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Counting the Cash: Deals in Medical Revenue Cycle Management Ticking Up

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Medical revenue cycle management is a little known (to the public) business service that involves helping healthcare professionals get paid.  It includes software to automate the process of submitting claims, as well as service providers, who ensure that every claim contains the appropriate service code and diagnosis code to maximize reimbursement.

While there aren’t typically a large number of deals in this sector, as seen in the chart below, the deal multiples can be significant, ranging from 9.0x to 11.0x EBITDA for larger transactions (although companies with less than $10 million in revenue typically trade at 6.0x to 7.0x EBITDA).


What are these acquirers looking for?  Many of them are looking to expand their service offerings.  For instance, Conifer Health Solutions acquired SPi Healthcare back in September to enhance its services portfolio and solidify its position as a sole-source provider of revenue cycle management and value-based care solutions to healthcare providers.

Others, such as PracticeMax, are expanding the customer base they serve.  PracticeMax acquired OptiMed to broaden its customer base from its historical focus on ACO’s and other integrated medical delivery systems.  At the same time, it broadened their practice geographically, by adding an office in Lincoln, Nebraska to existing offices in Chicago, Portland, Phoenix, San Antonio, and Shreveport.  MedNax acquired MedData to add expertise with additional physican specialties to its existing customer base focused on neonatal, pediatric, cardiology, etc. specialties.

Then, we see companies like Emdeon, which offers revenue and payment cycle management and clinical information exchange solutions, buying Capario, which offers cloud based revenue cycle management solutions, to beef up its technology solutions.

So, is it a good time to sell your medical revenue cycle management business?  It is, if you can show long-term loyal customers, expertise within a particular sector/specialty or that you have a technology which automates processes and increases the revenue recognized by physician practices or hospitals.

If you’d like to understand how a buyer is likely to view your business, in terms of valuation, risks or opportunities, please contact me.