athenahealth (ATHN) Jonathan S. Bush on Q1 2016 Results - Earnings Call Transcript

| About: athenahealth, Inc. (ATHN)

athenahealth, Inc. (NASDAQ:ATHN)

Q1 2016 Earnings Call

April 29, 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

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

Richard Close - Canaccord Genuity Group, Inc.

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

Elizabeth Anderson - Evercore Group LLC

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

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

Jamie J. Stockton - Wells Fargo Securities LLC

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

Robert Patrick Jones - Goldman Sachs & Co.

Donald H. Hooker - KeyBanc Capital Markets, Inc.

Jeff R. Garro - William Blair & Co. LLC

Eric Percher - Barclays Capital, Inc.

George R. Hill - Deutsche Bank Securities, Inc.

Greg Bolan - Avondale Partners LLC

David M. Larsen - Leerink Partners LLC

Charles Rhyee - Cowen & Co. LLC

Operator

Good day, ladies and gentlemen, and welcome to the athenahealth First Quarter Fiscal Year 2016 Earnings Conference Call. As a reminder, today's call is being recorded.

At this time, I would like to turn the call over to Dana Quattrochi, Executive Director of 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 made on this conference call are forward-looking statements within the meaning of the Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding management's expectations for future financial and operational performance and operating expenditures, expected growth, and business outlook, including fiscal 2016 guidance; statements regarding the benefits of and demand for our service offerings; statements regarding the potential expansion and value of our network and progress towards building the health care Internet; statements regarding our ability to improve client satisfaction and our net promoter score; statements regarding our goal of transitioning all customers to Streamlined by the end of 2016 and the impact on client satisfaction and our plan to leverage other best-in-class companies.

Forward-looking statements may be identified with words such as will, may, expect, plan, anticipate, upcoming, belief, estimate, or similar terminology, and the negative of these terms. Forward-looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties, many of which are beyond our control which could cause actual results to differ materially from those contemplated in these forward-looking statements.

These risks and uncertainties include those under the heading Risk Factors in our most recent Annual Report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission, or the SEC, which are available on the Investor section of our website at www.athenahealth.com and on the SEC's website at www.sec.gov. Forward-looking statements speak only as of the date hereof, and except as required by law, we undertake no obligation to update or revise these forward-looking statements.

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 items 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 first quarter fiscal year 2016 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 first quarter fiscal year 2016 earnings call. We carried strong momentum into 2016, as we delivered 24% top line growth over first quarter last year. We're competing and winning in the hospital and health system market. Our large scale implementations are getting faster and faster.

We keep advancing interoperability and the promise of a nationwide health information exchange. Every day we accelerate the expansion of our network-enabled services across the full continuum of care. One opportunity we're working on aggressively is our net promoter score, which was under pressure due to the amount and high rate of innovation we've introduced to our clients.

Client satisfaction and client engagement are very important to us. Our business model demands it. We only do well when our clients do well. As such, we have a number of initiatives underway that we believe will improve client satisfaction over the long-term; more to come on this.

Let's start with network growth. We ended the first quarter with over 78,000 providers, nearly 80 million patient records and over 128,000 endpoints that exchange information across the network. As our network continues to grow, so does the interest in our core and emerging services. For example, at HIMSS this year, our population health and emerging services teams delivered a stand-out performance. We exceeded our internal goal of demos delivered for athenaOne for hospitals and health systems.

Our ability to demonstrate one patient, one chart across the continuum crystallizes our value proposition and differentiated user experience. Given these strong levels of prospect interest, we remain sharply focused on delivering against our annual bookings goal.

Year-to-date, 2016 booking results already feature several notable wins. For example, just after the close of first quarter, we signed two exciting deals that position us for the future. First, an athenaOne enterprise deal with Michigan State University HealthTeam; another competitive win at a large academic medical center.

We also signed Providence Health system onto our population health service. Recall that this is the second large health system on the West Coast that athenahealth has signed on to our differentiated population health service in the last six months; and we keep moving faster.

With a four-week implementation of our Dignity Health first service area, this is more than twice as fast as our previous population health implementation cycle. Our focus on streamlining the onboarding process and delivering results continues to resonate in the market, as athenaOne implementation waves continued at Trinity Health and New York-Presbyterian Medical Group during the first quarter; and also kicked off at Adventist Health. We do not build software. Instead, we deliver network-enabled services across the full continuum of care. We deliver clinical and financial results for our clients, an approach that sets us apart.

Our unique combination of network, knowledge and work enables us to be very agile and help clients drive even during times of rapid change. Our service development efforts are focused each day on improving our core ambulatory services, strengthening and maturing our population health service and accelerating our expansion into the in-patient space and the broader care continuum.

Our persistent orientation around outcomes, results and patient provider experiences enables us to differentiate ourselves from traditional on-premise software vendors. Here are a few examples of this differentiation.

We exceeded our goal of 95% success for the 2015 Meaningful Use program, with 97.6% ambulatory attestation and 95.7% in-patient attestation. We also achieved our 2015 PQRS goal, with 95% of athenaOne providers successfully reporting their data. All of these clients will avoid the automatic penalties related to the Meaningful Use and PQRS programs in 2017.

As a mission-driven company, we need to continuously intensify our focus on delivering results and improving client engagement. With this in mind, one of the most important metrics for us to understand is our net promoter score. As you can see from our published balanced scorecard, our first quarter net promoter score was 34, which came in well below our goal of 44.

We've always been innovative and focused on driving forward progress, but we realize the amount and the rate of innovation we've moved to the market can be overwhelming. As such, we're focusing our actions in ways we believe will improve our net promoter score over the long run.

First, under the leadership of Ed Park, we now have product leaders whose primary responsibility is improving service delivery and client performance. Second, under the leadership of Prakash Khot, our new Chief Technology Officer, we're establishing a more modern and practical relief cycle cadence.

While we will continuously improve our network with updated rules, content and operational enhancements, we will limit any changes that impact client workflow to three times per year. Finally, we believe the migration to our streamline experience will be most critical for moving NPS in the right direction over time. The goal is to build a provider experience that is so intuitive that it feels like the EHR is working for the provider and not the other way around.

So, as of March 1, we began to sell only streamline across all segments and specialties; and we continue to refine our release approach for all existing clients, with the goal of transitioning everyone by the end of 2016. We expect that over time this transition will improve client satisfaction and metric-based performance levels across our entire network.

We are also focused on scaling our Population Health service and further accelerating the expansion of athenaOne into the acute care market. The signing of Dignity Health and the Providence Health system on to our population health service represents another critical turning point for athenahealth.

As I already mentioned, we are onboarding these large health system clients quickly, scaling and offering to support continued growth and thickening the service by adding patient self-monitoring and additional outreach capabilities. We believe that the performance of these clients will demonstrate game-changing population health insights and the power of our network. Stay tuned for our population health service and network performance updates throughout the year.

Finally, our emerging services team continue to execute on extending our suite of network-enabled services into the in-patient setting. During the first quarter, we signed additional hospital deals, started moving the existing RazorInsights client base onto athenaNet and began the onboarding experience with several hospitals we signed in 2015.

In addition, our new development partnership with the University of Toledo Medical Center is off to a productive start as we look to support acute care workflows for larger hospitals. And we've partnered with Intacct, a leading provider of cloud ERP services, in order to deliver a comprehensive, seamlessly integrated, cloud-based financial solution for hospitals. As part of this new partner agreement, we will integrate, support and sell Intacct's financial applications with our revenue cycle management services. Our plan is to continue to leverage other best-in-class cloud-based companies as we look to expand our service capabilities and accelerate our move up market.

As you may recall, over 38 million patients or approximately 10% of the U.S. population visited a provider who is on athenaNet in 2015. And since inception, athenaNet houses nearly 80 million unique patient records. We curate the network data we gather to gain knowledge and deliver insight to help clients practice better medicine and improve their financial performance. I would like to share one example.

During our recent meeting with the American Congress of Obstetricians and Gynecologists, or ACOG, their Vice President of Health Policy commented that since half of pregnancies in the United States are unplanned, hypertensive women of child-bearing age should not be on an ACE inhibitor, because that class of medication is connected with birth defects. In a quick query of athenaNet, we are able to see immediately that approximately 62,000 women of child-bearing age are on this type of drug. Armed with this knowledge, we partnered with ACOG to launch a network message, informing physicians of the potential risk, address email communication to clients who have such patients and an Epocrates DocAlert referencing ACOG guidance on this topic.

Now, organizations like the Robert Wood Johnson Foundation, the Harvard School of Public Health and the American College of Cardiology, recognize the importance of athenaNet data and network insights in improving healthcare information awareness and delivery. Our commitment to helping our clients improve patient outcomes requires that insights like these are rapidly made available across our network.

We believe our company culture of teachers and learners rewarded for team success is key to our performance as a mission-driven growth company. Part of my objective, when I came on board in July of 2014, was to help build athenaCentral, a team that holds athena nation together and helps us move faster as we identify and execute on new growth opportunities. We are continuously creating a work environment, where each athenista can stay connected, rapidly iterate and improve.

So we continue to focus on further enhancing our talent acquisition and leadership development programs, creating a scalable systems architecture and providing consistent connections and knowledge flow across all of our locations. We want to attract and retain the best talent and not only grow, but grow more efficiently. With that, I will now begin the financial portion of today's call.

Starting with the top line, we are happy to report that our first quarter revenue of $256.1 million grew 24% over the same period last year. On a consolidated basis, our non-GAAP adjusted gross margin for the first quarter was 62%, as compared to 62.7% in the first quarter last year. Our first quarter non-GAAP adjusted gross margin was negatively impacted by the timing of implementation and benefit costs. We expect these higher first quarter costs will be offset by lower costs in the second half of 2016.

Looking forward, we see considerable opportunities to drive efficiencies, increase automation and deliver even 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 the first quarter, we continued to invest in both growth and innovation, increasing our GAAP selling and marketing investment on an absolute basis by approximately $4.2 million over first quarter last year; and our GAAP research and development expense, on an absolute basis, by approximately $1.4 million over first quarter last year. We expect to continue to invest in growth and innovation as we connect the still large disconnect in healthcare and expand our services across the full continuum of care.

Our GAAP general and administrative expenses increased $4.7 million or 13% over first quarter last year. While we expect to scale our general and administrative costs for full year 2016, the first quarter was impacted by timing of legal expenses, as well as a one-time expense related to closing out a longstanding vendor relationship.

Our non-GAAP adjusted operating income of $24.2 million for the first quarter grew 49% from $16.3 million in the first quarter last year. Our non-GAAP adjusted net income was $13.4 million for the first quarter or $0.34 per diluted share, up from $9.1 million or $0.24 per diluted share in the same period in 2015, largely due to strong top line performance.

We set guidance once a year at our Annual Investors Summit. We continue to have high visibility into our expected performance; and with one quarter of 2016 behind us, we are reaffirming our guidance for fiscal year 2016. Let me remind you that our fiscal year 2016 guidance is as follows. GAAP revenue of $1.085 billion to $1.115 billion; non-GAAP adjusted gross margin of 63.5% 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, we entered 2016 with momentum across all major aspects of our business. From new reimbursement models and peer consolidation, to the emergence of new care delivery models and interoperability initiatives, the ability to thrive through change has never being so critical. We are the only network-based company of any size and scale in healthcare. We are the only continuum company; and we have demonstrated time and again our ability to keep our clients profitable and agile.

There will be a healthcare Internet, and we're building it. Our opportunity to transform the healthcare industry is vast and exciting and the path is clear. Stay tuned for more updates on our progress throughout the year.

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

Question-and-Answer Session

Operator

Our first question comes from the line of Nicholas Jansen from Raymond James. Your line is open.

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

Hey, guys. Just wanted to get a little bit more detail surrounding kind of the in-patient success rate. It seems like you've onboarded a couple of new customers from last year. You mentioned that you've kind of won some business in the first quarter. Anyway you can kind of size that momentum and that pipeline right now? Thank you.

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

In the small hospital market, there is a borderline collapse of the established technologies. So there is a huge demand. There is obviously hundreds and hundreds of hospitals owned by existing clients, but also just in general – really with the exception of Epic and Cerner, most of the HIT companies appear to be just not able to make a go of it. And so, there is just a crush of demand, which is terrific for sale. It puts a lot of pressure on us to make sure we are building out our in-patient product to the degree that it needs to be to actually generate the promise, right, to generate the results.

We're selling this service just the way we do our others as a percent of collection, and we do all the work. The difference is in the hospital there are many other threads of work. There are many different departments each with their threads of work. There is cost accounting, supplies management, each with their threads of work. But in terms of demand, it's screening. And we are feeling very welcome in terms of our reputation by those smaller hospitals that we're dealing with; and we've got some slots for some larger hospitals. We just have to be careful not to get out over our skis, so that there is nothing but good results as we grow into the segment.

Operator

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

Richard Close - Canaccord Genuity Group, Inc.

Yeah. Thanks. I was wondering if we could hit on the population health area. Obviously, a good win last year with Dignity and then you have Providence this year. If you can go into those deals, maybe the competitive – I guess the competitive – or the competition you had in those deals, was it the same in both? And what's really leading to you guys beating out your competition on population health?

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

So if the sort of quasi crumbling small hospital IT market acts like a greenfield in terms of market segment, population health is our greenfield in terms of product. So in both of those deals, there was no established population health platform to speak of. So they needed to look new. And, of course, the competition were the established players. Both of those guys are large customers of traditional, well-performing enterprise software companies. And so, their first instinct and their trialed close was to use those established companies as they should have tried. Thankfully, they tried and it didn't work for them. So then they allowed the camel's nose to creep into the tent; and we've had a marvelous experience with them.

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

And I think one of our differentiators there in terms of being competitive is really not just about price, it's got to be about delivering results in population health and bringing the power of our network with 80 unique patient records out there; and being able to look across the entire network and help populations manage is a significant opportunity and differentiator for us.

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

Our role as an outsider, most of our traction over the years has been – obviously all of it has been in ambulatory, but a lot of it has been in independent ambulatory that has needed to connect to the rest of the supply chain; and we've had to do that without a lot of market power on our clients' behalf. That connectivity is the basis for the coordinator service, but it's also a very powerful basis for the population health service. It's one thing to have a full screen that shows you a hotspot of patients in the demo; it's another thing to go out in the world and actually make these archaic claims management systems that all these tired old payers merge into a single dataset that's usable in any screen.

Same thing with continuity of care documents, medical record documents. Munging them together into a readable, usable integrated table requires more than software that demos well. It requires in archaic hundreds of people who've gotten better and better and better at tweaking and torquing and reconciling these feeds out of these tired old system; and that's one of the key service components that set us apart.

Operator

Thank you. Our next question comes from the line of Sean Wieland from Piper. Your line is open.

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

Good morning. So the final rule is out on MIPS. And first I'd like to know do you think that this next generation under macro is a good thing or a bad thing for the industry? And how do you think these rules changes are going to affect your business?

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

Well, yeah, I'm assuming you've read it. I know I have, the pithy 962 pages. All crowding out by the federal government destroys the biodiversity of the pond and further makes fragile the healthcare market. And we will pay for all of this micromanagement from on high with a vengeance in the years to come. We all know that, it's already happening, whether you look at the monopolization of the supply chain or the lack of innovations, lack of cloud-based players in the market, which is tragic, except that it makes it easier for us to move about the cabin.

Changes from the federal government do make it easier for us to win a peer-based sale, because we always figure out the rules, we always get the cleanest, tightest and highest compliance approach to dealing with them. It should be that we win by getting tight approaches to things that are being invented by our clients. Instead, we are getting tight approaches to things that are being invented by committees of nabobs in Washington, which is really depressing. It also keeps us sort of stuck in stacking gear in terms of our own innovation pace. But it's fine; it's going to go well. All of our clients – there's nothing we see that we can't make sure our clients get full value in the new MIPS rule set. And hopefully they'll stop doing that, so that innovation can at least try to start in healthcare.

Operator

Thank you. Our next question comes from the line of Ross Muken from Evercore. Your line is open.

Elizabeth Anderson - Evercore Group LLC

Hi. This is Elizabeth Anderson in for Ross Muken. I was wondering if you could talk a little bit more about your experience moving over the Razor Insights clients to athenaNet. How did that transition go? What did you learn that might change your in-patient strategy going forward, that kind of thing?

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

So how is it going? It's still going.

Elizabeth Anderson - Evercore Group LLC

Yeah.

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

It's very hard. So the good news about Razor is that it's run by a – was built by a phenomenal group of people. They were fast to market with a cloud-based infrastructure; and it demoed well and it got Meaningful Use. The bad news is in order to be that fast, the architecture was more client-centric than network-centric. So every single table, the drug list, the provider directory, the pharmacy supply – the medical supplies, every single one of them is a separate table that only works for each individual customer. That is not the point of athenahealth.

We ourselves had to build that way a lot of athenaClinicals, because we were moving slowly. It was a very network-centric version of our medical records. Then the Meaningful Use program came out and in Washington there were these lists of features that you had to have immediately or you weren't allowed to be considered an EMR. So in both cases, we and Razor built a lot of tables so that customers had to configure them, manage them and deal with them over time.

As we roll from Razor to athenaOne and as we roll from old athenaClinicals to Streamlined, we are taking back those tables, taking back the administration of them and connecting them to great little web services that connect to national tables that are always current, always correct because they're maintained by us. That work involves moving the cheese of people that have worked very hard on their tables for years.

And so, it's painful. We're not daunted by that. We knew that that would happen. We knew that – we've learned that that will happen with Streamlined. Part of what you're seeing on our NPS core is the movement of the cheese of those people who've actually figured out how to use old athenaClinicals; and we are like, oh my God, I've got to learn the equivalent of Sean Wieland's Bloomberg screen being rearranged on skiing day. It's like, he'll be fine, but he might miss skiing that day and he's going to be kicked off. So the Razor movement and the movement to Streamline have in come in this recivilization of the underlying data schema, which positions our clients and us very well for the long-term, but hurts in the removal of the mandate.

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

Yeah. I think the only thing I would add to that is that pain is often good. It helps you learn and grow faster; and I think that's exactly what we've been able to do. So while we're pleased with the transition overall, it has not been easy for sure. We're pleased with our ability to sell into the market. But the bigger opportunity for us with in-patient is to learn from the existing Razor clients and the new clients that we've brought on, so it can improve our services, as Jon said, add other ancillaries and move up market.

Elizabeth Anderson - Evercore Group LLC

Good. Thank you very much.

Operator

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

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

Thanks for taking my questions. And, Kristi, a nice video message on the press release. That was a nice thought. Thanks for that.

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

Thank you, Mohan.

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

So on the net promoter score, I just wanted to touch that again. Is it just the clients that are unhappy with the frequent updates to the product or is it a particular service that you guys are seeing problems with? And also you said you're going to restrict releases only three times a year. How does that compare with prior years?

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

We're not going to restrict releases to three times a year, but we're going to restrict GA releases, so where everybody in the network gets something new. We'll keep our frequent cadence of alpha releases where we'll try stuff. We'll get better at A/B testing. So we're replatforming a lot of athenaNet, as I described in the previous questions, so that we can turn stuff on for small groups of customers, see how it goes, try others for other groups. Once we get it right, then in the three big releases a year we do the video education, get them all ready and release it.

In terms of NPS, there are other things in there that hurt us in addition to Streamlined. The biggest, most proximate was we've started using a subset of our client support center to fly out and do in-person, go-live support for new customers. It's great for the CSC staff because they get to see their customers, meet their customers. They get a slightly higher paying flight to their life, they do business travel, it's kind of neat, but we get didn't get the timing right; and at times, we didn't have enough people in the client support center for the calls that came in from the Streamlined releases that were going on elsewhere.

So during this quarter, we had an all-time goof in terms of telephone answer time where at times we got as high as 204 seconds, whereas we shoot for 95% under 60 second. So that also ran a shockwave through the stat. The last thing is, we call it co-sourcing, but what we really mean is outsourcing of everything that's distracting you from patient care.

Over time, with legal cautiousness and customers that feel needy about certain aspects of their work, we've allowed the subset of things that customers get to work on in their dashboards to creep up instead of being forceful about figuring out how to get rid of that work. Credentialing is one. Claims that involve a coding error. Even if we know the error they made, we won't fix it. We'll make them go in and fix it.

So while there has been no spike in that, in fact that number is moving in the right direction, I do suspect there is a little bit of exhaustion in the amount of work that customers still have to do when they're on athenaNet; and we are driving that number down. I don't know – I can't mathematically show that that pointed to this net promoter score movement, but I'm throwing it in there because it's affecting my net promoter score.

Operator

Thank you. Our next question will come...

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

I think the only thing that I would add those are all items that we're working on aggressively. But part of it is the robustness of our business model in a way, because the services that Jon is talking about really don't exist in other places in our marketplace. So even though we aren't performing perhaps at the level that we'd like to, we have improvements that we'd like to make. We still consistently get feedback that that performance is better than what our competitors or substitutes in the market would offer.

Operator

Our next question comes from the line of Garen Sarafian from Citigroup. Your line is open.

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

Good morning, Jonathan and Kristi.

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

Hey, Garen.

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

On the in-patient market – good morning. On the in-patient market opportunity, appreciate the competitive landscape among current vendors, but there's also one of your outpatient cloud-based competitors who is trying to enter the space. So how often are you starting to run into them in the in-patient setting? And how big of a threat do you see them? And I guess beyond the big two competitors, who do you see as your most formidable competitors getting in the way of your success in the in-patient setting?

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

I love all of our competitors. I love that they're there and I have no ill will towards any of them. But you need to double check on the idea that anybody that you're thinking about is cloud-based. That somebody will host your data center and run backups does not make them cloud-based. I just described the agony we're going through centralizing the remaining tables that are being maintained by clients. These are companies where 100% of tables are maintained by clients. This is just rental software; and 99% of the code is running on the servers in the client side.

So let's be clear. Those guys are not cloud-based. eClinicalWorks is not a cloud-based company by any stretch. That being said, we haven't seen them in the market on the in-patient side. We hope they get in there. I'm more worried about a kind of a collapse due to a food desert of product, than I am about competition. We have plenty of hospitals that are saying I've got to go buy Epic because my stuff is exploding and I just don't think I can wait long enough. So, more products in there that are cloud-based, that are more interoperable or that are just new. The good news about eClinicalWorks is it's nice new technology that's been written while I was alive; and that's useful as an improvement over some of the stuff that we're trying to interface to.

So alternatives for small hospitals will make us good and will make those hospitals not collapse in the next three years. We have a genuine worry about clients collapsing or going onto systems they can't afford in the next three years.

Operator

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

Jamie J. Stockton - Wells Fargo Securities LLC

Hi, yeah. Good morning. Thanks. One of the things that you talked about in the prepared remarks that you're really working on is time-of-service collections. I would love to hear some more color on how you feel like the way you are approaching that isn't different than what your competitors are doing, given the providers are seeing more and more high deductibles and more patient pay?

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

Yeah, absolutely. So there are things that we're doing to just optimize the backend credit scoring and improve patient statements and electronic patient statements. But the two big moves that we're excited about are: A, reimagining the patient's initial engagement with the practice, so that they're almost always connected to us online. So portal adoption rate – text permission, mobile messaging permission rate – are going up multiples upon multiples as the team innovates the way you first connect to athenaNet; and that's going to continue up.

If you look at the early adopters there, the stuff that are in alpha, you have rates that are three times the rate of the average in the network. So, getting customers to know that the first step of having a doctor is being engaged with that doctor online, both financially and clinically, is probably the biggest opportunity and tracking the fastest.

Second fastest is a whole new section of the athenahealth rules engine that calculates what the actual specific patient responsibility is likely to be post adjudication. There is next to no real-time adjudication in the country. We used to have a big program to get all the payers to connect with us on real-time adjudication, maybe we'll try that initiative again in the future. But, frankly, the payers just weren't doing it.

And so, what we're doing now is building a team that is spoofing real-time adjudication, that is taking the allowables that we see coming off of paid claims, checking for deductibles, checking for the consumption of the deductible, and then calculating what portion of the allowable will be patient responsibility after the claim adjudicates and asking for permission of that exact amount on the credit card before check-in.

That engine exists, but we haven't built the rules engine. So we plug a number in there. Can we use your credit card for up to $300? So if they're coming in for a regular routine visit, they're like why would I give you permission for $300? See, I am thinking this might be $5 or $10, why are you asking me for $300. And if someone is getting their ACL repaired, we probably need their whole deductible, which can be $1,000 or $5,000 depending on the product. So that rules engine is the second big piece. It's a boulder for this year, so there – by which I mean that it's a new invention that we're expecting to be in existence, whether it's performing well across the base or not.

Obviously, our software type companies – they could build a engine, but it's not about the engine, it's about actually knowing customer-by-customer, instant-by-instant what that responsibility is going to be and providing the work flow that in sixth grade English, talks that receptionist through asking for the credit card and the amount. That's really cool stuff. It uses the bill on EOB functionality that is already unique to athena, where when an EOB comes in, the permissioning that happened, and the credit card swipe that happened at check-in for the co-pay can be reused automatically without a patient statement. All that stuff is there, but we need that rules engine; and the work is underway. Other than that, not much.

Operator

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

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

Hey, good morning. Thanks for taking the question. I wanted to ask about the bookings performance. It's sometimes hard to gauge from the outside, but it seems like the financial scorecard could indicate that bookings were perhaps below target during the first quarter. And based on your comments, it sounds like the pipeline activities are very strong. But can you just update us on the bookings trends you're seeing within the key sales buckets for small group and enterprise? Thanks.

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

So population health and hospital demand, volume, new meetings, every metric is off the charts high. Small group and group were a little lower than we wanted, partly because we promoted a ton of small group staff that did so well – and group staff that did so well up into this emerging hospital and enterprise business unit and may not have gotten the timing right on hiring the replacements, training them up and getting them in the market. That affects you.

Even on initial meetings, not having us starving, just something sales exec demanding the next meeting does affect that meeting pull-through; and then of course it affects closing the regular sales cycle. So those are two areas where we just operationally had a glitch. We are also thrilled, as Tim O'Brien described in his investor conference presentation, to be moving away from spinning at the watering hole and waiting for the federal government to drive people, driving the game, to actually going out and generating our own demand.

Our first effort at that was let doctors be doctors, that happened after the investor day, the very end of the fourth quarter, generated a huge spike in awareness and activity. There's a new one coming out soon, UNBREAK HEALTHCARE. I've seen the galleries and it's still fun. And it accesses the deeper, more powerful vein, artery of discontent that doctors feel, it's a harder conversation than just sitting there. I mean, anybody can sit there when the government has recruited people to buy something. You don't get to differentiate yourself; you don't get to build your identity the same way.

So the second thing that's going on in addition to our operational blip on hiring, et cetera, is a demand source shift. So, for example, the medical supply companies that we work with to bring in leads are very, very light. It's easier when there's Meaningful Use or ICD-10 for the guy who sells you medical supplies, I've got something for Meaningful Use. Now it's like, do you feel like this isn't what you're wanting the medicine for. It's a deeper conversation and they're unlikely to be as powerful.

And we work very hard with them, but they've been a little light since the decline of the federal programs in the conversation. And the last thing is, another temporary thing, our account management team has been working very hard and getting ready to switch the client base from traditional athenaClinicals to Streamlined. They are an extraordinary source of new meeting, new prospects.

So the account manager says, hey, does any – I noticed you send a lot of referrals to Happy Valley OB/GYN. Any chance they'd be willing to meet with us about getting you both on athenaNet. Think how cool that would be. Those meetings that those account managers bring close at an astonishing 45%, from initial meeting to close rate. And with the account managers getting everybody ready for Streamlined and moving all the doctors cheese, they've struggled to get the same number of meetings.

None of this changes our feeling about the year. We've got puts and takes all over the place. It's a – I pinch myself every day. I mean, Michigan State, are you kidding? That was phenomenal. Providence, I mean, into belly of Epic, no offense to you, but it's so great in there.

Operator

Our next question comes from the line of Robert Jones with Goldman Sachs. Your line is now open.

Robert Patrick Jones - Goldman Sachs & Co.

Great. Thanks for the question. Just looking at the overall head count growth, the one area that seems to have slowed a bit is in your sales and marketing. I know you guys are still obviously growing quota carrying reps, but just wanted to get a better understanding around the staffing cadence within that division?

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

You're kidding me right. Yeah, we threw off our staffing cadence in the small group and group market by promoting a lot of the people in that segment into others. Kristi, you try answering it. (41:21).

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

So that's it. I mean we're behind on our hiring plan. It's not a systematic shift in choosing to spend less on sales and marketing. We're just catching up on our hiring plans. It's totally a timing thing. And the other thing – two good things have come out of this. Number one, at athena, you know we really believe in promoting from within. And so that's exactly what happened. As we created some of these new services, we promoted and moved people from one segment into another, which made that a little bit light for a time. But we're also not going to compromise on the quality of talent that we need to bring in to meet the future needs of the organization. So no compromises on talent quality, and promoting from within got us a little bit behind. We're still focused on growing our sales and marketing function to help athena grow. We're still a growth company; nothing changed.

Operator

Thank you. Our next question comes from the line of Donald Hooker from KeyBanc. Your line is open.

Donald H. Hooker - KeyBanc Capital Markets, Inc.

Hey, good morning. Thank you for taking a question from me. So I wanted to kind of follow-on this discussion on the hospital space, which I think is very interesting and wanted to kind of hear maybe a little bit more elaboration from you all around kind of where you view a lot of these hospitals financially? And is there a need to screen from a credit standpoint in terms of what hospitals you would want to work with? Because maybe there are some that you might pass on. How do you think about sort of the credit worthiness of some of these hospitals?

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

We used to joke in selling to doctors in the early days that we restrict our sales team to doctors that have a pulse. And that was an interesting comment at the time because a lot of the doctors' pulses that we originally signed were quite thready at best. Death, when you have a very fragile new product is an often competitor, because dishonor and weakness seems a lot better than death. This is a segment, not only are the HIT companies dying, but a lot of the hospitals are dying. You have very, very low bed occupancy in this segment, a need to dramatically change strategy from kind of end provider of in-patient and acute care to front-end of the larger health system for the ill.

It is a business model that can work, but they need to do a lot of transformation, a lot of reduction of their core fixed costs, which is where we come in. We have already had customers have to back down due to financial crisis that started long before we showed up; and it's going to be something that we're going to have to pay more and more attention to as we grow in the segment. Right now, we're so new and so early – in med school they operate on cadavers. I mean, anybody who is willing to try with us right now, we want to work on. But certainly in the coming year, the testing -especially because we get paid a percentage of collections, right? We're going to have to be a little bit careful with.

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

Yeah. So I think we are still new to this, Don. So there really isn't a discernible trend. It's something that we're watching. While we have had some clients, the potential clients drop out due to financial problems, we've also anecdotally had the opposite where we've had a couple of clients that maybe were skittering on the edge, but are now on more stable ground because of their association with athena. So more to come on that, but it's definitely something that we are keeping an eye on.

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

It's one of the reasons we were all a little reticent about the in-patient segment. We were wondering whether there would even be one and should we instead just build the modalities that happen inside a hospital, because really what's a hospital, it's a cement wrapper around a lab, and imaging center, a pharmacy and some nursing beds. Most nursing now happens at home, most imaging – well, there was a kibosh on independent imaging centers.

It would have been the case by now that most imaging happened. That didn't happen in time, but at every market segment – and I've written about this way too early – but the level of underlying financial fragility of every major medical center in the company of every size. I mean, for example, I think if you took the imaging margins out of every hospital right now, more than half the hospitals in the country would close.

Some of the best names in healthcare with the best institutions in healthcare have the majority of their profits coming just from an anomaly where the cost of the imaging equipment is going down because of digital equipment faster than Medicare can figure it out and chase them down. Those things are real and are going on. I don't think the doctors and the care and the patient are going anywhere, but the shape of the purveyor is definitely going to change from bricks-and-mortar to more of a service network.

Operator

Our next question comes from the line of Jeff Garro from William Blair. Your line is open.

Jeff R. Garro - William Blair & Co. LLC

Good morning. Congrats on the nice quarter and thanks for taking the question. I wanted to ask in light of recent security breaches and the ransomware incidents in healthcare, curious how conversations are going, whether you're trying to persuade prospects that your SaaS-based platform is likely less susceptible to breaches given all of your investments in network operating centers?

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

Yeah. No, obviously, we have a vastly more sophisticated security apparatus than any normal hospital should rationally pay for it. It just makes sense, right. If your whole IT budget – we easily spend more and can attract a caliber person than any hospital would ever make sense having, but we also have a larger target on our backs, right. So with 72 million patient records, we're more interesting as a target than somebody with one or two.

So it remains a major focus. Prakash Khot, our new CTO, has given us a lift and good nexus that reports directly to me to take another look at our security apparatus. Kristi has done a lot just on the physical security around here, the intensity with which we monitor where people go and how just so that the social aspect of data hacking, which is 99% of the time the origin is social. It's a person who didn't know and gave a password or went a place or whatever that they shouldn't have.

So we have to be vigilant on it. The key is to be vigilant in a way that's very inclusive. That's a group project and not kind of an socially isolating experience that will: A, hurt our culture; and B, get less buying. And I'd like to have 5,000 co-patrollers than a few patrollers patrolling 5,000 employees.

Operator

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

Eric Percher - Barclays Capital, Inc.

Thank you. So given your comment about group sales and maybe referral source productivity, the enterprise seems all the more important. You spoke about 1,800 physician adds in the quarter. I think you've mentioned 800 from known entities, the Trinity, Privia and New York-Pres. Could you speak a little bit about what they're contributing and your expectations for the year? And then I know we've seen one of your competitors put out a couple of releases around winning current customers' ambulatory businesses. Have these been surprises at all, expected, meaningful, what's your view on those?

Dana Quattrochi - Executive Director-Investor Relations

I'll take the first part of the question. So Trinity added 500 physicians, about 800 providers in the quarter; Privia added another 100. They were the bulk of the publicly announced deals, representing the 800 you mentioned. We're not done with Trinity. Of the business we won, we're about two-thirds through that. We're still working with New York-Presbyterian. Adventist just kicked off. So there is more to come on the publicly announced deals. And as Jonathan mentioned, we signed Michigan State in early April. That's another 250 providers. And enterprise can be lumpy, but we believe we've had a great start to the year, year-to-date.

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

Right. And as far as your question about sort of competition in the marketplace and maybe some of our competitors taking away clients, Jonathan talked earlier about how we really like having competition in the marketplace. That makes us stronger. And while we have seen some clients go to our substitute providers, we've also pulled them our way. So that's how a competitive marketplace works. We win some and we lose them. But I think on the whole, we feel really optimistic and positive about our ability to win rather than lose.

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

I mean, the whole MDP program, More Disruption Please program, is literally – it's about attracting alternatives to athena into the healthcare continuum. It's too bad that Epic and Cerner and MEDITECH and all these guys can't build open enough platforms, because we don't really want to do athena dietary management systems. But if it doesn't come out of MDP and if Epic and Cerner and MEDITECH don't open up their API so that they could be used by responsible developers, what can you do, you've got to create a new generation.

I am hoping that – we're a very small player in terms of each of these modalities. Healthcare is a thousand different industries, each of which needs athenahealth. Now we'd like to be the backbone that connects them on; and so far we're pretty far out in first place in that regard. But Google doesn't make all the apps that you use or it doesn't own all the sites that you use when you go on to Google. It connects you to them. We very much want to be an industrial strength version of that for the healthcare space, but it requires either new entrants or established players being there. And it's happening, you know that, but I'm just saying – I'm just panting.

Operator

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

George R. Hill - Deutsche Bank Securities, Inc.

Hey. Good morning, Jonathan, and congrats on the Providence deal. I am surprised we are not talking more about that. Can you talk about what exactly you're selling into Providence, so we can kind of think about the market opportunity there. And then as it relates to population health, can you talk about the demand for – what exact functional components are you guys seeing demand for as it relates to population health right now?

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

Right. So as we mentioned earlier in the hospital question, hospitals need to morph from something that's centric around a bunch of departments wrapped in brick to a network, right, to a corporate entity responsible for a population of patients, whether they need to be inside the bricks or not; you need to change your business model, so you can get paid for engaging people where they need to be engaged; you need to change it, so that you can find people who frankly just don't access the system because it's too inconvenient and expensive, and so they end up triggering losses later on down the road.

The more forward-looking health systems – actually all health systems are now aware that they need to – as part of this – build a virtual layer around their bricks-and-mortar that engages patients on a regular basis. Our population health service does this, right. So it gets chunks of patients. And it doesn't have to be patients at risk. Typically, we start with the patients that are under risk contracts because the payers will give us a direct feed of the paid claims data. So suddenly we can see everything that's happened to these patients in the last three years and we can go and trace a line to all the different places where they've gotten care to build an amalgam of the medical record – of the key medical records data necessary to really drive a care pathway for all those patients, right. It's a population engagement service as much as it is population health.

So we take the paid claims data feed, then we match it to in-patient, outpatient, other medical record system feeds and create essentially a light version of athenaClinicals that's attached to a very heavy version of athenaCommunicator, where we buy sub segments, by phenotype of patient, launch care management sort of human engagement program. Some of them are human engagement by the staff of the health system. Some of the more simple ones that are larger populations of patients are actual virtual engagement by athena in the voice of the health system.

So the low-hanging fruit is managed all the time by athena; the surface to higher and more important fruit is accessed using athena more as a platform by the system itself. It's either charged for as a percentage of the savings we generate. If you have a real risk contract, we will only get paid for the savings. We've done so well on the savings, but this actually approximates our list price, which you can also get just by charging a per member per month if they want to engage populations for whom they don't yet have a risk contract to speak of.

The difference of course between a traditional medical record stuff is that you're responsible for these patients regardless of where they sit in your medical record; you're responsible for them even when they're getting care at places, at doctors that don't work for you; you're responsible for them if they go to the emergency room of your competitor across town. And so that ability to pull together a complete picture, that need for interoperability, mitigates well to our core competencies.

And so too does taking on large, large, large amounts of busy work doing the low level engagement with patients that need their annual pap smear, that need a mammogram, that need a follow-up, that need to know that their result was normal and haven't picked it up yet, that need to pick up their drug and haven't done so, or at least need to admit that they're never going to, so the doctor can try a different course of care. These are the kinds of low-grade follow-up work that doctors are dying to have done for them, so that they can actually be doctors and not just be kind of guessing with patients when they happen to beat a path to their door.

It's a very profitable business initially. We may have it be a little less profitable depending on how much of that outreach we take on. We already take on a lot of it, but we could take on more. And it's very valuable to the survival of the system because it allows them to move market share and brand identity towards the well, not just towards the subset of people that need to spend nights and nights and nights in acute care beds.

Operator

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

Greg Bolan - Avondale Partners LLC

Thanks, guys. Just, I know that obviously on the DAR side, this is constantly a focus for Athena. Just thinking about the patient side just in terms of collections, I think Jonathan you mentioned that earlier. DARs are staying pretty stable. Do you foresee a time in the coming years where that goes from, call it, the 40%, 41% area, down to the mid-30%s? And, Kristi, I think, we've kind of touched on this last call, but can you remind us maybe what that opportunity is from an incremental revenue perspective?

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

I remember it's one time, but let me – it's an absolute priority. So Dave Tassoni is now the General Manager of our Collector Service. He has everything he needs, development, design, analysis, operations, all under him directly. He's got two big levers he's working on. One is stuff that we're still waiting on the customer for. That's what we call hold bucket. We can cut that. He is already started. For the first time in years in the first quarter of 2016, we had a major reduction in the hold bucket levels of clients, the amount of stuff that we're waiting on the client before we can get it to the payer. And the second thing is all of the self-pay work I told you about.

Those two things, stuff in hold and self-pay are his top two priorities, and he is tracking well against them; and, yeah, absolutely into the mid-30s%. I think our median may already be in the mid-30s%, but you've got these outliers with credentialing problems that bring the mean out of match with the median. So, absolutely into the mid or low-30s%.

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

Yeah. Each day that we take off, DAR is worth approximately $3 million in revenue to us. So it's an important...

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

And I dare say that revenue goes briskly...

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

...to the bottom.

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

Like Montezuma's revenge, right?

Greg Bolan - Avondale Partners LLC

Understood. Thanks, guys.

Operator

Our next question comes from the line of David Larsen from Leerink Partners. Your line is open.

David M. Larsen - Leerink Partners LLC

Hey, guys. Congratulations on a good quarter. In the prepared remarks, there were some comments around accelerated development efforts for Toledo. Can you give anymore color around that? And then also in terms of initial investments into the Razor product, I think you were adding more revenue cycle, patient accounting capabilities of the Razor product. Is that largely complete, any update there would helpful? Thank you.

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

Huge amount on the patient accounting for the Razor using the same platform, same approach, right. So the front desk for the hospital is the front desk for athenaNet, it's the same front desk, same work flow, same insurance capture, same portal registration; everything is the same. In fact, one of the big arbitrage opportunities for athenaOne for the in-patient is, we get all the doctors around the hospital, we don't have to register them when they show up at the hospital. We already know what their deductible utilization is, we already know their eligibility, we know their medical records, et cetera, et cetera.

So there is a huge duplication. The stuff that's new to us on the hospital side are things like accounts payable, where we've got to maintain now a national chart of accounts. Now there has been a product we've been dying to release for years, for a decade, called athenaController, which basically takes on the same approach to the cost cycle as we have to the revenue cycle. We are now pregnant with that baby. We have to do it.

We were already providing kind of a toolkit level of that with a shared national chart of accounts, where every hospital is going to know exactly what each natural and their chart of accounts is doing compared to their peers nationwide. There is a huge opportunity once we've rationalized that chart of accounts to do the work, to do the benchmarking, to do the real ordering, potentially through our partners at Schein and McKesson, et cetera. But that work is new work, the patient stuff is not new.

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

But just a little further color, as we brought over Razor, one of the things that we found out pretty early on was that there was more reusability from the ambulatory side, particularly on the collections piece that we could put into the product pretty rapidly. So we actually were able to drop our first claim in July of last year. So we had some early success with that.

I think our partnership that we've just announced with Intacct moves us along that path of being able to provide general ledger types of services for clients in the space. And then finally I guess, I would say I don't know that we're ever done. If you look at our first product ever, collector for the ambulatory space, we're still today finding ways that we could make that leaner, more efficient and better. So we feel good about what we have in this space right now and how fast we've been able to develop it. I think there's a lot more to come.

Operator

Our next question comes from the line of Charles Rhyee from Cowen. Your line is open.

Charles Rhyee - Cowen & Co. LLC

Yeah. Thanks for squeezing me in here. I just want to come back to the small hospital opportunity as well, Jonathan, and talk about – a lot of these hospitals also are critical access care hospitals and they get a lot of exemptions from the government. And I am just curious how much of an inertia to change that creep in that client base, recognizing that there is lot of needs that they have as well.

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

Yeah. Well, it causes you to need exemptions they get. I don't know if it's an exemption or just a check. They get 10% over their supplies and expenses, as long as you categorize and can identify and can back up the nature of those expenses. So suddenly in order to submit the claim, the mother of all claims, we need expenses to be carefully managed and categorized. We need to exclude stuff that are not appropriate for reimbursement. That accounting, that form filling, it's a lot like what we do for the FQHC segment.

So we've got a very large and very fast-growing business with FQHC. One of the reasons why we've had a run on that is we fill out all of their federal reimbursement and performance reporting for them, just like PQRS or Meaningful Use. This is true of critical access hospitals. In order to start where we wanted to start, which is at the low-end, we needed to build that competency. We wouldn't have otherwise done it obviously, but those are key constituencies to athenahealth, now those low-end hospitals; and we want to be the best in the world at keeping their fixed costs low so they can survive. And that includes all of that expense management.

It's a little bit like that – sorry. It's a little bit like that earlier question about the government programs, the MIPS. These programs are ridiculous. But they in a way provide a very easy first date for athenahealth. They're these multi-hundred page absurd bureaucratic dances that you have to do; and if you miss the step in the dance, you can go to jail or you get a similarly cutoff by Medicare. And so, our ability to just be vigilant about making sure that every step is followed every day of the year is a strong reassurance to the entire healthcare market right now as all of these programs come barreling through.

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

I think that was our last question. I like the last section of the Kristi's prepared remarks that I think we've started to say it around here cautiously like maybe a lightning bolt will strike us if we're heard to say it, but we're starting to believe that the healthcare Internet is actually going to happen. We just used to use it as sort of our P. T. Barnum line to get people to come and join the circus. And no, there is 10% of all medicine, ambulatory medicine is happening, obviously a smaller percent of in-patient care, but growing at hundreds of percent a year, with no sign of abating, a level of joy in the small community hospital markets that have come on that we just remember from early days of struggling independent practices as our only clients on athena. And it creates a level of optimism in us and euphoria, but also a huge amount of – a sense of fiduciary responsibility, this is getting serious. And I think we're up to the task, and I want you guys to know that we're aware of it.

Kristi Ann Matus - EVP, Chief Financial & Administrative Officer

Thanks all.

Operator

Ladies and gentlemen, thank you again for your participation in today's conference. This now concludes the program and you may all disconnect your telephones at this time. Everyone, have a great day.

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