The news: Revenue cycle management (RCM) company R1 RCM is acquiring its competitor Cloudmed for $4.1 billion, including $857 million in net debt. The deal is expected to close in the second quarter.

More on this: Both companies focus on improving RCM in healthcare through technology like AI. For context, the RCM process involves all payments-related tasks from the start of a patient encounter through provider payment. These tasks include patient insurance eligibility, copays, claims submission and management, and billing.

• R1 RCM uses tech-powered solutions to improve the patient payments experience and optimize financial performance for providers, making sure they don’t lose out on untapped revenues.
• Similarly, Cloudmed’s software analyzes healthcare finances (like claims data and revenue captured) to identify undiscovered revenue sources and ensure accurate reimbursement.

How we got here: R1 has made previous acquisitions that have covered different aspects of RCM, from the standpoint of both consumers and providers.

• In 2020, R1 bought EHR giant Cerner’s RCM business for $30 million.
• In May 2021, R1 scooped up digital health payments platform VisitPay for $300 million. This deal gave R1 a platform that streamlines the healthcare financial experience for consumers and access to major health system partners (like Intermountain and Geisinger) that already use it.

The bigger picture: This M&A deal primes R1 to become a top player in the healthcare RCM market—which is undergoing massive transformation, spurred by the pandemic’s effect on hospital finances and a newfound focus on discovering revenue streams from telehealth.

• The acquisition fortifies R1’s revenue intelligence and automation capabilities and gives it access to Cloudmed’s roster of top-tier health system partners. Cloudmed serves more than 400 health systems, including 47 of the top 50 in the US.
• Health systems and hospitals had losses of nearly $203 billion in the first few months of the pandemic alone (largely due to low patient volumes and other COVID-19 related costs), per the AHA.
• So, it makes sense that health systems want to tighten their RCM to cushion against future financial hits by investing in tech tools like those offered by R1/Cloudmed.

On the flipside, as consumer frustration with existing healthcare payment processes rise, digital payment solutions like R1-VisitPay are long overdue.

• In an AccessOne Fall 2021 survey, 41% of consumers expressed confusion about medical bill coverages, and one in three consumers said communication on payment options for their bills could be improved.