athenahealth (ATHN) Jonathan S. Bush on Q4 2015 Results - Earnings Call Transcript

| About: athenahealth, Inc. (ATHN)

athenahealth, Inc. (NASDAQ:ATHN)

Q4 2015 Earnings Call

February 05, 2016 8:00 am ET

Executives

Dana Quattrochi - Executive Director-Investor Relations

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

Jonathan S. Bush - Chairman, President & Chief Executive Officer

Analysts

Matthew D. Gillmor - Robert W. Baird & Co., Inc. (Broker)

Richard Close - Canaccord Genuity Group, Inc.

David M. Larsen - Leerink Partners LLC

Sean W. Wieland - Piper Jaffray & Co (Broker)

Garen Sarafian - Citigroup Global Markets, Inc. (Broker)

Gene Mannheimer - Topeka Capital Markets

Charles Rhyee - Cowen & Co. LLC

Ricky Goldwasser - Morgan Stanley & Co. LLC

Greg Bolan - Avondale Partners LLC

Jeff R. Garro - William Blair & Co. LLC

Robert P. Jones - Goldman Sachs & Co.

Mohan Naidu - Oppenheimer & Co., Inc. (Broker)

George R. Hill - Deutsche Bank Securities, Inc.

Michael Cherny - Evercore ISI

Eric Percher - Barclays Capital, Inc.

Nicholas M. Jansen - Raymond James & Associates, Inc.

Sandy Y. Draper - SunTrust Robinson Humphrey, Inc.

Mike A. Newshel - JPMorgan Securities LLC

Jamie J. Stockton - Wells Fargo Securities LLC

Operator

Welcome to the athena Fourth Quarter Full Year 2015 Earnings Conference Call. As a reminder, today's call is being recorded.

At this time, I'd like to turn the call over to Dana Quattrochi, Executive Director-Investor Relations for athenahealth. Please go ahead, Ms. Quattrochi.

Dana Quattrochi - Executive Director-Investor Relations

Good morning and thank you for joining us. With me on the call today is Jonathan Bush, our Chairman and CEO; and Kristi Matus, our Chief Financial and Administrative Officer. On today's call, Kristi Matus will share brief highlights from the prepared remarks we published yesterday, and then Jonathan Bush and Kristi Matus will take questions.

We would like to remind everyone that certain statements contained in this conference call may be considered forward-looking and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements reflecting our expectations for future financial and operational performance, including fiscal year 2016 guidance and additional insight thereto, growth rates and key metrics; our focus in 2016 on driving internal efficiencies, finding more standardization and on-boarding clients more quickly for selling and marketing efforts, market opportunity and differentiated business model and service offering benefits; our expected growth and sustainability of future growth, addressable market and our market positioning; our ability to drive innovation in healthcare, investments in disruptive innovation and emerging services and the expected long-term value-creation from our investments; our bookings goals, developments and plans for inpatient service offerings and positions to serve the hospital and health system market, including the expansion of services to support the Acute Care market by leveraging our More Disruption Please program; developments in our enterprise business and the sales pipeline; and the creation of the healthcare Internet and connected care.

Forward-looking statements may be identified with words such as we expect, we anticipate, upcoming or similar indications of future expectations. These statements are not promises or guarantees and are subject to various risks and uncertainties that could cause our actual results to differ materially from those expressed in such forward-looking statements, including the risks and uncertainties under the heading Risk Factors in our most recent Annual Report on Form 10-K and other periodic reports filed with the SEC, which are available on our website at investors.athenahealth.com and on the SEC's website at www.sec.gov. These statements speak only as of the date hereof, and except as required by law, we undertake no obligation to update or revise the information contained in this call.

Finally, please note that on today's call, we will refer to certain non-GAAP financial measures in which we exclude certain non-cash or non-recurring item such as stock-based compensation from our GAAP financial results. We believe that in order to properly understand our short-term and long-term financial trends, investors may wish to consider the impact of these items as a supplement to financial performance measures determined in accordance with GAAP.

Please refer to yesterday's press release announcing our fourth quarter and full year 2015 results available on our website for a reconciliation of these non-GAAP performance measures to our GAAP financial results.

With that, I'll now turn the call over to Kristi Matus.

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

Thank you, Dana. Good morning, everyone, and welcome to our fourth quarter and fiscal year 2015 earnings call. We set an objective early last year that we wanted to move faster as a company while maintaining the agility and discipline that is required of a growth company. During the year, we accomplished several key goals that led us in that direction.

We delivered over 30% bookings growth across our athenahealth-branded services. We onboarded some of our largest clients ever and we did it fast. After acquiring two strategic assets in RazorInsights and webOMR, we pushed our Acute Care offering from concept to market in less than one year.

As we shared at our Annual Investors Summit, we are all about the network. Today, it is the most connected cloud-based network in healthcare with over 75,000 providers, 38 million patients, and connections to over 98,000 information trading partners. We will keep leveraging this network to drive growth, broaden and deepen our services across the continuum of care, and build deeper and more strategic connections in the industry.

So let's talk growth. We are an aggressive growth company. We shoot for 30% bookings growth every year, and for 2015, we were shooting for over 40%. While we did not hit the stretch growth goal, we did hit our longstanding base objective of 30%. Our group and small group segments set bookings records. Our enterprise team brought in notable athenaOne wins like Trinity Health, NewYork-Presbyterian and Adventist Health.

We delivered strong performance in the Acute Care market and nearly doubled our base of contracted clients. In addition, our population health team delivered standout performance, signing seven new clients, including Dignity Health, and delivered over 200% bookings growth year-over-year. Our population health services now manage data for nearly 2 million at-risk lives.

Recall from the third quarter earnings call that athenahealth clients represent approximately 2% of accountable care organizations, but earned approximately 10% of the 2014 shared savings across the MSSP and Pioneer ACOs in the country. This results-based performance and the repackaging of our population health services have helped us better target the right prospects and differentiate our offering from traditional software vendors.

We are committed to being able to bring clients live as quickly and efficiently as possible. We brought a record 13,067 providers live in 2015, bringing our total provider count to over 75,000. Go lives at additional extension health locations and implementation kickoffs at both Trinity Health and NewYork-Presbyterian were big contributors to the record provider adds. We believe that we deliver a fast, simple and productive on-boarding experience for all of our clients.

Just five months after signing, we brought the first wave live at NewYork-Presbyterian Medical Groups in the fourth quarter, but we want to go even faster. In 2016, we are focused on delivering a more instant-on experience for clients joining our network, driving internal efficiencies and finding opportunities for standardization.

We continue to drive innovation in healthcare. From day one, we have been building the healthcare Internet. Starting in the ambulatory space, we keep taking every opportunity to extend cloud-based services across the continuum of care.

Just like last year, when we bought two strategic assets and moved into the Acute Care market, we were able to enter quickly, thanks to the growth and scale of our network, our facility-related payer rules, quality programs, best practices, content and knowledge.

In fact, by leveraging our ambulatory expertise and the assets from our acquisitions, we were able to push further on two fronts. We extended athenaClinicals to earn Meaningful Use certification for the Acute Care setting, and we expanded the capabilities of athenaCollector to process our first in-patient facility claims in less than a year.

Similar to our entrance into the ambulatory space, we moved into Acute Care from a disrupted position by focusing on the most underserved markets. While we grow and learn from the under 50-bed hospital market, we are pursuing development partnerships with larger, more complex hospitals to expand our coverage of the Acute Care market.

We recently announced our partnership with the University of Toledo Medical Center to accelerate athenaClinicals development for Hospitals and Health Systems. This partnership focuses on creating a seamless user experience for physicians and nurses at Academic Medical Centers. Furthermore, it expands on our existing development partnership with Beth Israel Deaconess-Needham Hospital (sic) [Beth Israel Deaconess Hospital-Needham] (7:51).

In addition to enhancing these partnerships, we are expanding services to support the Acute Care market by leveraging our More Disruption Please, or MDP program. For those of you who were in San Francisco at the JPMorgan Conference in January, we hope you had a chance to see the excitement surrounding our MDP Innovation Challenge. It is a virtual hackathon, seeking solutions that challenge the status quo in hospital information technology.

From medication tracking to blood banking and care hand off to discharge planning, inpatient facilities are starved for innovation. The outputs from the Innovation Challenge will be aimed squarely at these needs. We expect to have results to share with you later this year.

We will continue to build, buy and partner in order to provide services and solutions for new modalities across every setting of care. The opportunity to build the healthcare Internet is vast, and we are leading the way. We believe our growth remains sustainable because we provide the technology-enabled services that helps keep our clients profitable and agile in the face of industry change.

We have never been purely a software model. Instead, we believe the healthcare Internet will deliver even faster and better results, not just for our clients, but the broader community. This commitment to building the most connected and expanding network in healthcare earned us the highest-ranking for interoperability from KLAS in 2015.

In 2016, we will continue to measure company performance on our balance score card. And since we view the network as the engine for growing and delivering optimal results, we have increased our service performance waiting on our corporate score card from 25% in 2015 to 40%. This further demonstrates that our business model and internal incentives are linked tightly to client performance.

Finally, we consistently focus on culture as a key differentiator, along with our unique business model. There are now more than 4,600 of us, and every athenista shows up each day to work as one, building the healthcare Internet. We know why we are here, and the why is to let doctors be doctors.

This means that we shoulder the administrative burdens of our clients, we get them the information they need, we follow up on their work, and we make sure they get paid for doing the right thing on behalf of their patients. We are reshaping the clinical experience to one where athenahealth provides exactly what doctors need in the moments of care. Imagine a day when the electronic health record system serves the doctor, rather than the doctor serving the system.

With that, I will now begin the financial portion of today's call. Starting with the top line, our fourth quarter revenue of $257.5 million grew 21% over the same period last year, and our full year 2015 revenue of $924.7 million grew 23% over 2014.

On a consolidated basis, our non-GAAP adjusted gross margin for the fourth quarter was 65%, and 63.5% for full-year 2015, as compared to 67.1% in the fourth quarter last year and 63% for the full-year 2014.

Looking forward, we see ample opportunity to reduce inefficiencies, increase automation, and deliver better services and results for our clients. The opportunity to grow and strengthen our connected network is huge. And as we do so, we believe we will improve our non-GAAP adjusted gross margin every year.

As planned, in 2015, we continued to invest in both growth and innovation, increasing our GAAP selling and marketing investment on an absolute basis by approximately $40 million over 2014, and our GAAP research and development expense on an absolute basis by approximately $25 million over 2014. As we shared at the Investor Summit, we will continue to invest in growth and innovation as we expand our services across the full continuum of care.

Our non-GAAP adjusted operating income of $95.1 million for the full-year 2015 grew 9% from $87.3 million in 2014. Our non-GAAP adjusted net income was $53.7 million for the full year 2015 or $1.35 per diluted share, up from $49.5 million or $1.31 per diluted share in 2014, largely due to strong performance in our core business.

We set guidance once a year at our Annual Investors Summit. Let me remind you that our fiscal year 2016 guidance as we communicated on December 10, 2015 at our 8th Annual Investors Summit is as follows. GAAP revenue of $1.085 billion to $1.115 billion, non-GAAP adjusted gross margin of 53.5% to 64.5%, non-GAAP adjusted operating income of $120 million to $135 million, and finally, non-GAAP adjusted net income per diluted share of $1.65 to $1.85.

In summary, the year was full of ambitious next steps and leaps forward. We onboarded 1,667 athenistas, we added a record 13,067 providers to our network. We signed several marquee enterprise clients, and we doubled our addressable market with our move into Acute Care. But in typical athena fashion, there is more to do, so we keep pushing ahead. We are now locked on to our 2016 and long-term strategic initiatives. We remain intensely focused on growing, innovating and building the connected network that is so desperately needed in healthcare today.

We believe 2016 will be another record year for athenahealth. We expect to see exciting progress in leveraging our network and continuing to connect with the wider healthcare industry. We know we can help bring humanity into healthcare because we deliver an experience where providers and patients feel less isolated and more connected. So, we look forward to sharing our progress with you throughout the year.

We appreciate you listening in and now look forward to your questions.

Question-and-Answer Session

Operator

Thank you. Our first question comes from the line of Matthew Gillmor of Robert Baird. Your line is now open.

Jonathan S. Bush - Chairman, President & Chief Executive Officer

Hey, Matthew.

Matthew D. Gillmor - Robert W. Baird & Co., Inc. (Broker)

Hey. Thanks. Thanks for taking the question. I wanted to ask about the University of Toledo Medical Center partnership for inpatient. It sounds like there's some development work that'll be done before you implement an inpatient system. So, can you maybe help us understand the things you expect to get accomplished before going live with Toledo? And then also give us a sense for when you expect to go live?

Jonathan S. Bush - Chairman, President & Chief Executive Officer

So, we're comfortable now selling to sort of sub-100 bed, in fact, really better sort of sub-50 bed hospitals is what we have. There are modalities, departments that a larger hospital has with its scale that a smaller one does not. Kristi mentioned some of the things that we're looking for in the MDP network that should be really nationalized rather than added to a local enterprise software type footprint.

So, University of Toledo is going to help us work out those incremental departments whether it's chemotherapy or more advanced pharmacy and lab or surgery, pre-op, post-op, more sophisticated discharge planning, those are things that smaller hospitals don't need. And so, we're working to prototype those as we move from all the way at the bottom of the market kind of up to more of the middle of the market. So, yeah, there's no time line on an implementation there. The good news is though they are a very fast moving partner. They were very fast moving and forward thinking with the physician group that is already on athenaNet and been very eager to be first in line on the mind-sized inpatient. So we're thrilled that we're going to be able to work together.

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

Yeah. I think the exciting thing here now is that we have two partners with BIDMC and Toledo. So with webOMR, we got some coding footprint for how we wanted to go into larger hospitals, but now we get another place to co-develop it, test it and really find out what best practices are. So again, it's a learning effort here. No rush to a sale, but really excited about what we can learn through both organizations.

Operator

Thank you. Our next question comes from the line of Richard Close of Canaccord Genuity. Your line is now open.

Richard Close - Canaccord Genuity Group, Inc.

Yeah. Thanks for taking the question. Just really quick on the population health, I know that you're doing a lot here near term on the PMPM but you want to go more I guess at risk. Can you talk to us a little bit how you expect if you go more and more at risk, how the revenue flows for you guys? Does it become more of a lumpy revenue recognition model?

Jonathan S. Bush - Chairman, President & Chief Executive Officer

Well, for the full risk contracts, there's a quarterly settle up. So we expect it to be quarterly. These are all very new. So, the number of – this is the great – sort of what's the right word, awkward truth that not many doctors, not many lives are truly, truly at risk. They are part of ACOs and other things where the government takes the first two cents and then they spend the year figuring out what the savings might be and then they give you half the savings. And then if you created savings in past years, they rebate you at a later year.

I mean, for those things, we don't. We just take a flat PMPM because there is no way of mechanically quarterly updating. For the few lives that are truly at risk and which we hope to be kind of the future, we're very much encouraging customers to take some, and we're doing our part by being at risk getting paid out of the gain share. Some – the vast majority is still going to be PMPM in this coming year because that's just the vast majority of where the lives are today.

Operator

Thank you. Our next question comes from the line of David Larsen of Leerink. Your line is now open.

David M. Larsen - Leerink Partners LLC

Hey. Congratulations on a good quarter. Kristi, did you say that your bookings growth goal was 40% in 2015 and it looks like you met that? Is that correct?

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

Yes and no. Our bookings goal for 2015 was slightly over 40%, and we did not meet that number, but we did meet the target that we set sort of aspirationally year-over-year of 30%. So, our total bookings grew over 30%. We had tried to stretch a little bit further last year just to see how far down the road we could run, but 30% still feels like the right achievable number for us.

Operator

Thank you. And our next question comes from the line of Sean Wieland of Piper Jaffray. Your line is now open.

Sean W. Wieland - Piper Jaffray & Co (Broker)

Good morning. Can you talk a little bit about what your marching orders are for your new CTO that you hired just recently? And then more specifically, do you have a timeline for implementing share tablespaces across customers to promote interoperability?

Jonathan S. Bush - Chairman, President & Chief Executive Officer

So, I'm hoping he's going to give me some marching orders as well. We are aware (19:11) sales force with a lot of companies, so they got to a certain size and they said, boy, we could grow faster if we could let more teams work more independently. And they've all – they all embarked on an aggressive re-platforming, really move everything to more of an open API even internal calls, even calls amongst the 67 systems that make up athenaNet. We want to do that.

Eddie could do it. Our team could do it, but Eddie has taken on this new role as the kind of the President of our service delivery. So, he's got all these products that we deliver now. We're trying to move away all of the supporting functions. And just looking at the landscape, having a person – a key supporting function for companies like ours should be that technology platform that everyone plugs into.

And Prakash has a lot of experience with this both as an entrepreneur and as a Senior VP at salesforce where he's involved with helping them with their architecture. It's going to be great for MDP, but it's going to be great for the speed of our newly-developed quasi-independent product teams as well. So that will be the first order of visit. And then of course, they'll try to grow up our scalability in other ways, security in other ways, keep us growing up now that we've got an independent member of my team on that front.

Obviously, on the latter question, the goal here is to be the healthcare Internet, most of our – we start with – hey, let's give you a business service that you like, doctor, that make him more cash at the end of the month doctor or hospital, we've been doing that very well. We've been using a lot of common code across our customers over the years. The big break in terms of customer-facing network effect during 2015 was a provider directory that really took over most of the list of providers in Epocrates, in the clinicals record, in all of the other places across athenaNet. That's all been remapped to a single, if you think about it, MPI, where the P is provider. Now, we can take work that's going on in those products consolidated into this new platform service coordinator. So, that master provider directory is now a corporate-wide asset that fits in athena coordinator.

The next move after we perfect the ongoing maintenance of that provider directory, which will allow doctors to see each other as they move from practice to practice regardless of what sort of tax ID they're sitting in, we'll need to do the same thing with patients. We'll begin to sort of dedupe and create a national master person index in collaboration with the CommonWell group that we've been working on trying to get a key system that other systems will accept.

But whether they help us, whether they succeed or not, we will build a common key that can match every patient, and there's about 77 million patients in athenaNet. So, a decent-sized chunk of United States, a huge network effect, that we can begin to introduce, will be when those patients are known before they arrive. And any information collected, that the doctors are willing to share, that the patients was willing to share elsewhere in the network, can be reused as the patient moves through their care. No one in the country will be able to do this obviously, and we're very excited about it. But we got to get the provider directory thing perfect. And then, hopefully, by the end of 2016, we'll have our first accomplishments around the patient directory.

Operator

Thank you. Our next question comes from the line of Garen Sarafian of Citi. Your line is now open.

Garen Sarafian - Citigroup Global Markets, Inc. (Broker)

Good morning, everyone. So, during the prepared remarks, speed seemed to be a key theme. Were implementation was one of them? So, could you elaborate that a little bit? Are you expecting to do more with external consulting partners or maybe something you acquire or is this more of what you guys I thought were talking about, I think it was last quarter when you were trying to implement, at least on the smaller end of the physician side, within 30 days. Is that...

Jonathan S. Bush - Chairman, President & Chief Executive Officer

Yeah. We love our consulting partners and we will try to do more and more with them. We've signed a great deal with the advisory board recently. But the main theme on the implementation is really taking advantage of this national provider directory and other national resources. So, we've got an OB team that knows every setting that an OB should have and has tested it to where we know better than the doctors the right way to click through an OB visit or at least 85% of the OB visit that doctors commonly see. We have another team that does that for Pediatrics and another for Ortho and another for Internal Medicine and for another for – did I say Pediatrics?

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

Yeah.

Jonathan S. Bush - Chairman, President & Chief Executive Officer

And another for Attention Deficit. Just kidding. As those team gets larger, the amount of work left for that – we already have the provider directory, there's no need to put in your doctors, we've already got them. We already know where they can submit their claims. We already know who refers to them, and who they refer to, by and large.

So, that idea of getting the network so wired together that it's almost an instant-on kind of experience. I can imagine, by the end of this year, Hippocrates kind of wakes up and says, hey, your practice manager just signed with us, click here for your welcome video, and your entire implementation happens in kind of a mobile-first environment where you're pleasantly surprised at how much stuff we already have on your patients and on your referral pattern and on the best way to see a patient. So that's the goal of that initiative. And it's part of a lot of different initiatives around using the knowledge we've accumulated, kind of bright spotting type analysis to help new members of the network get to value quicker.

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

And I guess I would add to that, while our consultants can be helpful, I think, from Jon's perspective, what he just said, the network effect both impacts the technology and the people, we get smarter every year. And what we really want to do is take this idea of speed and make it native to how we look at our own processes. It should be like a core asset of athena, in terms of how we can move faster and onboard our patients, or onboard our clients. That said, we always move just as fast as our clients want to move. If they want to go slower, we go slower, but we're prepared to exercise that process rigor and get them live as soon as possible.

Jonathan S. Bush - Chairman, President & Chief Executive Officer

Just as a quick – I know we've already covered me, but I want to just reinforce, we love our consulting partners, we plan to do more with them. But we'd like to move them up and to the right in the value chain. We'd like them to be working on taking risk, getting better compensation for doctors, getting better governance, getting better coordination philosophy between the various nodes of the continuum of care, building profitable models that profit from savings for society, since that's the most sort of sustainable business approach these days. That's where consulting firms can do the most business, make the most money for themselves over time and sort of be seen as value added, as opposed to attacks on progress. So, that's still there.

Operator

Thank you. And our next question from the line of Gene Mannheimer of Topeka. Your line is now open.

Gene Mannheimer - Topeka Capital Markets

Thanks. Good morning and congrats on a good quarter and finish to the year. Can you talk a little bit about changes in the composition of your sales organization across your segments as we kick off 2016, specifically small group, group enterprise and of course, the Acute Care business? Thanks.

Jonathan S. Bush - Chairman, President & Chief Executive Officer

Well, as we get bigger, we try to make our sales team more specialized so that their content expertise is more impressive, and they can move more quickly. Doctors don't think of themselves as doctors; they think of themselves as nutritionists or cardiologists or obstetricians, et cetera. Similarly, enterprises don't think of themselves as enterprises; they think of themselves as urgent care chains or retail clinics or multi-state hospital systems or multi-state hospital systems trying to become multi-state accountable care organizations. These business types are best served by folks that are experts in that business type.

Another new business type for us to get a lot of volume around is payers. So payers, under pressure of sort of commoditizing government regulation, are trying new things for the first time in a while, employing large numbers of doctors, doing extra services for large groups of doctors that they don't employ, trying to get creative with Medicare Advantage. And so we built up a team focused just on that. There's another team just focused on new ventures, telemedicine and other capabilities that will hopefully be like retail clinics were to us back in the day, small now, but explodingly quick in growth because of their obvious new value.

So, we try to get – now, you can't do it without – you need enough volume to keep somebody busy. So you can imagine, as you get more and more size, you can get more and more specialization. And one of the things we're doing is, little by little, adding more specialties to our clinical team and adding more specialty focus to our sales and account management team.

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

And I would just add to that. I think, Jon's point on focus is well taken. That is a significant change and we believe will drive effectiveness. The other thing that we really are witnessing real-time is the maturity of our sales force increasing. We've hired a lot of people in the last few years. And as they grow and learn, they're becoming a whole lot more effective on the athenahealth fleet of services. So, the true story with sales is both. It's both focus and maturity, I think, that drives us forward in 2016 and 2017.

Jonathan S. Bush - Chairman, President & Chief Executive Officer

There's a certain number of hours that a – number of demos that a salesperson logs, at which all of a sudden their close rate and cycle time is nearly double than what it was when they started. We can shorten that number of demos by narrowing the number of specialties they see.

I think Kristi makes a very good point that, even without that, the fact that we've been able to keep these kids and have them do enough – do their Malcolm Gladwell 10,000 hours. We've got an unbelievably effective sales force, pleasant surprises in the group practice division, where they've had very little turnover and a lot of seniority, we want to see that cycle happen faster.

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

I think, just one other thing, and not to beat this up, but you could tell we're so excited about this. We also hired last year a new Chief Learning Officer, Karen Hebert-Maccaro, and she's helping us train up the sales force. We have our sales kick-off next week. She's been a big part of wrapping free learning about that, with the idea that Jon said of really, really compressing that time from hire to effectiveness, is going to be a big focus for us in terms of maturity of the sales force going forward.

Jonathan S. Bush - Chairman, President & Chief Executive Officer

What she said.

Operator

Thank you. And our next question comes from the line of Charles Rhyee of Cowen & Company. Your line is now open.

Charles Rhyee - Cowen & Co. LLC

Yeah. Thanks for taking question, guys. Wanted to go back to sort of the University of Toledo, you guys talked about – obviously, it gives you more capabilities as you develop your inpatient for larger hospitals. You mentioned that you don't really have a timeline set, but if I recall, I think, didn't University of Toledo talk about that, eventually, their current vendors are going to be sunsetting the system, and I think they kind of set something like a 2018 timeline. Is that then a sort of upper bound, in terms of when you would expect to get sort of a larger inpatient system ready? And then secondly, Kristi, in the guidance for 2016, do you have an estimate for what you expect in terms of D&A? Thanks.

Jonathan S. Bush - Chairman, President & Chief Executive Officer

There are a very large number of older inpatient systems that are turning into a pumpkin in 2018. And, yes, we would like to be able to gobble up as much of that as possible. The number one feedback that we get in focus groups with health system executives around athena is, they don't do inpatient. I need another choice. I can't get another choice until they can cover my hospital as well as my group. It's the number one diss on athena from hospital systems executive that still don't believe that networks work. Well, I think, in fact, they're probably right, right? I mean, we're going to get it so networks work well. Networks attached to us in MDP do work well. But in the meantime, they think they need that one throat to choke. So, we've got to be there with inpatient and outpatient. And it's true, 2018 is a bellwether year for us if we're ready.

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

Yeah. And on the second question, we don't really guide on D&A. We did our Investors Summit in December and we have our few key things that we guide on for the year. But maybe just to size it for you, I know our CapEx has grown significantly over the last couple of years. A lot of it has to do with physical plant. But CapEx overall is 8% of revenue, Capitalized Software is about 7% of revenue, so that's 15% overall. And frankly, when it comes to Capitalized Software, we work with the accountants and the controllers to make sure that we're using appropriate rules for how we capitalize. Most of our cap is less than two years, two years or less in terms of how we capitalize our software. So, it's not a significant tale on that. And that's exactly how we want to keep it, but staying true to accounting guidance.

Jonathan S. Bush - Chairman, President & Chief Executive Officer

And if I were an analyst, I would go and compare that to what the amortization schedules that clients buying enterprise software feel that they can use. I'll just give you a hint and say it's more than two years.

Operator

Thank you. Our next question comes from the line of Ricky Goldwasser of Morgan Stanley. Your line is now open.

Ricky Goldwasser - Morgan Stanley & Co. LLC

Yeah. Hi. Good morning. So, Jonathan, when I think about kind of like what you're saying, I mean, should we think about it kind of like the longer term for athena really, kind of sort of a horizontal expansion across kind of like provider and delivery system? I mean, you started with physician and now going to the hospitals. I mean, should I think about it as next bucket or market opportunities the retail then the payers, finally the patients?

Jonathan S. Bush - Chairman, President & Chief Executive Officer

Oh, yeah. Oh, yeah. And don't forget the nursing home and the ambulance. If you just imagine that the doctor is the guy who launches that pinball up into the pinball machine, right, most important guy to get is that ball launcher at the bottom of the pinball machine. And we are tracking very well there. We are loved more than anyone else. We are the only likeable cafeteria food in all of sort of undergraduate education, right? That ball is the patient (33:24) and shoots up and bounce against labs and pharmacies and clinics, hospitals, surgery centers, we've been starting with the most frequent bumpers, pharmacies and labs, and we've got a lot of them on coordinator or Surescripts. Surescripts is a problem and we want that to get better, but we've gotten at least some level of connection. We've got to get all the rest of the bumpers all the way down to the paddles. And we're knocking them out, one by one.

Another reason why it's so important that we build the ability to specialize is sales force, right? Now, we've got this payer-focused guys. We've got a new emerging business (34:00) telemedicine-focused guys. We've got a hospital – small hospital guy, a little but – not guy, team. Little by little by little, you will see even through ownership, development or partnership little teams that cover every single node, every single bumper on the healthcare supply chain.

And it's a horizontal. Hopefully, that will create a marketplace for deep vertical companies to do a better job than us. So, last year, we partnered with Flatiron that sells the medical record to oncologists that do chemo. We do oncologist for chemo, but not as well as Flatiron. We'd rather have deep vertical companies snapping into our horizontal than try to build one great big moat or arc that holds everyone as past enterprise software companies have tried to do.

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

And I think for athena, this is just a natural progression. We've talked since the beginning of the company about becoming a healthcare Internet. And you really can't do that unless you eventually connect across the entire continuum of care and pull all the nodes together. So, going into inpatient is the logical next expression of that. But I think you can see us – to Jon's point, going – continuing to go horizontal but also going vertical, building, buying, developing, whatever it takes to build out that healthcare Internet. That's the full vision of athena over time.

Jonathan S. Bush - Chairman, President & Chief Executive Officer

You have no idea how long we've been holding this in our heads. It is so nice to see it finally breaking out across the rest of pinball machine.

Operator

Thank you. Our next question comes from the line of Greg Bolan of Avondale Partners. Your line is now open.

Greg Bolan - Avondale Partners LLC

Hey. Thanks, guys. So, I know, historically, collections, patient collections has been somewhat of an issue and maybe somewhat stifled where you could be in terms of days in accounts receivable. And I guess in that spirit, DARs are a little elevated in 2015. I wanted to hear kind of your thoughts on this new TOS workflow that you guys are introducing. And if you guys think this could potentially be meaningful for kind of tamping down the total DAR vis-à-vis better patient collections? And maybe, Kristi, how that might play out through the P&L if that occurs. Thanks.

Jonathan S. Bush - Chairman, President & Chief Executive Officer

Way to go deep, Greg. Absolutely, that is an area of major focus. So, there's the native – athena native work. First of all, we've reorganized so that there's essentially a CEO of athenaCollector in the person of Dave Tassoni. He's got his own product manager who's leading new initiatives, Matt Levesque, one of our top, top VPs in terms of guy knows make – how to make things happen.

We are rewriting the experience of arriving in the practice, better mapping it into athenaCommunicator so that we can ask for a credit card and more demographics earlier, making it a stronger app when you arrive, doing better research on what moneys you've owned – owed from other – from elsewhere in the network and from other visits, presenting it in a hard stop kind of way, consolidating the credit card merchant piece and including it in collectors so that we get more – so we get everybody to do it our way consistently, bringing in partners, redoing the patient's statement and other e-patient and e-outreach consolidating into collection agencies with API so that we can see their work after the fact.

There's a whole series of activities that are going into that, ballooning of self-pays that had come from the obvious consequence of Obamacare not touching the employer liability. All the employers stopped moving to consumer directed care in the beginnings of Obama because they thought maybe Ed McMahon will be showing up with a giant cardboard check and they didn't want stiff (37:46) their employees and lose the best people unnecessarily. Ed McMahon did not show, and so, they're now, in fact, they're in trouble if their cost don't get under control because of that tax. And so, they're pushing back the deductibles, pushing up the deductibles and the penetration of high-deductable plan and we got to be ready. That's going to be one of the big areas for us to either sale or succeed differentiate ourselves further.

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

And I think self-pay as I mentioned with the high-deductible plans is a huge opportunity and one that we are entirely after. As we grow even faster, that (38:25) continues to be a sort of long pole in the tent that we're working on both from a process perspective, but as we get more people on our network that becomes less and less of an issue. So, again, I think that's a process issue and it's a maturity issue. And as far as how that flows through the statements, if we can improve across our entire network VAR by just one day, it's millions of dollars of revenue to us. More importantly, it's the difference, in some cases, between keeping the lights on at people that we serve. So, we are all over it. It's a really important target for us.

Jonathan S. Bush - Chairman, President & Chief Executive Officer

And if you see Dave Tassoni, you should know that in his pocket is a square dongle which is his metaphor for moving to the mobile first credit card capture. So, feel free to call him square dongle Tassoni until self-pay days (39:07) half of the payer side.

Operator

Thank you. Our next question comes from the line of Jeff Garro of William Blair & Company. Your line is now open.

Jeff R. Garro - William Blair & Co. LLC

Good morning. Thanks for taking the question. I want to ask about the expanded relationship with Privia Health. Maybe you can discuss what prompted them to expand their relationship with athena rather than invest further in their own technology when maybe, arguably, those investments might do more to expand their competitive mode.

Jonathan S. Bush - Chairman, President & Chief Executive Officer

Privia is one of – count them on less than one hand, the all-stars of global risk management. They know more than anybody on how to manage a large dollar Medicare Advantage life into a better quality of life and a much lower spend. And we're obviously thrilled that they decided to bank on us and put a lot of the value prop that they offer docs native to athenaNet.

They're very interesting in all kinds of other ways. They have a brand and reputation. They've attracted venture capital into old school primary care, making it sexy. They are a superior choice to a lot of primary care doctors that in the last eight years sold out to hospitals and have been unhappy.

We have seen hospitals – doctors leave hospital systems and join Privia, and then seen those hospitals and say, oh darn, we better offer athena as well. So, these guys are very powerful kind of tip of the spear on the future of network medicine. And we're absolutely ecstatic that those guys decided to work with us so closely.

Operator

Thank you. And our next question comes from the line of Robert Jones with Goldman Sachs. Your line is now open.

Robert P. Jones - Goldman Sachs & Co.

Great. Thanks for the question. In the prepared remarks, it was mentioned that you brought another Trinity wave live in January. I was hoping you could give us an update on how the progress in that contract is going and to what extent you could share how you're faring in the outpatient environment versus Trinity's current inpatient acute vendor? Thanks.

Jonathan S. Bush - Chairman, President & Chief Executive Officer

Well, you'd have to ask Trinity. We're very happy with Trinity. We know a lot of you sort of went out and announced that it was a pilot and I tried to get the whole music for today's call to be that Sky Pilot song, but I couldn't pull it off in time.

Yeah, we're thrilled at Trinity's support and belief in the work so far and the expansion. Yeah. I think you'd have to ask them about their plans or what they think about their models. We don't – we've got nothing bad to say about Cerner other than the fact that their business model went out of business when the Internet was born.

It's a great company that does great work. They've been very cooperative, making their technology available to us to create a really seamless experience for doctors both at Trinity and at Ascension, at CHS, at Tenant. There's a lot of places where Cerner is doing Yeoman's work allowing us to connect. And we don't have any bad things to say about them other than the fact that their business model is pretty much out of date at this point.

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

I think we were absolutely thrilled to continue to move forward with Trinity. It's a great relationship implementations as far as we can see and again talk to Trinity, but we feel like they've been very smooth.

A couple – maybe just a little more color on some of the other enterprises that are growing, Jon mentioned Ascension. Fourth quarter, Ascension added 600 more doctors and 800 providers to our network in addition to what we already have. And NewYork-Presby also continues to grow with 200 docs and 200 providers in fourth quarter. So these large enterprise clients seem to be very satisfied with our service as we continue to expand with them sort of across the board.

Operator

Thank you. Our next question comes from the line of Mohan Naidu of Oppenheimer. Your line is now open.

Mohan Naidu - Oppenheimer & Co., Inc. (Broker)

Thanks for taking my questions, Jonathan and Kristi. Maybe I'll take a shot at athenaOne for Acute Care once again. When you're thinking about the departmental solution, how were you guys categorizing which solution is – solutions you're going to build in-house or is this leveraging an MDP partner or external company? And how do you unwind (43:30) like the chicken-and-egg problem there? The hospitals are probably not going to be so sure of getting into athenaOne unless they have the full suite of departmental solutions versus – the MDP partner is not going to jump on until you have hospitals to sell into.

Jonathan S. Bush - Chairman, President & Chief Executive Officer

Yes. We have a chicken-and-egg situation, Mohan, no question about it. I think Kristi's comment earlier that we're doing – or actually Ricky Goldwasser's comment about trying to get the entire horizontal locked up so that verticals could drop in, there will probably be a athena store brand way of doing 90% of what hospitals do available so that people feel safe.

Over time, we are hoping that More Disruption Please marketplace company create problem-oriented verticals that becomes superior because of their ability to aggregate volume across geography. So, if you're running a radiology department at a small- to mid-sized hospital, you actually can't staff people at the level of subspecialty that you need to be best-in-class. But you want to keep patients in your hospital. So, what you really like is the ability to beam in the best subspecialists to your hospital to read your images in order to get a definitive reading that it's okay to keep the patient at that particular hospital or a definitive analysis of what hospital is best to send them to.

To do that, you need multi – you need a deep vertical specialized in multiple geographies. I mean, specialist (45:08) a given problem across multiple geographies. We want to attract those types of companies, but we're not going to sort of ask our hospital clients to kind of wait for Godot. We'll be there with something right away, and then we'll encourage the market to grow up around these great opportunities. This has been a food desert because of the enterprise software market, which has been largely closed, very hard to inter-operate with, very hard to sell through. But now that it's open, I think you're going to see some real growth. We've already seen it.

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

I think one of the most interesting outcomes of 2015 was discovering how much reusability we had from the ambulatory side into the small hospital bedside, which really propelled us to go much faster into that market that we anticipated. I think now as we move up in level of sophistication, the architecture, looking at this from the perspective of – what are the resources and assets that we already have that we can use, those are ready to go. We can serve people with those.

What are the things that are reasonably within reach, that we can build based on reusability, knowledge, the coding footprint, and what we'll learn from University of Toledo and BIDMC. And then there may be some modalities that, for reasons of compliance or complexity or just the fact that there are other people out there in the world that already do them extraordinarily well, that we'll want to partner with them rather than build them. So, I think you'll see a combination of us reusing what we have, building new things, and then partnering with others on complexity. And there is a pretty good rubric behind the scenes in terms of how we sort through what we want to do to tackle those modalities.

Operator

Thank you. Our next question comes from the line of George Hill of Deutsche Bank. Your line is now open.

George R. Hill - Deutsche Bank Securities, Inc.

Hey. Good morning, guys. Thanks for taking the question. I'll say, Kristi, I have an annoying bean-counter kind of question for you and only (46:57) one for Jonathan. As we picking up the (46:59) 30% growth number that was achieved in 2015, how do we think that kind of net of charge-backs or customer losses and kind of – did we make those right reverses? I guess, is that an apples-to-apples basis bookings-to-bookings, or is it we adjust losses out of 2015 or have we adjusted them out of 2016? Just kind of, how are you thinking about that?

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

Yeah. So, when you look at the revenue growth number that's out there for 2015, any charge-backs that we had are already baked into that. So if we know it's happened, it's already taken out of our future revenue stream, any forecast, et cetera. And again then, as you look at our 2016 guidance, if there were things that we had eyesight into that we knew were happening, they've been taken out of the revenue stream. So, we always go forward with that netted out as soon as we know. We have very specific rules and guidelines about how we account for and report that.

George R. Hill - Deutsche Bank Securities, Inc.

Okay. So, it's taken out – okay.

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

It's taken out of the performance. It's not in there.

George R. Hill - Deutsche Bank Securities, Inc.

Okay.

Jonathan S. Bush - Chairman, President & Chief Executive Officer

And now, I need the question – they're becoming expert at packing two questions into one question, so – but I don't remember what the other one was. Oh, you didn't ask it? Oh, never mind. Okay. Next.

Operator

Thank you. And our next question comes from the line of Michael Cherny of Evercore ISI. Your line is now open.

Michael Cherny - Evercore ISI

Good morning, guys. We've dug in a little bit on some of the large contracts. You referenced Ascension as a customer that brought 600 physicians live in the quarter. This deal is well above and beyond what you had originally expected when you signed the deal, can you just talk to us a little bit about where are all these doctors coming from? And if you think about it on a go-forward basis, with them and with other customers in similar size, how much incremental opportunity do you see within that base for your largest enterprise customers, particularly since – it doesn't – I haven't seen, at least, a lot of the M&A that's driving these groups adding on new doctors.

Jonathan S. Bush - Chairman, President & Chief Executive Officer

Well, I think – I don't know. Let's see. First of all, there are a lot of docs and all kinds of employment relations tucked into some of these very large enterprises that get life events that break them free from moving towards corporate alignment over time. So, we've seen that with all of our for profit and multi-state chain clients. They get the lion's share of the ones that are easily movable and then, as people pop out, they come along.

The other thing that happen is, groups just finally poop out. They just – the ACL things too complicated and their EMR's going to be too expensive to upgrade, and they don't like ICD-10, or they don't understand it. And so, they call the hospital and say, hey, shelter from the storm. It doesn't really look like a big acquisition, but they kind of snap in.

The other thing is that, all of these deals include an affiliate relationship, a joint go-to-market channel partnership for non-employed doctors that are in some way admitters, coordinators, clinical cooperators with our clients. We have done, as yet, very little of that work with the big enterprises, that's sort of Phase II after we get the entire employee group aligned. We are coming up upon that, and that will be a whole new phase that we're excited about. All of them get really good prices, which is too bad for us, but we're thrilled to have the docs on the network much more than the incremental prices.

Operator

Thank you. Our next question comes from the line Eric Percher of Barclays. Your line is now open.

Eric Percher - Barclays Capital, Inc.

Thank you. I'd like to go back to your comments around 2018, what you're holding (50:42) together with Toledo. As we think about where larger hospitals are today, they are looking, today, for solutions that they'll implement in 2018. And we know there's a lot of Horizon customers that have to find solutions by simply think (50:57) they're in the market today.

Was your comment meant relative to what you want to achieve with Toledo, which leads to sales as you go beyond 2018, and that that's a point in time for this customer? Or how do you think about the layering in of when you can bring the product to market, show that it's tested, have a referable partner, and then actually drive sales beyond the 50-bed hospital?

Jonathan S. Bush - Chairman, President & Chief Executive Officer

You're on to the dilemma right? So, we want to – we don't want these beautiful animals to bolt off the cliff in panic and go enter themselves into another 10-year amortization and another sort of nightmare of capital encumberment for their balance sheet, and a nightmare of administrative complexity for their IT teams.

We want them to believe. Some will bolt, but the partnership with Toledo, the partnership with Beth Israel, the progress through larger and larger hospitals, and the fact that we have a pretty darn good reputation as an entity that delivers in this space, we're hoping will save some people from unfortunate decisions. The more we can get done without destroying our own ability to deliver, we don't want to go live and announce something that isn't over delivery on the client side. We got to make them cash flow better than they were before we showed up.

They don't have to be perfect by my definition, but they got to actually be looking at more cash at the end of every year because they flipped the switch in order to feel safe about recommending it to them. And that's mostly true today in the smaller space. You've got a couple of guys who went sideways that we're studying very closely. And when we get into these bigger hospitals, it will be true there too. Hopefully, people will remain calm and try to take advantage of it where they can.

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

And I think from an internal athena perspective to Jon's point, these are tremendous learning opportunities for us. And as we get into them, we're going to find out what the time line looks like. We accelerated in the 50-bed hospital. That was a really nice outcome for us last year. As we're get in and learn, I think we're going to have a really good sense over time of how quickly we can move into the larger hospital space. We will be very thoughtful about it, but when we know we have it, we're going to be incredibly aggressive.

Operator

Thank you. The next question comes from the line of Nicholas Jansen of Raymond James. Your line is now open.

Nicholas M. Jansen - Raymond James & Associates, Inc.

Hey, guys. Lots have been discussed, but two quick ones. First, on the financial scorecard, certainly, you beat revenue – or at the high end of your guidance, you significantly beat your operating income targets. You exceeded 30% bookings, yet it looked like your performance metrics decelerated through the year. I just wanted to get a better sense of what was causing that relative to your internal plan.

And then secondly, on free cash flow, it does look like you're guiding towards a recovery in 2016 based on the CapEx numbers you provided. That turns positive again, any source of use of that cash flow, M&A ideas, just what your thoughts on capital deployment. Thanks.

Jonathan S. Bush - Chairman, President & Chief Executive Officer

Well, the big number was that we tried to make up for 2014 in 2015 by growing bookings more than 40%. And we didn't really grow at 30%. We actually did, believe it or not, grow at over 40%, but we had a couple big customers sign but never go live because they didn't sell their business. And that moved us back to a 30% bookings growth attainment, not the 43%. But since we set the goal at 43%, that's a miss, and there's probably more. But that's the one that I certainly watch. Still feel pretty good about growing bookings at 30%, but...

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

Well, I think when you look at our financial scorecard overall, coming in at 101% for the year is pretty darn good. I think the story of it is we kind of front-loaded the year in terms of sales, but it doesn't imply that there was a lessening of a momentum at the end of the year or that we think that that was a setback. We feel really good about our pipeline in all of our segments and are leading (54:52) ratios and how we're working that.

So, the fact that we started out the year incredibly strong, we had a plan, has to do also with how we plan. We tend to plan for lighter sales in the early quarters and heavier towards the backend. And so, that's why it looks like a diminution, but it's not. We feel really good about how we're positioned going into 2016.

Jonathan S. Bush - Chairman, President & Chief Executive Officer

You got to remember, lot of these enterprises are sort of been a Pavlovian training to wait till the last moment of the last quarter on the enterprise software world. Since it's all margin, you're going to get a great deal if you hang them out over the edge of the year.

And so, we end up with people behaving that way. It's an operational nightmare for us and it doesn't help them financially as much as they think it does. So, if anyone's listening, stop doing that. Spread it out through the year, you'll do better operationally. If you're not listening – we've got to have the business, but...

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

Anytime.

Jonathan S. Bush - Chairman, President & Chief Executive Officer

Yeah.

Operator

Thank you. And our next question comes from the line of Sandy Draper of SunTrust. Your line is now open.

Sandy Y. Draper - SunTrust Robinson Humphrey, Inc.

Thanks very much for taking the question. I think this is probably for Kristi. When I think about the price side of the revenue equation, I sort of think about the inputs or how much you can cross-sell to get higher dollars per customer. The mix of the business you're selling, enterprise being lower price versus small docs being higher price, number of office visits or size of claims, number of claims. How would you think about that sort of – those input hitting 2015, and how you would think about essentially a price side of the equation for 2015. And what would you expect for 2016? And I guess the genesis of the question is your comments on the prepared remarks about the maybe lighter flu season and how that's going to impact the fourth quarter or maybe spillover, and just trying to think about how we think not just about the docket, and that's growing, but the offset of where the revenue per customer comes from? Thanks.

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

Sure. Well, Sandy, I think, as you know, over time, we feel really good about the pricing discipline that we've instilled into the operations. That said, one of the things that we are working on is really deepening the breadth of our services. And as we do that, and as they provide more value, that will have some natural upward pressure on pricing and revenue for us which I think is a very positive thing.

We've had a lot of discussion about flu. I think it's obvious to everyone who's watching that the flu season is somewhat lighter than it's been in previous years. We don't see that as a significant – it certainly wasn't a significant drag in the fourth quarter last year. And we'll talk about first quarter of this year when we get to the first quarter call, but it doesn't seem to be something that significant for us.

Product mix doesn't have as much to do with it. I think our products are getting more mature, and that's where we can get margin as there are more mature products as we grow. So, we feel pretty comfortable with our pricing. I think there's more that we can do to expand, but really deepening our services and keeping diligence on how we price and go after – treat all of our clients sort of fairly from a gross margin perspective is the answer for us.

Jonathan S. Bush - Chairman, President & Chief Executive Officer

In clinicals, we believe that we are backing some great new value into clinicals in the coming months and that we're going to be able to get credit for it in better pricing. We have some early guys that we really are grateful that they joined us and they have absurdly low prices baked in. And as the product is matured, I'm sure they'll agree that they should pay a little more.

Operator

Thank you. And our next question comes from the line of Michael Newshel of JPMorgan. Your line is now open.

Mike A. Newshel - JPMorgan Securities LLC

Thank you. Good morning. So, I have a follow-up question on your long term sales approach in the hospital market. And obviously the current focus of hospital sales team is on small hospitals. But are you making any efforts now to specifically identify and get into an early dialogue with those larger hospitals that maybe they're not ready to make any decisions now or be a beta tester like University of Toledo, but maybe they are at least interested in following your progress as they consider their options to replace the legacy system in a couple years. Are conversations like that happening or are they premature until the development comes further along? Thanks.

Jonathan S. Bush - Chairman, President & Chief Executive Officer

We are absolutely in those conversations. Obviously, all of those institutions have physicians already in their employ, and so they're athenaOne prospects. And we're talking to them in there.

The other thing we've done is really worked on with great success the maturity of our population health service, which is something that doesn't require you to switch to athenaOne. So, imagine a net that goes over the entire system uses the paid claims database as the sort of chassis, plugs into the hospital system, the medical record system of the doctors even if the network of doctors are on multiple medical record system, and we become the kind of consistent measurement and outreach system for the entire sort of accountable care entity.

You saw a big deal with Dignity last year, hopefully, we'll have a few more of those. So, we're very involved with the large enterprises on all kinds of levels. And of course, the emergence of our inpatient and the rest of the continuum of care capabilities is in the conversation. Yeah – and that health piece is already something that we're proposing aggressively in some of the biggest and most advanced risk-bearing institutions in the country.

Last one?

Operator

Thank you. Our next question comes from the line of Jamie Stockton of Wells Fargo. Your line is now open.

Jamie J. Stockton - Wells Fargo Securities LLC

Yeah. Thanks for squeezing me in. Maybe just real quick, Kristi, you guys have indicated that the difference or at least part of it between the 40% bookings (1:00:47) 30% has been some of the charge-backs. Could you talk about the timing of when those occurred? Seems to be a very big focus for investors especially given the 88% number for the fourth quarter. Thanks.

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

Yeah. We pushed one of those chargebacks through in third quarter and the other in fourth quarter. So they were all out of the numbers by the end of the year. That was the timing.

Jamie J. Stockton - Wells Fargo Securities LLC

Okay. Thank you.

Operator

Thank you. I'm showing no further questions at this time. I'd like to hand the call back over to Jonathan Bush for any closing remarks.

Jonathan S. Bush - Chairman, President & Chief Executive Officer

Thank you, guys. I love the metaphor we got to on today's call. It's exactly what is the gestalt of the company, is to get a very, very credible horizontal backbone that holds the identity of providers and patients together by providing services and save some cash and then creates an environment for a whole new deeper type of vertical economy that reforms medicine in all kinds of way.

So, you're getting it. Now, we got to deliver it, so we got to get back to work. Thank you, guys, very much.

Operator

Well, ladies and gentlemen, thank you for participating in today's conference. That does conclude today's program. You may all disconnect. Have a great day, everyone.

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