Dan Almon, Vice President, Baird Capital

Dan AlmonRevenue Cycle Management (RCM) is integral in helping healthcare providers remain financially competitive, operational efficient and patient-centric. At Baird Capital, we view RCM as an extremely vital functional component given the mutable and highly complex nature of the healthcare landscape. In an environment of rising costs, mergers, new billing nomenclature, and regulation compounding the difficulty of receiving payments and maintaining patient satisfaction, RCM has never been more important than it is today. The Centers for Medicare and Medicaid Services expects national health spending to be 20% of the economy by 2026. RCM will see continual creative transition that is necessary and healthy, and Baird Capital is well-situated to advise and spearhead niche-focused companies’ efforts to improve provider workflows. 

By creating clarity and improving workflow within the provider billing process, RCM companies take on the occasionally archaic practices of increasingly vast, disparate networks that are being combined through hospital M&A and consolidation. Healthcare deal volumes increased by 14.4% between 2017 and 2018, representing over $121.5B in transaction value. Similarly, for the seventh consecutive quarter, industry-wide mean EV/EBITDA multiples increased by 0.8x to 13.9x over the same period. RCM optimizes integrated delivery networks by enabling efficiencies in these ever-larger organizations – from scheduling practices, pre-authorization, and eligibility checks to mid-cycle coding proficiencies and finally, accurate billing, accounts receivable management, cash posting and denial mitigation. 

Yet, integrating revenue departments remains tricky. The large acute care systems and other providers are creating and penetrating niche patient populations nationwide, servicing specialized areas of care through smaller retail clinics, specialty clinics, and ambulatory surgery sites. This complicated matrix of patient populations, billing requirements, and reimbursement severely challenges the hospital systems’ budgetary and financial control – and can quickly sour the patient experience, despite the outcome of the care.

Industry complexity creates ripe opportunity for investment especially in service providers that operate in specialty silos and maintain functional control over key areas of providers’ revenue cycles. In 2018, Healthcare IT and Services boasted an impressive 3,445 transactions in the middle-market of which 75% reflected values under $100MM.2 New technologies oriented around billing, coding, and patient-intake tend to penetrate the market and scale more rapidly. One such area is innovative front-to-back optimization services that reduces workflow error, denied payments, and self-pay issues which is integral in improving collections, overall transparency and importantly, patient satisfaction. These services continue to attract investment and bolster providers’ reputations allowing them to thrive.

At Baird Capital, we are focused on partnering with lower middle market businesses with strong management teams that understand niche billing and concentrate on complicated patient populations or particularly complex areas of the payer mix. It can be difficult for these smaller businesses to scale to the next level. Besides inherent challenges for any company of a certain size to grow and scale, mature industries always take longer to incorporate emerging services. On top of this, selling into the healthcare sector is one of the longest, most laborious sales cycles due to bureaucratic decision making, change management and budgetary approval processes. Nonetheless, industry tailwinds continue as national providers continue to outsource key functional areas of their revenue cycles.

Baird Capital can assist in penetrating health systems, hospitals, and the payer and provider networks. Our global platform features extensive operational resources, capital, and expertise to help businesses enhance their commercial component or sales force – through organic growth or M&A – and capture more market share. 

Dan Almon is a Vice President at Baird Capital focused on private equity investments in the Healthcare sector.