The healthcare payment integrity market is undergoing a significant transformation…
In an industry rife with administrative inefficiencies, payment errors, and mounting financial pressures, a recent merger between The Rawlings Group, Apixio’s payment integrity business, and Varis, facilitated by New Mountain Capital, is poised to disrupt the sector in ways that mirror the remarkable growth witnessed in Revenue Cycle Management (RCM) over the past years.
This merger, valued at over US$3 billion, marks a critical turning point, signaling intensified competition, heightened innovation, and a shift toward more integrated and holistic payment integrity solutions. In this blog, our analysts dive deep into what all of this means.
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A game-changing merger
The merger of The Rawlings Group, Apixio, and Varis introduces a strong third player to challenge the traditional dominance of Cotiviti and Optum in the payment integrity space. Each of the three merging companies brings unique capabilities:
- The Rawlings Group has built its capabilities in subrogation and complex claims management, providing essential services to healthcare payers
- Apixio is a player in artificial intelligence (AI)-powered payment integrity solutions, leveraging advanced data analytics
- Varis focuses on identifying overpayments, helping healthcare payers reduce financial errors in claims processing
Together, these companies aim to address major challenges in payment integrity, such as administrative inefficiencies and payment inaccuracies. The merger will not only increase competition but also push the industry toward more innovative, tech-driven solutions.
Intensified competition: a call for innovation
One of the most immediate effects of this merger is the increased competition it brings to the payment integrity market.
Buyers have long expressed dissatisfaction with current providers, particularly around their ability to deliver a Return On Investment (ROI), leverage AI and technology, and provide better insights and analytics.
In a recent survey by Everest Group, enterprises rated these priorities 9.1, 9.0, and 8.8 out of 10, respectively. However, providers’ success in meeting these needs was rated much lower at—4.8, 5.0, and 5.8.
This performance gap highlights an opportunity for the new entity formed by the merger to raise the bar. By combining the strengths of The Rawlings Group, Apixio, and Varis, the merged company has the potential to meet buyers’ demands more effectively, driving innovation and raising the overall standard of service in the payment integrity market.
Addressing key market demands
The merger aligns well with the evolving demands of healthcare payers. Three major trends have been identified as critical for success in today’s payment integrity market:
- Shifting to pre-payment models: Healthcare payers are increasingly moving toward pre-payment review models to identify errors and fraud before payments are finalized. About a quarter of healthcare payers Everest Group interacted with now have active pre-pay programs, marking a significant shift in the way payment integrity is managed
- Establishing internal payment integrity offices: Many healthcare organizations are developing dedicated internal teams to manage payment integrity in-house, seeking support in setting up and running these operations effectively
- Reducing partner complexity: To streamline operations, healthcare payers are looking to reduce the number of external partners they work with. Many payers currently manage relationships with more than seven partners, with some overseeing as many as 13. Simplifying these relationships will enhance efficiency, reduce costs, and improve service consistency
The newly merged entity is well positioned to address these needs, offering a broader range of services that can help healthcare payers streamline their operations and improve payment accuracy.
As other market players, such as EXL, ClarisHealth, and Optum, respond to these same trends, the competitive landscape is likely to shift rapidly, with innovation and adaptability becoming critical for success.
Parallels with RCM: a growing market
The trajectory of the payment integrity market closely mirrors the growth of the RCM sector. RCM experienced significant growth over the past five years, expanding from US$ 8.8-9.3 billion in 2021 to an estimated US$ 12.5-13 billion in 2024, thanks in a large part to substantial private equity investments.
Similarly, the payment integrity market is now seeing increased interest from private equity, with the sector expected to grow from over US$ 9.5 billion in 2023 to over US$ 14 billion by 2028.
The payment integrity market also shares the same underlying drivers of growth as RCM, including the increasing complexity of healthcare payments and the need for advanced, technology-driven solutions.
The merger between The Rawlings Group, Apixio, and Varis is likely to accelerate this growth, attracting even more investment and further consolidating the market.
Future implications: technology and consolidation:
Looking ahead, the merger will have significant implications for the future of payment integrity, particularly in three key areas:
- Market growth: Payment integrity is one of the fastest-growing segments in payer operations, with a projected Compound Annual Growth Rate (CAGR) of 5.0-5.5% from 2023 to 2028. The newly formed entity will be well-positioned to capture a large share of this expanding market, as it offers a more comprehensive and integrated approach to payment integrity solutions
- Consolidation: The merger is part of a broader trend of consolidation in the healthcare payment market, as private equity firms continue to invest heavily in the space. Recent investments, such as KKR’s backing of Cotiviti and Pamlico Capital’s investment in ClarisHealth, highlights the sectors growing importance and potential for disruption
- Technology evolution: The payment integrity market is moving away from traditional, service-based models and toward more integrated, technology-driven solutions. The combined expertise of The Rawlings Group, Apixio, and Varis positions the new company to lead this shift, offering a holistic approach that integrates AI, analytics, and automation to improve payment accuracy and efficiency
As the healthcare industry increasingly adopts new technologies to address its most pressing challenges, this merger is a landmark move. It has the potential to reshape the payment integrity landscape, setting new standards for accuracy, efficiency, and innovation.
Conclusion: a landmark merger in the making
The merger of The Rawlings Group, Apixio, and Varis is likely to significantly disrupt the healthcare payment integrity market.
By combining their respective strengths and addressing key payer demands, the new entity aims to drive innovation, intensify competition, and pave the way for future growth in the sector.
As the payment integrity market continues to mirror the growth path of RCM, stakeholders should closely monitor the evolving landscape and prepare for a wave of transformation.
For a deeper analysis of this landmark merger and its broader implications for the healthcare payment integrity market, read the full report.
If you found this blog interesting, check out our blog focusing on Generative AI In Healthcare – A Game Changer Or Another Fad? | Blog – Everest Group (everestgrp.com), which delves deeper into another topic in the healthcare sector.
If you have any questions, would like to delve deeper into the Healthcare market, or would like to reach out to discuss these topics in more depth, please contact Vaibhav Srivastava, Suyash Choudhary, and Ankur Verma.
