MedAssets: Thriving on health-care chaos
Any insured individual who has ever been in the hospital has had the pleasure of plowing through stacks of what the insurance industry calls EOBs, or “explanations of benefits.” Any sane person quickly concludes there can be no explanation for the torturous jumble of dates, codes, charges, exclusions and reimbursements that confronts him.
Health care is complicated, and the doctors, hospitals and clinics providing the services don’t have it much easier. They face perpetual disruption in revenue streams from denied claims, partial reimbursements, changes in Medicare, and, inevitably, patients who can’t figure out how much they owe. On the other side of the profit equation, they face constant pressure from rapidly escalating supply costs. That’s where MedAssets (Nasdaq:MDAS) comes in.
Atlanta-based MedAssets offers products and services to health-care providers that are designed to un-complicate processes that have become so complex, even Hillary Clinton couldn’t figure them out. Its offerings fall into three main categories: revenue cycle management, spend management and business analytics.
Revenue cycle management tools focus on capturing revenue that is currently lost when porous and, in many cases, outdated collection systems are overtaxed with denied claims, confused patients, or any dealings with the government. MedAsset’s spend-management solutions do one of the most difficult things in business: make sure the customer gets the supplies it ordered at the price it agreed to pay. This is of particular value to hospitals and clinics that purchase masses of high-priced supplies from a boatload of different vendors. According to the company, 25% to 35% of invoices and purchase orders don’t match.
Savings come from analyzing and controlling the supply chain, including the ability to find the best prices through MedAsset’s catalogue of 1,000+ manufacturers, distributors and other vendors. MedAsset’s third service offering, business analytics and decision support tools, is designed to provide better data that leads to better decisions, better cash flow and healthier operating margins.
If all of this sounds like a good idea, investors agree. Even though the company recently narrowed its 2008 earnings-per-share outlook, most analysts reiterated their "buy" or "outperform" guidance after release of second-quarter results. MedAssets reported total net revenue of $61.2 million for the period, 42.3% better than the year-ago quarter. The increase was driven both organically and by the acquisition of competitor Accuro Healthcare Solutions, completed in June of 2008. The purchase of Accuro is expected to enhance MedAsset’s revenue cycle management offerings by giving the company a significantly larger position in a fragmented industry and by facilitating cross selling for existing MedAsset solutions. Second-quarter EBITDA including the Accuro contribution was $19 million, a 40.2% increase over the second quarter of 2007. Excluding Accuro, adjusted EBITDA for the period would have been $16.8 million. Second-quarter adjusted pro-forma EPS of $0.11 was slightly better than many analysts’ predictions.
As with all health-care companies, changes in legislation and reimbursement pose a risk to continued success. Other risks include potential bumps in the Accuro integration and delays in the release of new software releases. Overall, however, the company has many positive drivers in its favor. As long as hospital financials continue to deteriorate, technology in the health-care infrastructure remains outdated, and the coding, reimbursement and billing process remain indecipherable, MedAssets will always have a market.
Health care is complicated, and the doctors, hospitals and clinics providing the services don’t have it much easier. They face perpetual disruption in revenue streams from denied claims, partial reimbursements, changes in Medicare, and, inevitably, patients who can’t figure out how much they owe. On the other side of the profit equation, they face constant pressure from rapidly escalating supply costs. That’s where MedAssets (Nasdaq:MDAS) comes in.
Atlanta-based MedAssets offers products and services to health-care providers that are designed to un-complicate processes that have become so complex, even Hillary Clinton couldn’t figure them out. Its offerings fall into three main categories: revenue cycle management, spend management and business analytics.
Revenue cycle management tools focus on capturing revenue that is currently lost when porous and, in many cases, outdated collection systems are overtaxed with denied claims, confused patients, or any dealings with the government. MedAsset’s spend-management solutions do one of the most difficult things in business: make sure the customer gets the supplies it ordered at the price it agreed to pay. This is of particular value to hospitals and clinics that purchase masses of high-priced supplies from a boatload of different vendors. According to the company, 25% to 35% of invoices and purchase orders don’t match.
Savings come from analyzing and controlling the supply chain, including the ability to find the best prices through MedAsset’s catalogue of 1,000+ manufacturers, distributors and other vendors. MedAsset’s third service offering, business analytics and decision support tools, is designed to provide better data that leads to better decisions, better cash flow and healthier operating margins.
If all of this sounds like a good idea, investors agree. Even though the company recently narrowed its 2008 earnings-per-share outlook, most analysts reiterated their "buy" or "outperform" guidance after release of second-quarter results. MedAssets reported total net revenue of $61.2 million for the period, 42.3% better than the year-ago quarter. The increase was driven both organically and by the acquisition of competitor Accuro Healthcare Solutions, completed in June of 2008. The purchase of Accuro is expected to enhance MedAsset’s revenue cycle management offerings by giving the company a significantly larger position in a fragmented industry and by facilitating cross selling for existing MedAsset solutions. Second-quarter EBITDA including the Accuro contribution was $19 million, a 40.2% increase over the second quarter of 2007. Excluding Accuro, adjusted EBITDA for the period would have been $16.8 million. Second-quarter adjusted pro-forma EPS of $0.11 was slightly better than many analysts’ predictions.
As with all health-care companies, changes in legislation and reimbursement pose a risk to continued success. Other risks include potential bumps in the Accuro integration and delays in the release of new software releases. Overall, however, the company has many positive drivers in its favor. As long as hospital financials continue to deteriorate, technology in the health-care infrastructure remains outdated, and the coding, reimbursement and billing process remain indecipherable, MedAssets will always have a market.
About the Author
Lynne Heitman has extensive business experience as both a management consultant and senior manager. She is also a published author.
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