Revenue Cycle Quarterly
Revenue Cycle Quarterly, an initiative by Novistra Capital, is a curated newsletter to keep you updated about the US Healthcare RCM Industry. In our first edition for the year, we bring you the latest trends, developments and insights, along with select M&A transactions that happened during Q1 2021.
Increased vaccination rates and stringent government measures has led to a decline in U.S. COVID-19 cases through the end of March, providing much needed relief to the country’s strained healthcare system. However, hospitals and nursing homes are still looking to the Senate for further assistance after being left out of the White House’s $1.9 trillion stimulus package. The Biden administration is prioritizing healthcare technology in its budget for 2022, including higher funding for digital health response, modernizing public health data collection and driving digital health innovation.
Healthcare providers and service companies around the US have shown an increased precedence for virtual care, AI and other predictive technologies when it comes to digital health investments.
Hospitals and independent physicians are preparing for a permanent shift to virtual care for some of their functions, including remote monitoring for inpatients and outpatients and telehealth consultations. While companies are investing in AI, they are also engaging in strategic partnerships with other technology and healthcare IT/ informatics companies to drive innovation, implement digital transformation and streamline complex processes.
M&A activity remained healthy in Q1 2021 as strategic investors pursued targets in search of new technologies and complementary solutions. Also, financial investors sought out bolt-on acquisitions to strengthen existing platform offerings. Overall, the RCM industry witnessed deals in diverse investment themes, including healthcare payments, billing and claims, workflow automation software, patient engagement, EHR data management, denials management, RCM services and medical coding. Heightened demand for RCM services and the need for digital transformation in the industry is expected to accelerate M&A activity in H1 2021.
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About Novistra
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.
Ripun Jai Mehta
Managing Partner
ripun.mehta@novistra.com
(646) 645 1935
Pankaj Arora
Managing Director
pankaj.arora@novistra.com
(917) 460 0659
Peter X. Li
Managing Director
peter.li@novistra.com
(917) 250 8605
Jeffrey Neustadt
Senior Associate
jeffrey.neustadt@novistra.com
(437) 234 1151
Latest News & Developments
CMS proposes to increase hospital reimbursement rates in IPPS rule for 2022
The CMS released its annual Inpatient Prospective Payment System (IPPS) rule for fiscal year 2022 which recommended an increase in Medicare rates and removing some price transparency requirements. The new rule proposes an increase of Medicare fee-for-service payment rates to acute care hospitals by 2.8%, or $3.4 billion in 2022. The rule repeals the former mandate that hospitals disclose privately negotiated payer rates, claiming that this will reduce administrative burden by 64,000 hours and $4.3 million.
Additionally, the rule requires hospitals to report vaccination rates among health care staff, increasing visibility of staff health. Moreover, the proposed IPPS rule would extend add-on payments for COVID-19 treatment through the end of the 2022. The proposal will also add about 1,000 new Medicare-funded medical residency positions to train physicians. The additional 200 slots per year will be phased in beginning in 2023. The CMS expects to spend $1.8 billion to increase these residency slots.
Biden administration outlines higher funding for healthcare IT
In advance of Congress’s annual appropriations and budget process, the Biden Administration has released a list highlighting its priorities for healthcare IT funding for fiscal year 2022. The list includes billions in funding for public health data modernization, broadband and 5G expansion, addressing of social health detriments and healthcare cybersecurity.
About $8.7 billion will go towards improving the nation’s digital health response, including modernizing public health data collection, supporting core public health capacity improvements in states and territories, training new epidemiologists and other public health experts, and building international capacity to detect, prepare for and respond to emerging global threats. $153 million will be spent on improving health equity and data collection for vulnerable populations.
The budget also includes $6.5 billion to be invested with the launch the Advanced Research Projects Agency for Health, which is aimed at driving transformational innovation in health research and speeding implementation of health breakthroughs.
AI and Analytics can automate CMS coding and documentation
Stringent CMS coding requirements are burdening the already overworked healthcare providers in the pandemic. But analytics programs, when combined with AI can automate coding and help quality reporting. This leads to reduced physician burnout and errors in unplanned hospitalizations use among fee-for-service beneficiaries receiving home health care. For example, innovative planforms can provide real-time guidance and analytics functions at the point of data entry, guiding healthcare professionals and decreasing overall workload.
In the area of pre-claim submission, advanced systems can validate recommended and required clinical documentation and automatically resolve any gaps or errors. This can alleviate some potential denials and unnecessary administration, while positively impacting quality ratings. Deploying AI across the RCM value chain can reduce re-work effort required to improve clinical documentation by 30-40%, significantly reducing the burden on clinical staff and eliminating the need to repeated access patient files to secure reimbursement.
Majority of healthcare decision makers prioritizing virtual care and AI
The “Philips Future Health Index 2021” report, which surveyed nearly 3,000 leaders, executives and managers in the healthcare IT industry, stressed that nearly two in three healthcare leaders are prioritizing investments in virtual care. The report found that healthcare leaders appear to be taking a three-step approach to digital transformation:
1) by investing in telehealth in the short term;
2) by investing in AI in the longer term; and
3) by collaborating with other private hospitals and healthcare technology companies.
According to the report, a significant 89% of healthcare Ieaders are considering to heavily invest in telehealth. Also, about 57% of healthcare leaders say that in three years, their healthcare facility will most need to invest in implementing predictive healthcare technologies, compared with only 7% currently. Their initial focus is to apply AI for operational efficiency, followed by diagnostic integration, outcome prediction and clinical decision support. About 1/3rd of leaders agreed that collaboration is necessary to implement digital health technologies.
Healthy M&A activity in the RCM Industry
*All figures in $ millions, except valuation multiples
Select M&A Transactions in the RCM Industry
Middle East-based alternative investment firm, Gulf Capital, completed the strategic acquisitions of two US-based healthcare technology companies for a combined value of $60 million. Eclat Health is a Washington DC-based technology-enabled healthcare solutions provider, and Hansei Solutions is a techdriven full-suite RCM operator based out of California.
The majority stake investments in Eclat Health and Hansei Solutions will expand Gulf Capital’s healthcare-focused RCM platform. In line with its buy-and-build strategy and its extensive track-record of taking local businesses and transforming them into global leaders, Gulf Capital’s latest acquisitions will create a comprehensive RCM platform for the entire health provider value chain.
The platform, which will also include ACCUMED Practice Management (acquired in 2018) besides Eclat Health and Hansei Solutions, will provide tailored solutions for an RCM market that is expected to accelerate at 14% CAGR up to 2025, driven by physicians, integrated solutions, and cloud deployment.
Nasdaq listed healthcare improvement company, Premier Inc., acquired the assets and certain liabilities of Invoice Delivery Services (IDS), a US-based provider of procure-to-pay solutions, for $80 million. IDS processes over 365,000+ transactions very month and offers technologies to convert paper & PDF invoices to electronic format and streamlines accounts payable processes in healthcare.
Post the acquisition, IDS will be integrated within Premier under the brand name of Remitra, which will help Premier in long-term growth and advance its position in healthcare supply chain technology. Premier has been a reseller of IDS’s technologies for more than three years and its capabilities integrate with every major commercially available ERP technology in the world.
Through Remitra, Premier will strengthen its capabilities to eliminate unnecessary waste and technology-enable administrative processes. Starting with the contracting and ordering process, moving all the way through to digital invoicing and payment, Premier aims to deliver an automated, seamless and paperless procurement experience for both health systems and suppliers.
Leading provider of value-based healthcare, Vytalize Healthcare, acquired MedPilot, a digital health platform. MedPilot’s proprietary engagement engine personalizes outreach based on various patient characteristics and then uses machine learning to optimize communications between the healthcare provider and patient.
MedPilot has helped over 1 million patients and demonstrated a 97% patient satisfaction score., and has raised $3.5 million from investors, including Hudson River Capital, Wavemaker 360 Health, Tom Hirschfeld, Cedars-Sinai, Jumpstart, Techstars, Northcoast Ventures, and TurnCap. Financial terms of the transaction was not disclosed.
The acquisition of MedPilot brings Vytalize a unique, end-to-end patient engagement capability to manage its 65,000 Medicare patients and $1 billion of medical spending. By investing more than $2 million into the combined company and achieving 800% year-on-year growth since 2019, Vytalize is positioned to reach breakout leadership in the value-based care delivery space for Medicare patients.
Multiplan Corporation, a leading value-added provider of US-based healthcare data analytics, payment and technology-enabled revenue and cost management solutions completed the acquisition of Discovery Health Partners, a provider of SaaS-based healthcare revenue and payment integrity services.
Discovery serves approximately 80 healthcare payor customers in the Medicare Advantage, Medicaid and commercial markets by improving their payment and revenue process’ integrity. The transaction value was estimated to be around $155 million.
With the acquisition, Multiplan strengthens its service offering to payor customers in payment integrity market with new and complementary services to help its customers manage the overall cost of care and improve their competitiveness. It also adds revenue integrity for plans that receive premium from CMS. After the acquisition, Multiplan will serve more than 700 healthcare payors in the commercial health, government, property and casualty and dental markets.
RCM Industry underperformed in Q1 2021
*RCM Industry is the market capitalization weighted index comprising of companies: Cerner, CHANGE, CPSI, Craneware, Health Catalyst, Health Stream, NextGen, Nuance, Premier, R1, Vocera and MTBC (CareCloud)
Public Comparable Company Analysis – RCM Industry
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