Of all investment sectors, payments (including healthcare payments/ rev cycle) has seen good activity lately. AI-based technologies look to provide real benefits for both the back end and front end parts of healthcare payments. In this issue we also review some data about the level of charity care offered by not-for-profit hospitals, and a new payment model for medical tourism. This week's CEO Chat is with Scott Sanner at Millennia, and our AI item directs you to Christina Farr's Second Opinion.
But first, an update on the ongoing take-private saga of R1 RCM...
DEAL NEWS
Interest in R1 RCM turning into bidding war
As first reported by Bloomberg last week, TowerBrook Capital Partners - which owns 30% of R1 RCM (NASDAQ: RCM) - has teamed up with Clayton, Dubilier & Rice to make a joint offer for R1 that would top an updated bid from New Mountain Capital. New Mountain originally presented a draft bid of $13.75/ share in February with an investor group. In early July, New Mountain filed a new bid without the earlier partners valuing R1 at $13.25/ share.
Ascension Health, which is R1's third largest shareholder, attempted over the last several months to put a bid together with TowerBrook to top New Mountain's original price, but Ascension and TowerBrook were unable to agree on terms. R1 is one of the largest RCM services/ outsourcing companies serving large health systems including Ascension, Intermountain, Sutter Health, PennState Health and LifePoint.
Revenue cycle tools using AI and dental platform raise capital
Adonis. New York, NY. Revenue intelligence and automation platform solving operational challenges that impact the integrity of revenue cycle management. $30 Million Series B equity investment led by Point72 Private Investments. Read more. (Hear from CEO Akash Magoon in next issue's CEO Chat.)
Thoughtful AI. Austin, TX. AI agents for revenue cycle management designed to handle claims processing, patient eligibility verification and payment posting tasks. $20 Million Series A equity investment led by Drive Capital. Read more.
Regard (formerly HealthTensor). Los Angeles, CA. Clinical decision software with an AI tool for physicians to streamline documentation and help diagnose medical conditions. $61 Million Series B equity investment led by Oak HC/FT. Read more.
Image: zuub.com
Zuub. Los Angeles, CA. Dental revenue cycle management platform. $9 Million Series A equity investment led by Vertical Venture Partners. Read more.
Check out our deal tracker for a listing of healthcare payments deals since November 2023.
CHARITY CARE
Do non-profit hospitals provide adequate financial assistance?
In order for non-profit hospitals to maintain their tax-exempt status, they are required to provide some level of "charity care". Charity care is defined by the IRS as "free or discounted health services provided to persons who meet the organization’s eligibility criteria for financial assistance and are unable to pay for all or a portion of the services". State governments often require hospital facilities licensed in their state to offer charity care as well.
In a November 2022 report, KFF analyzed hospital cost reports and determined that charity care costs represented 1.4% or less of operating expenses at half of all hospitals in 2020, with a high level of variability across facilities.
It is hard to determine from the KFF report if the amount of charity care provided is appropriate. KFF just looks at the level of charity care as a portion of operating expenses (and the report does a thorough job explaining charity care, bad debt and uncompensated care). So it was interesting to see a recent study from the Boston-based Lown Institute measuring "meaningful community investment for nonprofit hospitals nationwide".
Industry groups and individual hospitals named in the report with big "fair share" deficits pushed back on the findings. Fierce Healthcare reported on a blog post by American Hospital Association President and CEO Rick Pollack, who said the Lown report "cherry-picks" certain areas of community benefit and therefore "suffers from the same biases, flaws and shortcomings as its previous reports."
Regardless of which side you fall on, one thing is clear - the issue of high medical costs, affordability of hospital care, availability of financial assistance especially from non-profit hospitals, and scrutiny of medical debt and patient financing is not going away. If the White House remains with the Democrats this fall, expect the CFPB to continue to lean in hard on the question of hospital affordability and medical debt.
In order for patients to pay for procedures, the medical tourism industry has relied on cash and wire transfers for many years. This has limited financial transparency and can be inconvenient for patients seeking treatments abroad. Now, as part of the Medical Tourism Association's "Better by MTA" program, patients can pay with the method of their choosing, and MTA will take care of getting payment to an overseas provider in their network using Mastercard's virtual card technology.
According to Mastercard’s release describing the program, “Introducing virtual cards brings a range of benefits to providers including increased security, robust controls, and real-time remittance data for more efficient reconciliation.”
Better by MTA enables a patient to compare care options with in-network providers, pay for and schedule a procedure, and reserve travel and lodging on the same platform.
Cary, NC-based Millennia offers a personalized payment process from pre-visit to final payment, enabling providers to increase patient payment revenue, lower administrative burden, and ensure patient satisfaction. Click here to read CEO Scott Sanner's thoughts on Millennia's right to win and the company's goals for 2024.
AI IN HEALTHCARE PAYMENTS
The regulatory landscape of AI in healthcare
We highlighted Christina Farr's research on ICHRAs in our last issue. Her Second Opinion newsletter does a nice job with many healthcare topics, with a focus on health tech and digital health. We hadn't expected to come back to her so soon, since payments and revenue cycle is only a small part of what she covers. However, since we're including a general look at AI here, we found her July 11 piece on the AI regulatory landscape a useful perspective to include.
Chrissy and her co-author, Randi Seigel from Manatt, describe the AI regulatory challenge as "balancing all the promises of artificial intelligence, while preventing potential harm". They list key healthcare areas being mined for AI benefits today:
Back office, including rev cycle activities
Front office, including scheduling, messaging, anything touching customer/ patient service
Testing and cleaning data
Diagnostic support
Drug development
The article takes a spin through current and potential future actions of the White House (e.g., Executive Orders), CMS, ONC (Office of the National Coordinator for Health Information Technology), DOJ, OCR (Office for Civil Rights), and the FDA, as well as state regulators. Definitely worth a read if you have any interest in the policy side of AI.
Venture’s asset growth has become an albatross around its neck. A look at how as the venture industry grew rapidly because it outperformed other asset classes, its size and expectations for returns have become a liability, especially as exits have been hard to find. (Pitchbook)
Prices paid to hospitals by private health plans. Analyzes medical claims data from a large population of privately insured individuals to determine the levels and range of hospital prices paid by employers and private insurers across the United States from 2020 to 2022. (RAND)
ADDITIONAL RESOURCES
All of the following resources can be accessed at the FinMed Partners Insights page.
Deal Tracker. Regularly updated list of healthcare payments related transactions since November 2023.
Conference List. Rolling twelve month look ahead at conferences and other events covering healthcare payments, revenue cycle, fintech and related areas.
CEO Chat. Thoughts from healthcare payments CEOs on the problem their company was founded to solve, their right to win, and plans for the next 12 months.
Newsletter Archive. News, trends, and insights from the healthcare payments industry compiled in our bi-weekly newsletter.
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FinMed Partners is a management consulting and advisory business focusing at the intersection of payments/ fintech and healthcare. Our founders have developed deep expertise from decades of experience with health IT companies, healthcare providers and many players within the payments ecosystem. Investors, boards and executive teams work with us to maximize business value through strategic input and tactical execution.
FinMed Partners, an affiliate of PayGility Advisors, 100 Theodore Fremd Ave., #b1c, Rye, NY 10580-2875, United States
