Fellow Health Partners, a medical billing services provider, is looking to raise up to USD 20m in the next 18 months to finance expansion through acquisitions, according to CEO Michael Brown. The Great River, New York-based company, which serves physician groups and healthcare providers with revenue cycle management (RCM) and other technology services, plans to buy smaller industry players, he told this news service. The company is looking at three potential purchases, having closed two this year.
Fellow Health, which the executive founded three years ago, has so far been financed by high-net-worth investors, mainly physicians. The company expects to reach out to lower-middle market private equity funds and other sources for growth capital for the upcoming capital round of between USD 10m and USD 20m.
The company is “aggressively pursuing acquisitions” as it looks for firms that will give it more clients, a presence in other regional markets, or both, the CEO said.
It operates in New York, New Jersey and California, but is looking to expand in the Southeast US and the Midwest, buying companies with significant client bases through which it can apply its proprietary SAVi software applications, Brown said.
Most acquisition candidates are sourced through brokers, not investment banks, but he is open to banker pitches.
The company has more than 50 clients, mainly physician groups, and provides health care information technology (HCIT) to enhance collections, billing coding requirements, manage practices and provide electronic health records, the executive said.
Fellow Health competes in a crowded, USD 22bn US HCIT sector with more than 1,500 players — from such large companies as Cerner [NASDAQ:CERN], Epic Systems and athenahealth [NASDAQ:ATHN] to a bevy of midsize and small firms with proprietary technology targeting business-process efficiencies.
So far this year the company has made two acquisitions: Rochelle Park, New Jersey-based Physicians Management, a medical billing company and Custom Billing Services, a Huntington, New York-based behavioral health billing company. The deal sums were unspecified. The CEO declined to mention the revenue figure, but said the company will be profitable in six months. It has about 40 employees.
In the M&A market, Fellow Health looks for client-rich businesses that may need restructuring where workers can be retrained and new technologies applied. Brown said his biggest competitors for acquisitions are offshore, mainly Indian, medical billing providers. However, when offshore companies acquire US medical billing companies, “they tend to lose customers” over customer-interface issues. The goal, he said, is to retain 100% of customers of acquired businesses, citing its US roots as a “competitive advantage and point of distinction.”
It is too early in its development cycle to discuss exit strategies for the company, but the executive said it would consider selling a stake in a dividend recapitalization or a public listing within five years.
The company is not engaging an investment bank now, the CEO noted.
by Dane Hamilton, Acuris