Recent Trends in Revenue Cycle Management M&A
We are entering a fascinating period when revenue cycle management (RCM) services and software businesses are drawing the attention of an increasingly larger and wider array of investors than ever before. The pace of consolidation has accelerated dramatically over the past year, drawing attention from both dedicated investors as well as new entrants, making it one of the most active M&A sectors in healthcare.
Several operational trends are emerging that underpin the recent surge of consolidation activity. For several years, larger consolidators have developed sufficient product-line breadth and scale to be able to afford to drive down pricing for comprehensive revenue cycle outsourcing solutions, leading clients to search for lower cost options. With margins under pressure, hospitals have become even more price sensitive and desperate for unique solutions to decrease their costs and improve their yield. These dynamics have not only made it challenging for RCM services and software businesses to retain their historical margins, but it has also elevated the need for vendors to develop differentiated and impactful workflow optimization tools that lower the total cost to collect, particularly as labor costs continue to rise.
Client labor costs, retention, and recruiting have become insurmountably challenging, enabling outsourced staffing firms to become more critical and offset the prior cost pressures to justify becoming expensive. RCM vendors who can present uniquely differentiated service offerings at a reasonable price with the staff and capability to bill for complex or recurring services, manage self-pay claims, obtain prior authorizations, and a multitude of other services across the revenue cycle should find continued strong demand for their solutions.
Inside our full Insider report, we highlight several developing trends that have become solidified by staffing shortages and other challenges exacerbated by COVID. We describe some of the recent technologies and process innovations that have yielded increased RCM productivity and outcomes. We also discuss how some of the largest players in the space are consolidating, while a fresh group of emerging companies have reached a sufficient scale to command significant industry attention and premium valuations.
We also share exclusive interviews with industry leaders featuring strategic rationale from some of the most active buyers of RCM services and software companies; insights from innovative RCM executives about what they are seeing shape the future of the industry; and an in-depth interview with a former RCM client in which we profile the entrepreneurs’ journey from growing a privately held business, taking on a private equity partner, rapidly scaling to unprecedented levels, and then exiting the business with an extraordinary outcome – demonstrating a realistic path one executive took towards capturing the often-fabled “second bite of the apple.”
Looking for more on the trends and innovations transforming Revenue Cycle Management in 2023? You can download our full 18-page Insider report here.
BGL’s Healthcare Outsourcing & Information Technology practice is uniquely qualified to assist RCM businesses in exploring their liquidity, investment, and sale options. As one of the country’s largest and most active healthcare investment banking platforms, our industry experience goes beyond traditional transaction advisory to subject matter specialization in the RCM field. BGL’s Managing Director Jonathan Bluth spent the first half of his career as a revenue cycle consultant, advising some of the nation’s leading payors and providers on process improvement and vendor selection mandates on topics such as patient access redesign, self-pay management, charge description master optimization, and cash collections acceleration.
To learn more about how we can help you strategically utilize the healthcare outsourcing market, please reach out via our contact form below.