Waystar makes $1.25B bet on AI for healthcare payments

What is Iodine Software?

Iodine Software is a healthcare technology company that leverages AI to enhance revenue cycle management, particularly through clinical intelligence. The company was founded in 2010 and is headquartered in Austin, Texas.

Iodine's solutions focus on mid-revenue cycle improvements to optimize revenue cycle management. Its core technology, IodineIQ, has a proprietary AI engine that calls upon a clinical condition library and data from millions of patient encounters and billions of clinical data points. The solution aims to emulate clinician judgment to ensure accurate clinical documentation and reduce revenue leakage.

Key Iodine products include IodinceCDI for clinical documentation improvement, IodinePreBill for reimbursement accuracy and IodineUM for utilization management.

Over 1,000 hospitals and health systems use Iodine's technology to automate the mid-revenue cycle, including AdventHealth.

AI to empower healthcare payments

Waystar expects significant strategic and financial benefits from acquiring Iodine and its technologies. Chiefly, the leading healthcare payments vendor aims to increase automation through Iodine's AI-driven capabilities across clinical documentation integrity, utilization management and prebill revenue leakage identification.

The combination, according to Waystar, will reduce administrative burden for providers while expanding the company's total addressable market by over 15%.

Additionally, Wayar aims to accelerate AI innovation through the acquisition. The company plans to combine its data network with Iodine's unique clinical data assets to increase the reach of its Waystar AltitudeAI. Waystar launched AltitudeAI in January to deliver AI capabilities for healthcare payments, including a new generative AI solution focused on appealing denied claims.

Through the acquisition, Waystar plans to expand its generative AI applications for prior authorizations, claims management and denials prevention, as well as appeals.

Combined, the companies would serve 17 of the 20 U.S. News Best Hospitals.

Transaction details

In the announcement, the companies said the transaction will be funded equally by cash and stock consideration. Upon closing, Waystar shareholders would own about 92% of the combined company on a fully diluted, pro forma basis. Iodine equity holders would own the remaining 8%.

Advent, which is Iodine's largest shareholder, would also only receive Waystar shares related to the transaction and has agreed to be locked up for 18 months post-closing.

The transaction would have a total enterprise value of $1.25 billion.

Additionally, Waystar anticipates financial benefits from Iodine's fully subscription-based revenue model and potential cross-sell advantages across both companies' client bases. Waystar already serves approximately 30,000 clients, representing over 1 million providers, and processes more than 6 million healthcare payments annually.

The company said it has also identified more than $15 million in run-rate cost synergies to be realized within 24 months after closing.

The transaction is expected to close by the end of the year.

Jacqueline LaPointe is a graduate of Brandeis University and King's College London. She has been writing about healthcare finance and revenue cycle management since 2016.