Image via Wikipedia.
St. Louis-based Ascension Health has tapped Accretive Health as its sole revenue cycle system provider, the nonprofit Catholic health system announced this week, under a new 10-year contract extension that includes the total revamp of its revenue cycle system.
The two organizations have also amended the terms of their Master Professional Services Agreement to cover all of Ascension's net patient revenue.
To cap things off, a new fund owned by Ascension and TowerBrook Capital Partners will invest $200 million in Accretive to purchase convertible preferred stock and receive warrants.
The transaction is expected to be completed by early next year.
When the deal is done, Ascension will transfer more than $8 billion in new net patient revenue to Accretive over the next several years, representing an increase of approximately 47 percent over Accretive's existing patient revenue base; the organizations expect this will begin to take place during the middle of next year.
"Ascension has been a valued partner of Accretive Health for many years, and we are very excited to have the opportunity to deepen and extend our strategic alliance and expand Accretive's business substantially," said Dr. Emad Rizk, president and CEO of Accretive Health. "Over the last 18 months, we have strengthened our infrastructure and operations, and we believe Ascension chose Accretive for its differentiated software and services model, scalable infrastructure and performance."
He also said Accretive would be scaling its business model to account for the growth the partnership is expected to provide.
Anthony Tersigni, president and CEO of Ascension, said in a statement that the partnership will result in "a single revenue cycle solution" and will serve as a sustainable long-term business platform.
"This new partnership will support our strategy of creating clinically integrated systems of care in the communities we serve across the country, strengthening our ability to provide compassionate, personalized care to all, especially persons in poverty and struggling the most," said Tersigni.
The Ascension/TowerBrook investment vehicle will purchase $200 million of convertible preferred stock, which is convertible into shares of Accretive common stock at $2.50 per share.
The preferred stock carries an 8 percent annual dividend, payable on a quarterly basis for the first seven years, and in cash after that time.
At the close of the transaction, the preferred stock will represent approximately 44 percent of Accretive's outstanding shares.
Accretive will acquire up to 60 million additional shares of Accretive Health common stock at an exercise price of $3.50 per share; those warrants will have a 10-year term and can be exercised on a cash or cashless basis.
Like Healthcare Finance on Facebook
Steve Shulman, chairman of Accretive's board of directors, said the board and its advisers had conducted a thorough review of strategic options.
"One of the many factors the board considered in approving this transaction was the ability of our existing stockholders to participate in any increases in the value of Accretive Health following the transaction," he said. "Following the transition of Ascension's new NPR, along with organic growth, Accretive Health expects to grow revenue to approximately three to four times the current top-line and produce operating margins in the mid to high teens. The board is confident in its view that this transaction is the best path forward to drive shareholder value."