What you should know:
– R1, a leading provider of technology-driven solutions that reduce friction in healthcare, just said acquired CloudMed, leader in Revenue Intelligence ™ for healthcare providers in a $ 4.1 million cash deal.
– At the close of the transaction, R1’s current shareholders will own approximately 70% of the combined company on a fully diluted basis and Cloudmed’s shareholders will own approximately 30%. Cloudmed capital holders will sign an 18-month lockout agreement, subject to partial early release after six months in certain circumstances.
Cloudmed Revenue Intelligence Platform
Headquartered in Atlanta, Georgia, Cloudmed, a New Mountain Capital portfolio company, serves more than 400 of the largest health systems in the United States, including 47 of the top 50 hospital systems. Cloudmed’s industry-leading revenue intelligence platform combines cloud-based data architecture with extensive domain experience with smart automation to analyze large volumes of medical records, payment data and models complex health insurance to identify opportunities to provide additional income to customers. In 2021, Cloudmed recovered more than $ 1.5 billion in poorly paid or unidentified revenue for customers, providing an average ROI of 3-5x.
The acquisition expands the reach to more than 400 major health systems
This strategic move also comes at a critical crossroads in healthcare, which faces financial pressures related to the pandemic at the crisis level and positions the company as a sector leader and partner in hospitals in danger that are struggling with labor shortages, rising wages and financial stress, which seek to reduce costs and recoup the lost income they need to survive and thrive.
The strategic and financial benefits of the acquisition include:
Advances revenue intelligence and automation capabilities: The combination creates a scaled leader in both end-to-end revenue cycle management and technology-based revenue intelligence. Cloudmed brings market-leading capabilities in revenue integrity with a focus on the middle revenue cycle and KLAS No. 1 rating in the category of revenue integrity / underpayment service providers in 2021. Together, R1 and Cloudmed will have enhanced offerings that combine decades of coding, collection experience, and reimbursement to drive greater digitalization of customers through automation and AI.
– Accelerate the value proposition and the commercial engine to drive growth: This transaction will allow R1 to improve its ability to deliver transformative value to healthcare providers through a more complete platform of differentiated capabilities. With greater commercial capacity, R1 will drive the growth of modular revenue with SaaS-equivalent margins. In addition, the combined company will have a diverse customer base with well-established relationships in 50 states, including 47 of the top 50 healthcare systems.
– Create significant financial benefits: The transaction is expected to increase earnings per share by R1 during the first full year after closing. R1 expects to unlock $ 85 million in cost synergies by the end of the third year and $ 98 million at full speed, as well as significant revenue synergies over time. R1 expects to have a net leverage of approximately 2.7 times at the close of the transaction and expects a strong cash flow generation after the close. “This transaction accelerates our strategy to build the most scalable, flexible, and integrated platform for the revenue cycle and consumer engagement in healthcare,” said Joe Flanagan, President and CEO of R1. “Our combined solutions, including enhanced automation capabilities, will further transform the patient experience and drive continuous improvement in our clients’ financial performance. I look forward to working with Cloudmed CEO Lee Rivas and all. Cloudmed team, whose additional talent and experience will help us continue.