the fact that for Athena to continue to see growth at rates similar to previous years, it needs to move beyond its traditional customer base.
Addressing PHM though patient engagement: Athena Health is very aware of this need to expand beyond its traditional ambulatory markets and products and it sees PHM as an opportunity to aid executing on this strategy. However, to date what it labels as its PHM business is relatively small, representing less than 1% of the company revenues.
However, when you include Athena’s patient engagement product line, athenaCommunicator, as part of the PHM market, then its already a significant player, with 64,763 providers using its patient engagement solution at the end of 2016, up 23% on the previous year.
The right direction: On the surface the Athena strategy towards PHM does seem somewhat disjointed. Patient engagement and care coordination are typically viewed as components of PHM. However, the Athena product offering keeps them separate and to some extent restricts their use by limiting implementation of certain PHM solutions, such as athenaCoordinator, to customers that also use athenaCollect or athenaClinicals. However, it’s overall strategy of expanding its offering beyond its core ambulatory claims and EHR customer base is the right one for the company.
Others Yet to Report
These two companies represent an important but relatively small share of the overall population health management market. Many other key players in the PHM market are still to announce their full year results.
For example, Allscripts is due to announce its results on 16th February. As with Cerner and Athena Health, results for Allscripts for the first three quarters of the year were mixed. It had seen growth in its PHM business of 4.4% but in a similar vein to Cerner, the share that PHM was taking of the overall business had remained relatively stagnant. Tomorrow will enable us to see whether the final quarter of the year has changed this.
Conifer Health Solutions is also due to announce its results (via its owner Tenet Health) later this month. Conifer had grown its business 13.6% during the first three quarters of the year. PHM still plays second fiddle to Conifer Health’s revenue cycle management business, in particular its captive business with Tenet. However, PHM is central to its growth strategy and the final quarter’s results should give some insight on how successful it’s been executing on this.
Analysis of All PHM Players 2016 performance in New Market Report from Signify Research Publishing Soon
A full analysis of all leading PHM players will be provided in Signify Research’s upcoming market reports ‘Population Health Management – North America Market Report 2017’, publishing in March 2017.
This will include analysis of the PHM businesses of Cerner, Allscripts, Medecision, GetWellNetwork, eClinicalWorks, AxisPointHealth, HealthCatalyst, Emmi Solutions, Meditech, AthenaHealth, Welltok, Verscend, Transcend Insights, Philips, Orion Health, Optum, NextGen Healthcare, YourCareUniverse, MedHost, McKesson, Lightbeam, InfluenceHealth, IBM, I2I Population Heath, HealthDialog, GetRealHealth, GE Health, Forward Health, Evolent, Epic, Enli, Conifer Health, Caradigm, Aetna and The Advisory Group.
For further details please click here or contact Alex.Green@signifyresearch.net.