R1 RCM to Acquire Cloud-Based Healthcare Revenue Company Cloudmed

R1 RCM Inc. has announced that it will acquire the cloud-based healthcare revenue intelligence company Cloudmed in an all-stocks transaction expected to close in the second quarter of 2022.

Cloudmed is a New Mountain Capital portfolio company that serves over 400 of the largest health systems in the US, including 47 of the top 50 hospital systems. The company specializes in healthcare revenue intelligence solutions that use cloud-based data architecture to automate the analysis of large volumes of medical records, payment data, and complex insurance models. The solutions are designed to identify opportunities for hospital systems to realize additional revenue.

R1 said in the announcement that it will leverage the cloud-based capabilities to scale end-to-end revenue cycle management and technology-driven revenue intelligence for hospitals.

“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.”

Flanagan will serve as CEO of the combined company, while Lee Rivas, chief executive officer of Cloudmed, will serve as president. The deal has already been unanimously approved by the Board of Directors of both companies. It is subject to several stipulations, including the approval of the stock issuance by R1 stakeholders, the effectiveness of a registration statement on Form S-4, and the receipt of regulatory approvals.

The revenue cycle management vendor acquisition values Cloudmed at about $4.1 billion, including $857 million of net debt. The valuation is based on R1’s closing price on January 7, 2022, the announcement stated.

The deal comes on the heels of another shakeup in the healthcare cloud space. Oracle, a leader in cloud-based technologies, announced at the end of last year that it will acquire EHR heavy hitter Cerner in a $28.3 billion deal. EHRIntelligence reports that “the acquisition should support continuous development and modernization of the EHR through Oracle’s cloud.”

The Oracle-Cerner deal signals a continued move to the cloud in healthcare. Already, 78 percent of organizations are deploying cloud computing, according to BDO’s 2021 Healthcare Digital Transformation Survey. Another 20 percent also plan to deploy cloud computing.

Cloud capabilities can benefit revenue cycle management for providers. The technology allows larger organizations to scale up automation and analytics within their revenue cycles, which have historically operated in many siloed departments that may use different IT systems.