Securities Trading & Revenue Cycle Management Are Related

Securities Trading & Revenue Cycle Management Are Related

Securities Trading and Revenue Cycle Management (“RCM”) may reside in different industries, yet they share enough common elements to be considered cousins. We believe that FinTech companies that play in the Securities Trading area will look to the HealthIT industry – RCM in particular – to capture growth. See our Interactive HealthIT / RCM company list after the break.

FinTech companies that have securities trading expertise (particularly back and middle office) may leverage that domain expertise within RCM. A decade earlier when I performed high-level due diligence on Athenahealth – the Electronic Medical Record (“EMR”), RCM company founded by Jonathan Bush – I was immediately struck by the similarities between the lifecycle of a securities trade and RCM. Securities trading and RCM share basic common elements such as interested parties, compliance, matching, interested party-specific business rules, stringent regulation, straight through processing (“STP”), trade/claim resolution and reporting.

Many readers are familiar with the lifecycle of a securities trade but may not be familiar with Revenue Cycle Management. The “RCM Wheel” depicts elements of the RCM lifecycle.

click to expand graphic

Payments-focused FinTech firms may also look to the HealthIT industry in pursuit of growth. However, those FinTech companies that are focused on middle and back office operations are a more natural acquirer of HealthIT companies.

Below is a representative list of private and public RCM/HealthIT companies sorted alphabetically. Some are pure-play HealthIT companies, others are part of larger Health Services organizations or FinTech companies. Contact for additional information about these companies.  

AdvancedMD: AdvancedMD was acquired by Global Payments (tkr: GPN) in September 2018 for $707 million. AdvancedMD provides cloud-based HealthIT solutions (including RCM) to small and medium-sized ambulatory physician practices in the United States. This acquisition is a good example of a payments-focused FinTech player taking an active role in the HealthIT industry in pursuit of growth. CEORater Profile.

AdvantEdge: AdvantEdge provides medical billing, coding and RCM services. The company raised $20 million in 2006 (Founders Equity and Safeguard Scientifics are investors). AdvantEdge has approximately 350 employees. We estimate 2018 revenue of $40 million. CEORater Profile.

Allscripts (tkr: MDRX): Allscripts was early to the EMR/ Practice Management space. We first met the company in 2004. MDRX reported 2018 non-GAAP revenue of $2.1 billion and adjusted EBITDA of $403 million (19% margin). The stock has essentially remained flat for 15 years. MDRX trades at 5.9x EV/Trailing Adjusted EBITDA. Thus, we believe MDRX is a prime candidate to be acquired. CEORater Profile.

Athenahealth: We first met Athena in 2004. Founded by former CEO Jonathan Bush, Athena was recently acquired by Elliott Management and Veritas Capital for approximately $5.7 billion. The company installed long-time software executive Bob Segert as CEO. Bob has CEO experience leading private equity-owned software companies. CEORater Profile.

Brightree: ResMed (tkr: RMD), acquired Brightree for $800 million in 2016. Brightree technology solutions include RCM, Pharmacy and Care Provider software and services. ResMed generated revenue of $2.3 billion in FY’18. The parent company sells a variety of sleep disorder and respiratory devices to consumers and healthcare professionals. ResMed’s SaaS business generated revenue of $65.2 million in the December ’18 quarter ($260.8 million annualized).

Cerner (tkr: CERN): Cerner is the largest publicly-traded electronic medical record (“EMR”) provider. CERN offers a comprehensive HealthIT product portfolio including RCM. CERN generated 2018 revenue of $5.4 billion and adjusted operating income of $1.0 billion (19% margin) on a year-end employee base of 29,200. CEORater Profile.

Change Healthcare: Change Healthcare was created in 2017 through the combination of Emdeon and McKesson’s HealthIT assets. Change operates a comprehensive HealthIT platform including RCM capability. McKesson (tkr: MCK) is Change’s majority owner and we expect McKesson to take Change public during 1H 2019. Previously it was reported that Goldman, Barclays and JP Morgan were hired to lead the IPO. CEORater Profile.

CollaborateMD: CollaborateMD processes approximately $1 billion+ of claims each month. We estimate 2018 revenue of approximately $6 million.

Conifer Health: Tenet Healthcare (tkr: THC) -owned Conifer has been on the auction block since summer 2018. Advent International and United Healthcare have reportedly kicked the tires. Conifer generated 2018 revenue of $1.5 billion, down from $1.6 billion a year earlier. Q4 Conifer revenue was $372 million with adjusted EBITDA of $87 million (23% margin). As of the Feb 26th earnings call Conifer had entered a period of exclusivity with a prospective acquirer. CEORater Profile.

Cotiviti: Cotiviti is owned by Veritas Capital. The company processed more than 600 million claims in 2018. The RCM and related operations were acquired from GE in 2018 for approximately $1 billion. Cotiviti was formed in 2018 when Veritas-owned Verscend Technologies acquired Cotiviti for approximately $5 billion. Verscend was formerly “Verisk Health”, which Verisk (tkr: VRSK) sold to Veritas in 2016. CEORater Profile.

Dimensional Insight (“DI”): DI is a Predictive Analytics provider to multiple industries including Healthcare. We estimate that Dimensional Insight generated 2018 revenue of approximately $25 million. CEORater Profile.

DrChrono: DrChrono provides EMR, practice management, medical billing and RCM services. We estimate 2018 revenue of approximately $19 million.

eClinicalWorks (“ECW”): Westborough, MA-based ECW is a leading EMR provider and more recently has entered the RCM space. ECW was founded in 1999 by Girish Navani and today has more than 5,000 employees. We estimate 2018 revenue of approximately $600 million. CEORater Profile.

Epic: Founded by Judy Faulkner in 1979, Epic is the largest privately-held HealthIT company. We estimate that Epic generated 2018 revenue of $2.9 billion on an employee base of approximately 10,000. CEORater Profile.

Evolent Health (tkr: EVH): EVH’s product and services portfolio includes RCM , Pharmacy Benefit Management and Performance Analytics capabilities to name several. The company serves customers across various health systems, health plans, independent physician associations and accountable care organizations. On October 1, 2018 EVH completed its acquisition of New Century Health (“NCH”), a technology-enabled specialty care management company. Total merger consideration was approximately $205 million. EVH generated 2018 adjusted Revenue of $632.4 million and adjusted EBITDA of $23.2 million (4% margin). CEORater Profile.

Greenway Health: Greenway Health is a leading provider of clinical, financial, connectivity, and information software products and services to physician practices. Greenway’s ambulatory products include EMR/EHR, Practice Management, electronic data interchange (“EDI”) and RCM solutions. Vista Equity Partners completed a take-private of Greenway in November 2013 and combined the company with Vitera (formerly Sage North America’s Healthcare Division) under the Greenway Health name. CEORater Profile.

Kareo: Irvine, CA-based Kareo has raised $163 million over 12 rounds. We estimate 2018 revenue of $70 million on an employee base of approximately 550. CEORater Profile.

MedeAnalytics: Based in Richardson, TX we estimate that MedeAnalytics generated 2018 revenue of $60 million. Thoma Bravo is majority owner. CEORater Profile.

MedEvolve: Based in Little Rock AR with approximately 80 employees, we estimate that MedEvolve generated 2018 revenues of $10 million. MedEvolve’s offerings include Practice Management, RCM, Practice Analytics and professional services.

Nextgen (tkr: NXGN): Nextgen (formerly Quality Systems, tkr: QSII) generated calendar 2018 revenue of $530.2 million. EMRs and Practice Management offerings are at Nextgen’s core. The firm has augmented its core offerings through a series of acquisitions in recent years. Examples include Entrada (acquired April 2017), a cloud-based platform for clinical documentation and collaboration; EagleDream (acquired August 2017) – population health analytics; and Inforth (acquired January 2018), for its specialty-focused clinical content. CEORater Profile.

nThrive: nThrive was created when Pamplona Capital Management acquired MedAssets for $2.7 billion in 2015 and merged the company with Precyse, subsequently re-branding the combined company nThrive. Pamplona sold off MedAssets’ non-RCM assets. Per the NY Post, nThrive worked to strike a deal to merge with Athenahealth in Q4 2018.

Optum360: UnitedHealth (tkr: UNH) owned Optum360 leverages artificial intelligence (“AI”) in its Revenue Cycle process similar to how SS&C Technologies (tkr: SSNC) leverages AI within its Singularity platform. Interview with Optum360 CEO regarding AI, ML and NLP in the RCM process. OptumInsight’s (UNH segment that contains the RCM business), aggregate backlog at December 31, 2018 was $17.0 billion, of which $8.6 billion is expected to be realized during 2019. CEORater Profile.

R1 (tkr: RCM): R1 is a leading provider of technology-enabled RCM services to health systems and hospitals, physicians groups, and municipal and private emergency medical service (“EMS”) providers. RCM generated 2018 revenue of $868.5 million and adjusted EBITDA of $57.0 million (7% margin). We estimate 2019 revenue of $1.2 billion and adjusted EBITDA of $155 million (13% margin). This implies a 2019 EV/adjusted EBITDA multiple of 8.8x which would be an attractive valuation to private equity and/or potential strategic acquirers. CEORater Profile.

Trizetto/Cognizant (tkr: CTSH): Cognizant acquired Trizetto in 2014 for approximately $2.6 billion. Trizetto’s RCM offering is sold into physician practices, hospital and health systems, billing companies, PMS/EMR vendors and payer organizations. Cognizant’s Healthcare segment generated 2018 revenue of $4.7 billion or 29% of total revenue. CEORater Profile.

TruBridge/CPSI (tkr: CPSI): TruBridge provides business management, consulting, managed IT services and its RCM platform to customers across all care settings. TruBridge’s target market includes community hospitals with 300 or fewer acute care beds. Chris Fowler is TruBridge president and CPSI COO. CEORater Profile.

Waystar: Bain Capital-owned RCM provider Waystar was formed via the merger of Navicure and ZirMed. More recently Waystar acquired Connace – an RCM and Predictive Analytics provider. Waystar CEO Matthew Hawkins has extensive executive experience in the HealthIT industry (see our CEORater Profile): CEORater Profile.

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