Revenue Cycle Yearly
Revenue Cycle Yearly, an initiative by Novistra Capital, is a curated annual newsletter to keep you updated about the Revenue Cycle Management Industry. In this annual review of the year 2021, we bring you latest news & developments, along with select M&A transactions for the calendar year.
Throughout 2021, COVID-19 spread across the US with hospitalization rates skyrocketing as a result of the Delta variant. This, in turn, further exacerbated pressure on healthcare systems’ margins and capacity. In Sep-21, The US government announced the distribution of ~$9bn of funds via Phase 4 of the Provider Relief Fund (PRF) with payments to providers who experienced revenue losses and increased expenses related to the pandemic. The government also passed the Telehealth Extension Act, establishing a two-year extension for certain COVID-19 emergency telehealth waivers, extending the waivers of the geographic and site restrictions, and allowing Medicare beneficiaries to access telehealth when at home. With the effects of the pandemic receding, we expect industry trends to improve in 2022.
The pandemic accelerated digital transformation in the RCM industry with heightened focus on efficiency and care quality. RCM companies continued to invest in Cloud, Artificial Intelligence (AI), Machine Learning (ML) and automation/ robotics (RPA) to enhance products and services, reduce costs, and accelerate growth. We expect these technologies to gain further traction in 2022 and provide revenue opportunities for innovative market participants.
The RCM industry experienced strong M&A and private placement activity throughout 2021. Strategic buyers accounted for the majority of these transactions, notably technology giants Microsoft and Oracle, who pursued acquisitions to strategically augment their healthcare offerings. Funds and PE-backed players continued platform and bolt-on acquisitions to further enhance their digital health offerings. We expect the sector’s continued focus on cloud, predictive analytics and automation to drive transaction volumes in 2022.
Upcoming Industry Events
Novistra Capital is a boutique M&A and PE advisory group with a strong focus on the Healthcare Revenue Cycle Management Industry. Founded in 2010, Novistra has a team of experienced professionals, located across 4 offices in the US, UK and India. Please contact the following members of the Novistra team to discuss strategic options for your company.
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Peter X. Li
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Latest News & Developments
Legislators float bill to extend and expand telehealth
The US Congress passed the Telehealth Extension Act of 2021 that would extend and expand access to telehealth services in the Medicare Program while imposing certain requirements for high-cost services. The Act would remove geographic and site constraints on Medicare enrollees’ access to approved telemedicine services and would provide clarity, certainty, and a framework for developing a telemedicine system that increases access, protects patient choice, and includes fundamental fraud and exploitation precautions.
Additionally, the Act would create a 2-year extension of the COVID-19 emergency telehealth waiver, permitting new types of providers to supply telehealth, including audio-only options. Telehealth services will also be available to federally certified health centres, rural health clinics, Indian Health Service (IHS), and Native Hawaiian Health Care Systems.
Finally, in the event of a disaster, the bill gives the CMS broad discretion to authorize further telehealth flexibility. The Act received support from more than 15 organizations, including key leaders across the healthcare community, and already has 30 bipartisan cosponsors.
Optimizing financial clearance is priority during the pandemic
Financial clearance, including patient identity verification and eligibility checking, has helped both providers and patients to overcome operational challenges during the pandemic. It has increased revenue from both payer and provider by ensuring data accuracy to prevent denials, identifying those patients that are likely to pay, and connecting patients who need financial assistance with the proper programs.
Organizations need to follow three important practices to ensure that patients can quickly obtain maximum funding with minimal effort:
(i) Screen every patient for eligibility – identify self-pay or uninsured patients and screen them as soon as possible;
(ii) Utilize automation to identify funding sources – enter patient response data into an automated program able to identify and submit applications, increasing efficiently;
(iii) Monitor performance metrics – review performance metrics in real time, make adjustments, and implement ongoing improvements to ensure that patients receive funding and that healthcare organizations are reimbursed in a timely manner.
If followed correctly, optimizing financial clearance can be a strategic advantage for driving improved revenue metrics, market share, and patient loyalty.
Migration to cloud-based RCM boosting technology spending
Cloud-based technology spending is becoming increasingly necessary in the US healthcare industry as it allows organizations to move from in-house, high-cost infrastructure maintenance to a “pay-for-what-you-use” model. With flexible and scalable capabilities, health clouds reduce IT complexity and decrease costs while enhancing resource utilization and service delivery.
By 2024, healthcare organizations are projected to spend an estimated $50bn on technology investments, with cloud driving much of that expense. The global market for cloud technology in healthcare is expected to grow by more than $25bn between 2020 and 2024.
While adopting a cloud server can save organizations from purchasing costly infrastructure in the future, frontend cost such as PaaS platform deployment and IT managed services can get expensive.
Therefore, it is critical to weigh the short-term expenditures against the long-term ROI for cloud migration. Before migrating to the cloud, it is important to review all unforeseen costs, as the total cost paid for cloud services should cover customer satisfaction, performance data security, and compliance.
Value-based payment models leading to better care quality
According to a recent Humana study of Medicare Advantage (MA) members, MA patients receiving valuebased care received better overall health outcomes, as well as lower costs and more preventative care.
The report found that 67% of Humana’s individual MA members sought care from primary care physicians in valuebased agreements, considering that, as of December 31, 2021, about 67,800 primary care physicians had value-based contracts with Humana.
A vast majority of Humana ‘s MA members (approx. 90% of 4.6mn members), had at least one chronic condition, while approx. 83% had at least two chronic conditions. Humana pointed to these statistics as evidence that value-based frameworks are appropriate for these populations, given that the care model is more focused on prevention.
Humana’s value-based proposition achieved an estimated medical cost savings of 13.4%, compared to volumebased Medicare. Preventative care helped lower the usage of acute care services, and value-based physicians reduced avoidable hospitalizations by 11% over their fee-for-service counterparts.
Strong M&A activity in 2021
*All figures in $ millions, except valuation multiples
Select M&A Transactions in the RCM Industry
The world’s largest database system management firm, Oracle, announced the acquisition of Cerner through an all-cash tender offer for $95.00 per share, or approximately $28.3bn in equity value. Cerner is a leading provider of digital information systems used by hospitals and health systems. Subject to regulatory approvals and satisfying other closing conditions, the transaction is expected to close in 2022, including Cerner stockholders tendering a majority of Cerner’s outstanding shares in the tender offer. Post closure, Cerner will become a dedicated business unit within Oracle.
The acquisition will be earnings accretive to Oracle on a non-GAAP basis in the first full fiscal year after closing and the company views Cerner as a major engine of revenue growth for years to come as they further expand Cerner new countries and geographies throughout the world. In addition, Oracle’s corporate mission now expands to provide overworked medical professionals with a new generation of easier-to-use digital tools enabling access to information via a hands-free voice interface to secure cloud applications.
Global data analytics player, Verisk, announced the acquisition of Actineo, which offers a comprehensive portfolio of technology, services and data solutions to support the entire bodily injury settlement process. Actineo’s portfolio includes solutions for the procurement and coding of medical data and the assessment of bodily injury claims, medical billing checks, as well as a SaaS-based platform for bodily injury claims management.
The financial details of the transaction were not disclosed. The acquisition aligns with Verisk’s innovative technology and digital business strategies and is a significant step for Verisk into the European market. Verisk will add ACTINEO’s established claims management solutions to its data analytics and insurance ecosystem, providing customers with digitalization and medical expertise solutions throughout the entire claims process. In addition, the acquisition will provide a strong platform for Verisk to expand its footprint across Europe from ACTINEO’s joint venture subsidiary ANTEVIS, which offers innovative digital solutions for medical coding and assessment of medical malpractice injury claims within the European market.
GeBBS Healthcare, a ChrysCapital portfolio company and provider of technology-enabled RCM & Risk Adjustment Solutions for Healthcare Providers and Payers, announced the acquisition of Aviacode. The company, based in Hyderabad, India, provides medical coding and compliance services to healthcare providers, including hospitals, physician groups, surgery centers, imaging centers, and payers. The financial details of the transaction were not disclosed.
The transaction broadens both the capabilities and the geographical reach of the combined company and once integrated will establish a combined strength of 9,000 employees across U.S., Philippines, and India, including 2,000 AAPC/ HIMA certified and 60+ specialty coders. This acquisition aligns with GeBBS’ growth strategy, which will enhance its end-to-end RCM services, workflow/automation tools, and its geographic footprint through Aviacode clients. GeBBS’ will further expand its US-based portfolio with added delivery capabilities, as well as medical coding, audit, and CDI services.
One of the largest announced transactions in the healthcare IT space, Microsoft is acquiring Nuance Communications for $1bn. Nuance is a pioneer in AI-based conversational technology solutions and is trusted by 77% of U.S. hospitals and 85% of the Fortune 100 companies worldwide. Over the past three years, Nuance has streamlined its portfolio to focus on the healthcare and enterprise AI segments, where there has been accelerated demand for advanced conversational AI and ambient solutions. Beyond healthcare, Nuance provides AI and customer engagement solutions across Interactive Voice Response (IVR), virtual assistants, and digital/ biometric solutions.
The acquisition builds upon the existing successful partnership between the two companies, which began in 2019. By augmenting Microsoft Cloud Solutions with Nuance’s healthcare solutions and combining Nuance’s expertise and strong relationships with EHR systems providers, Microsoft will be better able to empower healthcare providers through the power of ambient clinical intelligence and other Microsoft cloud services.
RCM industry underperformed the S&P500 in 2021
Public Comparable Company Analysis – RCM Industry
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