Last time Jonathan Bush was in the corporate world, he was engaged in a bruising battle with Paul Singer’s Elliott Management, ultimately losing control of AthenaHealth, the health software company he co-founded in 1997 and took public a decade later.
That was June 2018. Bush resurfaced this past September, announcing that he was becoming executive chairman of start-up primary care provider Firefly Health, which is trying to make quality care “effortless for all to access.”
Having been out of action for over a year, Bush is starting to open up about his painful experience losing his company to activist hedge fund Elliott, the same firm that’s now trying to push through major changes at AT&T. Over the course of several recent interviews with CNBC, Bush recounted the saga and talked about his expectations for the future of health care.
His final days at AthenaHealth were dark, not just because he was being pushed out by an investor that was intent on cutting costs through layoffs, but also as allegations of bad behavior began to surface. In particular, Bloomberg published a story about past domestic violence allegations, as well as an accusation that he “engaged in highly inappropriate conduct” with an employee at a banquet in 2005, according to a complaint that was filed in Massachusetts. The woman told Bloomberg that she regretted filing the complaint.
Bush said his job began changing in mid-2017 after he got a call from an Elliott employee, who said there were problems with the business that were weighing on the stock price. Elliott took a 9.2% stake in the company and said there were opportunities to “maximize shareholder value.” Bush and the board responded by making cuts to improve efficiency, an approach he later compared to operating with a “gun to your head” and regretted because of the harmful effects it had on employee morale and company culture.
Board meetings also became tense, unpleasant and way too frequent.
“Suddenly they are meeting three times a week,” Bush said. “It’s acrimonious and there’s fear about what’s being written down.”
Investors pointed to the stock price, which was hardly moving, while the S&P 500 was going up and the Nasdaq was rallying even more. Meanwhile, research and development costs at AthenaHealth jumped 21% in 2016 and another 29% in 2017, outpacing revenue growth, which was in the teens.
“I know why I was targeted,” Bush said. “We had a flat stock for over three years. And Athena was a steal. It’s a great business to own.” An activist could look at it and see, “R&D and marketing spend going up but the stock isn’t,” he said.
Once Elliott got involved, Bush says his mistakes became more apparent — and in unflattering ways. Media reports came out about the company’s work hard, play hard culture and the drinking that sometimes occurred at corporate parties.
Elliott presented a 45-page critique of Bush’s leadership to the board of directors, according to the New Yorker, including anonymous comments from employees and a slide that included photos from Bush’s Instagram account during a recent sailing trip, juxtaposed with drops in the company’s stock price. Elliott told the magazine that there was a compelling argument about why Bush shouldn’t be running the company.
While Bush acknowledges that activist investors can help companies operate more efficiently, his memories of the period are brimming with difficult personal experiences, including being suspiciously photographed while on a walk with a former female colleague in a park. He also says he got phone calls from other executives warning him of the “lengths these guys would go” to win.
Bush doesn’t have any evidence that Elliott was responsible for digging up the dirt, and the firm denied to the New Yorker having any involvement in it. However, Bush said he suspects that Elliott was behind the negative media reports about Athena’s culture and his personal behavior. Elliott declined to comment for this story.
An industry antagonist
As the battled waged on with Elliott and his public image suffered, Bush said he was told by crisis communications experts to keep quiet.
It was an unnatural position for him.
Bush, the cousin of former president George W. Bush and nephew of the late George H.W. Bush, is known in the health-care world for speaking his mind and for lightening the mood at industry events with pithy on-stage quotes. After two of his competitors merged in 2010, he compared it to a “woolly mammoth dating a dinosaur.” He once described a rival executive, former Allscripts CEO Glen Tullman, as a “symbol of atrophy.”
He and Tullman were supposed to be on a panel together at an industry event in 2009, but Tullman had to bail at the last minute and was only able to join remotely, meaning he would be beamed in from an overhead monitor above the stage. Bush dipped into his bag of tricks, surprising the audience by running out in a pair of red athletic shorts, reenacting Apple’s famous 1984 Macintosh commercial, where a woman in a similar outfit throws a sledgehammer at Big Brother on a big screen. Instead of a sledgehammer, Bush through a Nerf football at the image of Tullman, who was head of the much bigger and older company.
Bush started AthenaHealth in the late 1990s with Todd Park, who he previously worked with at consulting firm Booz Allen Hamilton. At the time, medical records were often stored in paper form, and the few electronic systems that existed couldn’t talk to each other.
Bush and Park brought the concept to the cloud, where documents could be stored, shared and viewed across networks. AthenaHealth benefited from the broader transition to cloud software and got an additional boost from the Obama Administration’s HITECH Act, which was signed in 2009 and provided tens of billions of dollars in incentives for health providers to adopt electronic medical records and ditch their paper systems.
AthenaHealth was one of the few vendors, along with legacy players like Epic and Cerner, big enough to deal with all the rules and requirements necessary for certification. Bush admits the regulations were good for his company but bad for innovation.
“The regulation froze the market and set a series of monolithic requirements that didn’t ebb and flow with need and utility,” he said. “Athena was able to scramble through it but hundreds of start-ups fared far worse.”
AthenaHealth’s stock price jumped ninefold from June 2010 to a record $204.41 in early March 2014, giving it a market value of $7.6 billion. It would never get close to that level again, plunging steadily for the next two months. Then in May of that year, Greenlight Capital’s David Einhorn said the stock was “caught up in a bubble and could easily fall 80% or more.”
Paul Singer, founder of Elliott Management, speaking at Delivering Alpha in New York on Sept. 13, 2016.
David A. Grogan | CNBC
In November 2018, five months after Bush stepped down, AthenaHealth was acquired for $5.7 billion, or $135 a share, by Elliott and private equity firm Veritas Capital. Elliott had initially offered $160 in May, but the team, still led by Bush at the time, said no.
A month after the deal, Bush joined CNBC’s “Squawk on the Street” for an interview from the New York Stock Exchange. A frequent guest of the network when he was CEO, Bush started off by saying, “It’s a little bit like getting invited to my ex-girlfriend’s family for Thanksgiving, but it still feels good to be here.”
Bush was highly critical of the atmosphere that an activist investor creates in a company and the fear that suddenly infiltrates every meeting and event.
“The death of optimism at Athena made it a hard place to run, made it a hard place to sell and that was really exclusively due to that experience,” he said. “It was not a cynical, negative, fearful place before. It turned on a dime.”
Given how unappealing it can be to be public, it’s no wonder that “there are half as many stocks on the Nasdaq today as there were when I took Athena public ten years ago,” he said. In a recent chat with CNBC, he said it’s an unfortunate dynamic for investors because when companies aren’t publicly traded, “only wealthy private-equity type players get to have these returns.”
Back at a private company
At Firefly, Bush is working to strip out some of the waste and inefficiencies with the health care system. He calls it the “Marie Kondo” of the industry, a reference to the Japanese author and consultant known for making things more simplified and organized.
Bush said the future of the $3.5 trillion health-care industry will involve more virtual care and fewer large hospital systems that are incentivized to fill beds. Firefly aims to provide primary care to patients in person or through an app and to help them find the right specialist.
Bush met Firefly CEO Andy Ellner years ago while serving on a hospital board, and the two shared their mutual passion for transforming primary care. Later, when Bush learned about Firefly from his wife, who had joined as president, he knew he wanted to get involved. Bush is also sitting on the boards for Innovaccer, a Silicon Valley artificial intelligence company focused on the health sector, and SonderMind, a mental health start-up that helps people access therapists.
Bush is devoting about half his time to Firefly Health, and the rest to advising companies, joining boards and hanging out with his wife and children. In a followup text message, he said he thinks “about running something someday.”
Wherever he lands, Bush is pretty sure he won’t be dealing with any more activists.
“I was recently told by a friend that I’m pretty much unemployable as a public company CEO,” he said. “They’d be happy to have me involved with any private company, which is where the returns are.”