A $3 billion merger of three closely held health technology firms aims to use artificial intelligence to help health plans police their payments to doctors and hospitals.
New Mountain Capital is forming the new company by combining three in its portfolio: the Rawlings Group, the payment-integrity business of Apixio, and a recently acquired firm called Varis. The deal values the combination at more than $3 billion, according to people familiar with the matter who asked not to be named.
The U.S. health-care industry is plagued by payment errors, with an estimated
Often operating behind the scenes, payment-integrity companies have taken on a growing role within the $5 trillion U.S. health-care system by helping insurers make accurate reimbursements and recover dollars that are paid in error.
Private equity firms have been pouring money into businesses that operate in the middle layers of the health care payments system. R1 RCM, which helps hospitals optimize billing and other payment functions, is set to go private in an $8.9 billion deal led by TowerBrook Capital Partners and Clayton, Dubilier & Rice.
Cotiviti, a payment-integrity firm that helps health plans save money, was recently backed by private equity giant KKR in a deal valuing the company at $10.5 billion, Bloomberg News reported in February. UnitedHealth Group's Optum Insight division is another major player.
New Mountain's new company aims to marry artificial intelligence and other digital tools with large health-care data sets to make the payment system more efficient, said Matt Holt, the firm's president of private equity.
"The overarching trend is absolutely toward the reduction of administrative cost," he said in an interview.
Founded in 1977, Rawlings helps health insurers determine when another party is responsible for medical claims. Apixio, previously owned by Centene Corp., uses artificial intelligence to review medical bills and patient charts. Varis provides auditing services for health plans.
Layers of approvals
Medical providers are frequently frustrated by the layers of approvals, reviews and audits they face from insurance companies when trying to collect payment. The new company aims to remove errors from the payment process and accelerate accurate reimbursements to providers, Pierre said.
"We can make these payments simpler," said Pierre, who was previously chief operating officer of Signify Health, a New Mountain company that went public and was later acquired by CVS Health for $7 billion.
AI can accelerate the work of sifting through voluminous data to find patterns that may signal a payment problem. For example, Pierre said, a medical record for an emergency visit with head trauma and shards of glass could indicate an injury in a car crash. That claim might be the responsibility of an auto insurer rather than a medical plan.
The new company is yet to be named and plans to employ about 2,000 people, including experts in medical coding, clinicians and attorneys. It will have more than 60 client health plans covering 160 million people, according to New Mountain.
