What You Should Know:
– R1, a leading provider of technology-driven solutions that reduce friction in healthcare, has just acquired CloudMed, a leader in Revenue Intelligence™ for healthcare providers in a $4.1B cash deal.
– Upon closing of the transaction, current R1 shareholders will own approximately 70% of the combined company on a fully diluted basis and Cloudmed equity holders will own approximately 30%. Cloudmed equity holders will enter into an 18-month lockup agreement, subject to partial early release after six months under certain circumstances.
Cloudmed Revenue Intelligence Platform
Based 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 and deep domain expertise with intelligent automation to analyze large volumes of medical records, payment data, and complex medical insurance models to identify opportunities to deliver additional revenue to customers. In 2021, Cloudmed recovered more than $1.5 billion of underpaid or unidentified revenue for customers, delivering an average client ROI of 3-5x.
Acquisition Expands Reach Into 400+ Large Health Systems
This strategic move also comes at a critical crossroads in healthcare, which faces crisis level pandemic-related financial pressures and positions the company as an industry leader and partner to imperiled hospitals that are struggling with labor shortages, rising wages, and financial strain – seeking to reduce costs and recover lost revenue they need to survive and thrive.
Strategic and financial benefits of the acquisition include:
Advances Revenue Intelligence and Automation Capabilities: The combination creates a scaled leader across both end-to-end revenue cycle management and technology-driven revenue intelligence. Cloudmed brings market-leading capabilities in revenue integrity with a focus on the middle revenue cycle and the #1 KLAS rating in the Revenue Integrity/Underpayment Services Provider category in 2021. Together, R1 and Cloudmed will have enhanced offerings that unite decades of coding, charging, and reimbursement expertise to drive further client digitization through automation and AI.
– Accelerates Value Proposition and Commercial Engine to Drive Growth: This transaction will enable R1 to further its ability to deliver transformative value to healthcare providers through a more fulsome platform of differentiated capabilities. With increased commercial capacity, R1 will drive growth in modular revenue at SaaS equivalent margins. In addition, the combined company will have a diversified customer base with well-established relationships across 50 states, including 47 of the top 50 healthcare systems.
– Creates Significant Financial Benefits: The transaction is expected to be accretive to R1’s earnings per share in the first full year post-closing. R1 expects to unlock cost synergies of $85 million by the end of year three and $98 million at full run-rate, as well as significant revenue synergies over time. R1 expects to have approximately 2.7x net leverage upon closing of the transaction and anticipates strong cash flow generation post-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 chief executive officer of R1. “Our combined solutions, including enhanced automation capabilities, will further transform the patient experience and drive continued improvement in our customers’ financial results. I look forward to working with Cloudmed’s CEO, Lee Rivas, and the entire Cloudmed team whose additive talent and expertise will help us continue