US-based health solutions partner Mednax has signed a definitive agreement to acquire the provider of third-party eligibility and other revenue cycle management services for hospitals, Cardon Outreach for $400m.
Subject to customary closing conditions and regulatory approvals, the transaction is expected to be completed within the next month.
Following the acquisition, the company will become a wholly-owned subsidiary of MedData, which is a Mednax company and the manpower is expected to increase to 2,000.
Cardon Outreach was established in 1996 and offers services and technology solutions aimed at assisting hospitals and healthcare systems to reduce operation expenditure, capital expenses while generating revenue with an increased productivity.
Other services offered by the company include specialised eligibility assistance, accounts receivable recovery services, third-party liability, workers’ compensation, social security disability, denials management and appeals.
The company also provides patient financing/early out programme to more than 800 hospitals and other healthcare facilities across 46 states.
Mednax CEO Roger Medel said: "We believe the addition of Cardon Outreach significantly advances the strategic development of our management services capability.
"Our hospital partners face numerous challenges in the evolving healthcare environment, many of which relate to the dramatic expansion of Medicaid coverage across the country and the increasing financial responsibility placed on the shoulders of patients.
"We believe the solutions we can provide, through an integrated management-services offering, directly address these challenges. Additionally, we believe that the combination of MedData and Cardon Outreach, complemented by our existing hospital relationships, can provide us with the opportunity for significant future growth through cross-selling of our diverse solutions."
On a financial aspect, Cardon is projected to generate 2016 annualised earnings before interest, taxes, depreciation and amortization (EBITDA), a non-GAAP measure, of $36m.
The earnings will immediately add to Mednax’s earnings which is expected to be $0.06 in annualised diluted earnings per share, which is net of an expected $0.08 per share in annualised non-cash amortisation expense and also includes certain transaction-related and one-time expenses.
However, the expected increase in Mednax’s revenue is conditioned to the completion of a third-party valuation to determine the fair value of the underlying net assets.