$3 Billion HealthTech Merger Aims to Cure Late Payments

New Mountain Capital is reportedly combining three HealthTech firms in a $3 billion deal.

The merger is designed to employ artificial intelligence (AI) to help improve payments from health plans to providers, Bloomberg reported Thursday (Sept. 5).

According to the report, the deal will bring together three companies from New Mountain’s portfolio: The Rawlings Group, Apixio’s payment-integrity business, and a newly acquired firm called Varis. The combined group is valued at more than $3 billion, sources familiar with the matter told Bloomberg.

The report noted that the healthcare sector is riddled with payment errors, with around $100 billion in improper payments in government health programs just last year. That’s brought about the rise of payment integrity firms aiming to reduce insurers’ mistaken outlays.

In the case of New Mountain, the companies hope to combine AI and other digital tools with large health-care data sets to bring more efficiency to the payment system, Matt Holt, the firm’s president of private equity, told Bloomberg.

“The overarching trend is absolutely toward the reduction of administrative cost,” he said.

Research by PYMNTS Intelligence has shown that payment and claims inefficiencies are a drain on healthcare resources, with 84% of organizations saying they’ve suffered financial losses from cumbersome accounts receivable processes. 

“Not surprisingly, 85% acknowledge the crucial need to revamp their payment experiences to curb the time and drain on resources required by current systems,” PYMNTS wrote earlier this year. “With the overwhelming majority identifying the issue as mission critical, these inefficiencies call for urgent intervention.”

More recently, PYMNTS examined the ripple effects of late payments permeating the health sector in the report “Critical Care: Healing Healthcare With Real-Time Payments,” done in collaboration with The Clearing House.

According to the report, late payments are a considerable issue, with a quarter of payments to small healthcare providers arriving past due. 

“This delay jeopardizes their ability to meet payroll, pay vendors and maintain smooth operations,” PYMNTS wrote. “For many providers, the strain of managing late payments translates into increased pressure on accounts receivable teams and the need for meticulous cash flow management.”

The problem was exacerbated by the recent surge of late payments faced by hospitals and health systems across the country. In the first quarter of this year, a rise in late payments led to revenue shortfalls of as much as 18%. This situation was aggravated by a cyberattack on Change Healthcare, a major payment processor, which exacerbated financial strains for healthcare providers.