Global private equity fund Carlyle Growth will purchase Visionary Revenue Cycle Management, a provider of healthcare solutions, for $65 million (Rs 420 crore) from the company’s promoters and venture capital investors, said three people with knowledge of the deal. Chennai-based VRCM had raised Rs 15 crore from venture capital firm Indo-US Venture Partners in 2010.
“The VC fund will also exit along with the promoters,” said one of the three people. Founded in 2006 by Rajesh Surana, VRCM specialises in healthcare revenue cycle management and medical coding services. The company has three offshore delivery locations and wholly owned subsidiaries in Florida and California.
A Carlyle spokesperson declined to comment on the transaction, as did VRCM. “It’s confidential and we do not have Carlyle’s permission on this,” Surana said by phone. VRCM has over 250 healthcare clients served by more than 1,000 employees who help out in risk adjustment programmes, audit and quality of care for Medicare, Medicaid and commercial health plans.
The unlisted company’s revenue was about $25 million and operating profit was $14 million. The US private equity fund will pay 4.5 times the company’s operating profit. Carlyle may look at merging VRCM with another business process outsourcing company that it owns, Allsec Technologies, to build scale and later exit.
The US contributes more than 80% of the global healthcare RCM market. According to a 2016 report by Everest Global, the $7.5-8.5 billion RCM outsourcing services markets represents a significant opportunity with 11-14% anticipated CAGR growth.
“Market for the traditionally outsourced RCM functions, such as post-service (medical billing and denial management) is now maturing. However, opportunities in pre-service (eligibility verification and appointment scheduling) and service functions (coding and charge capture) are gaining traction,” the report said. “A key driver for the growth in the market is the incident of rising administrative cost, which is significantly affecting profitability of the hospitals.”
For Carlyle, India is one of its key markets for growth and buyout investments. Some of its investments in the country include Allsec Technologies, Cyient, Dee Development Engineers, Edelweiss Financial, GOL Offshore, Newgen Knowledge Works, South Indian Bank, VBHC Value Homes and Visen Industries. The buyout fund is currently invested in companies such as Delhivery Logistics, Global Healthcare, Metropolis Healthcare and PNB Housing Finance.
Source: Economic Times