Software Companies Improving Health Care - TheStreet

Health care spending represents some 20% of U.S. gross domestic product annually, yet technology driving the industry remains archaic. Doctors continue to keep track of patient health records in paper files, and clinical trial research is often conducted on paper. Boston has long been a hotbed of technology and startup activity, and two young companies that claim its suburbs as their home are improving how pharmaceutical companies and physicians use technology.

Athenahealth

(ATHN) - Get Report

is an on-demand software company that serves the medical industry, providing tools for medical practice management and electronic medical records. Due in part to the archaic nature of health care technology and the maze of insurance company billing procedures, revenue collection for physicians is a hopelessly challenging task. Doctors frequently lose out on revenue due to complicated billing procedures, constantly changing rules, and inefficiencies in the process, despite hiring teams dedicated to the job.

Athenahealth's flagship product, Athenacollector, launched in 2000, allows medical practices to outsource the process of billing paying entities like Medicare and private insurance companies. Leveraging modern technologies like Software as a Service and a social-networking inspired rules engine, Athenahealth brings a large degree of automation to the claims process and drastically reduces the time it takes for doctors to get paid. Close to 15,000 physicians currently use the Athenacollector product, and customer satisfaction is very high.

Athenahealth's second product, AthenaClinicals, was launched in 2006. It is an electronic medical records product that is sold alongside AthenaCollector, and unlike the majority of solutions on the market today, is delivered in the Software as a Service model. Because Collector is a cloud solution rather than a client server product, it can partner with third-party providers like radiology and blood labs to digitally track test results, entirely removing paper from the clinical process.

Phase Forward

(PFWD)

is the market leader in Electronic Data Capture, or EDC software products and services which automate the clinical trial process. Founded in 1997, the company's flagship product is InForm, which allows pharmaceutical, biotech, and clinical research organization conducting clinical trials to record, track, and analyze data in digital form. It is estimated that 60% of clinical trials launching this year will use an EDC product, up from 50% last year, leaving a surprising 40% that continue to use other methods including paper and disjointed excel spreadsheets.

Standardized digital capture of clinical trial data allows research organizations to rapidly analyze and identify relevant trends and signals as they develop. This allows the research organization to cancel and reallocate funding early on when a trial is showing signs of failure. It is estimated that drugs cost $800 million on average to be developed and brought to market, with the clinical trial process being a significant expense. Further, Phase Forward's system is Web-based and supports many languages, allowing data to be collected in various countries and languages. Increasing the population a research organization can draft to test new treatments and drive down costs are additional benefits provided by Phase Forward.

Athenahealth and Phase Forward, based near Boston, are improving efficiency and removing costs from clinical trial and ambulatory medical processes. Investors are becoming increasingly aware of the crucial role these companies are playing in driving health care into the 21st century.

Battle Road Research (www.battleroad.com) an equity research firm, serves fund managers, analysts and financial advisers with an independent voice on technology, health care, solar power and education stocks. Battle Road analysts place an equal weight on industry and securities analysis in an effort to seek out stocks to buy and stocks to avoid. As an integral part of our research process, we tap into a network of industry sources who provide insight into the companies we cover. We present our conclusions in a straightforward buy, hold, sell format. As a matter of principle, we refrain from investment banking, company-paid reports, and personal investment in the stocks we research. Visit us on the Web at www.battleroad.com and www.battleroadblog.com.