Back in 2006 TripleTree wrote its seminal research report on the revenue cycle management (RCM) sector. The viewpoint at the time was simple: the RCM landscape is heavily fragmented and comprised of numerous niche companies that serve only a fraction of the overall RCM workflow continuum.
Back then, providers were forced to navigate a crowded RCM vendor environment, seeking ways to ‘stitch’ together an effective end-to-end solution that wouldn’t disrupt its all-important cash flow stream. The probability of future consolidation seemed evident as innovative SaaS, BPO, and technology-enabled services companies evaluated their strategic options.
Significant consolidation did in fact occur as leading platforms such as MedAssets andIngenix (now Optum) expanded their offerings across the RCM workflow and achieved scale. However, other major RCM players that appeared well positioned to take advantage of the industry roll-up opportunity failed to adapt to the rapidly changing landscape, creating opportunities for new market entrants, including Experian, Conifer, Parallon, Nuance, andTransUnion, as well as a host of emerging growth private companies.
Despite eight long years of consolidation, the level of fragmentation that continues to persist across the RCM landscape is remarkable. Several factors have contributed to this dynamic, including:
- A new era of regulatory complexity (e.g., ICD-10, RACs, PQRI and core measures reporting, etc.),
- Shifting payment models (inclusive of ACOs and other new, value-based reimbursement models),
- Changing hospital-physician alignment dynamics, and
- An increasing focus on the patient as it relates to reimbursement, engagement, and satisfaction.
The factors listed above are further illustrated below as we consider the reinvigorated appetite for RCM market consolidation:
- Hospital-physician alignment challenges require a different approach: The number of hospital-employed physicians has grown rapidly in recent years due to rising levels of direct employment and more notably, the increased consolidation of independent physician groups by hospitals. The latter trend presents a range of new issues that the hospital must now navigate, including physician recruitment/retention, referral management and scheduling, physician-focused RCM/billing, practice management, systems integration across acute and ambulatory care settings, and decision support analytics. While these components are foundational to the successful integration of a physician practice, the overarching challenge for hospitals is in aligning physician output, performance, and incentives with the financial and care delivery objectives of the broader organization. The recent acquisitions of MedSynergies by Optum andSPi Healthcare by Conifer Health Solutions highlight the importance of this critical objective, as large RCM vendors seek opportunities to source large RCM contracts by delivering end-to-end capabilities and the requisite hospital-physician skillset that allows hospital customers to more effectively manage their owned physician networks.
- Predictive analytics that address both fee-for-service and value-based care: With the growing prevalence of new, value-based reimbursement models that place greater risk on the provider for improved quality and outcomes, there is mounting demand within the provider community for analytics solutions that can provide meaningful insight across a diverse range of clinical and financial data sets. MethodCare, which was recently acquired by ZirMed, is a great example of how advanced data mining algorithms incorporating applied mathematics and statistics can be leveraged within the workflows of hospital staff to generate actionable intelligence across a patient’s entire episode of care. MethodCare initially focused its “Big Data” capabilities on predicting and recovering revenue leakage across the patient access, charge integrity, and accounts receivable/denials management functions within the hospital and has since extended its focus to address new emerging opportunities in population health management. In this regard, the Company’s true ingenuity and long-term view is showcased in its ability to layer workflow functionality on top of an underlying patient-centric data model that leverages a diverse range of data sources, including facility and professional claims, clinical data from EHRs, lab data, and prescription data, among other sources. The possibilities and extensibility of this centralized, predictive platform are endless and will be an important differentiator within ZirMed’s broader RCM and population health management product suite moving forward. (Disclosure: TripleTree acted as the exclusive financial advisor to MethodCare on this transaction).
- Managing increasing levels of patient-pay while optimizing satisfaction within the RCM continuum: The continued cost shift toward patients via high deductible health plans along with Health Reform’s expansion of Medicaid is dramatically increasing patient volumes and driving strong demand for patient-focused engagement and communications capabilities that can help stem the mounting levels of reimbursement risk faced by providers, particularly as it relates to rampant bad debt tied to patient self-pay receivables. The industry, however, is ill-equipped to address this new paradigm, as existing outsourced RCM services providers typically only address the insurance piece of the overall reimbursement pie. Companies like MedData—which was recently acquired byMEDNAX—deliver the necessary patient-centric capabilities to: (1) drive increased patient pay collection rates, (2) dramatically improve patient satisfaction reporting and monitoring, and (3) allow for new levels of provider-patient communication and influence as smoother care transitions and greater levels of post-discharge follow up are required for optimal reimbursement. (Disclosure: TripleTree acted as the exclusive financial advisor to MedData on this transaction.)
Beyond the transactions listed above, there have been a number of other recently announced deals, including PatientKeeper being acquired by Parallon, Capario being acquired by Emdeon, Cymetrix being acquired by Navigant Consulting, GTCR’s investment in Xifin, and Passport being acquired by Experian.
These transactions underline the current state of an increasingly complex yet dynamic and highly innovative RCM marketplace. Emerging companies that can deliver on any or all of the points called out above are strongly positioned as the next wave of competitive innovation and disruption shape this segment of the healthcare landscape.
Let us know what you think.