Private Equity Firm Invests in RCM Company Alpha II

Global private equity firm TA Associates has signed a definitive agreement to make a substantial growth investment in revenue cycle management (RCM) company Alpha II, according to a recent announcement. Alpha II provides a proprietary rules engine that identifies coding errors to ensure appropriate reimbursement and fewer claim denials.

The organizations announced late last week that TA Associates is making the investment in the RCM company alongside existing shareholder WestView Capital Partners, which will reinvest to maintain a minority position in the RCM company.

The transaction is expected to close in June.

The investment aims to continue the development of technology to drive provider organization missions, solidifying Alpha II as an RCM technology market leader. Claim denials have been rising, with the average rate pushing 20 percent as recently as the second quarter of 2020. What’s more, healthcare finance and revenue cycle leaders say their organizations’ RCM operations spend the most time on denials management compared to other standard revenue cycle tasks.

Alpha II also recently expanded its revenue cycle workflow solutions to include insurance verifications, denials prevention, and Merit-Based Incentive Payment System (MIPS) reporting. The RCM company’s technology supports more than 100,000 clinicians by integrating with EHRs, practice management systems, and clearinghouse partners.

“We are excited to welcome TA on Alpha II’s continued journey to revolutionize the revenue cycle technology ecosystem,” Todd Doze, CEO of Alpha II, said in the announcement. “The foundation of our partnership is a shared desire to create the leading RCM software platform. With deep experience investing in and scaling mission-critical healthcare technology companies, we believe TA will be a valuable partner as we further expand our solution suite and accelerate our growth trajectory.”

Provider organizations are looking to technology to combat rising denial rates, among several other troubling trends, including labor shortages and inflation.

Software is now a top five strategic priority for nearly 80 percent of organizations participating in a 2022 KLAS market study. An overwhelming majority of all the responding organizations also said they plan to make new software investments. Revenue cycle management will see the most provider software investment, respondents said at the time.

With the RCM market heating up, private equity is moving in.

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.

Bain & Company report that other recent deals in the RCM space include Berkshire Partners and Warburg Pincus’s joint acquisition of Ensemble Health Partners and Veritas Capital’s acquisition and subsequent merger of Coronis Health and MiraMed Global Services. At the end of 2021, Welsh, Carson, Anderson & Stowe also joined EnableComp and Argos Health, a revenue cycle platform specializing in the management and resolution of complex claims.