Media coverage

RevCycle : Private Equity Firm Invests in RCM Company Alpha II

June 7, 2023

Private equity firm TA Associates has entered into a definitive agreement to invest in revenue cycle management (RCM) company Alpha II. Alpha II specializes in RCM and offers a unique rules engine that detects coding errors, leading to accurate reimbursement and reduced claim denials. The investment will be made in partnership with existing shareholder WestView Capital Partners, who will retain a minority stake.

RevCycle May 30, 2023: Private Equity Firm Invests in RCM Company Alpha II

It her analysis of this RCM company acquisition and trends in the RCM industry in the story, Jacqueline LaPointe references the latest PESP healthcare acquisitions report from February 2023. Because the RCM market is booming, private eqtuiy firms and their capital are moving in with acquisitions.

“RCM companies saw significant interest from private equity firms last year, according to a February 2023 report from the Private Equity Stakeholder Project. Evidence supports the concept that RCM solutions and companies are more efficient at chasing medical debt and reimbursement compared to in-house operations, prompting more provider organizations to invest and scale their technology investments for RCM. This has led to surge in demand for RCM services, making the sector attractive to private equity firms.

Private equity transactions in RCM companies last year included 18 add-ons and three buyouts, the report stated.”

Private equity firms like seeking investments that can garner them outsized profits over short periods of time. With an increase in the RCM market, PE firms are unsurprisingly looking to infuse capital in areas that can provide their institutional investors with high profit margins. In the last year, RCM companies, in particular, saw significant interest from private equity, with 18 add-ons and 3 buyouts.

RCM companies specialize in the collection of medical debt, a service for which cash-strapped hospitals pay to outsource. They are often paid a percentage of the debt they collect for a hospital, and thus are incentivized to aggressively pursue patients using a variety of tactics, sometimes running afoul of federal laws such as the Federal Debt Collection Practices Act or the Telephone Consumer Protection Act.

RCM companies advertise themselves as more efficient and advanced than in-house debt collection operations at hospitals. There is evidence to support this contention, as many RCM companies have invested heavily in updating and scaling their collection services through technology. This has led to a surge in demand from hospitals for RCM services, which has made this segment of the industry very profitable and attractive for investors.

As a result, private equity firms have invested heavily in RCM companies, and have possibly contributed to an increase in aggressive debt collection activity. Private equity-backed companies, including RCM-focused ones, have played significant roles in the US surprise medical billing problem. Researchers and policymakers should remain vigilant as to how increased investment activity in the RCM sector is impacting medical bills for patients in the US.

Sign up to our newsletter to receive news and updates from PESP

Click here