Navicure and ZirMed, two large claims clearinghouses that also offer additional revenue cycle management services to healthcare providers and insurers, have agreed to a definitive merger in a transaction in which Navicure will buy ZirMed.

Terms of the transaction, expected to close in the next three months, were not disclosed. The combined company will retain existing locations and teams in Georgia, Kentucky and Chicago. During the transition, the new company will operate under both the Navicure and ZirMed brands with a new name coming when the deal is closed.

Both companies have good reputations in the industry, receiving high ratings from customers via KLAS and Black Book. The combined company will serve more than 400,000 providers and other healthcare organizations.

“We expect a smooth transition as we combine these two revenue cycle platform leaders and maintain our shared commitments to our clients, partners and employees,” says Tom Butts, chairman and CEO at ZirMed.

Bain Capital Private Entity, which invested in Navicure in 2016, is the source of funding for the acquisition, says Jim Denny, president and CEO at Navicure.

ZirMed was looking to sell and landed in the right spot with Navicure, Butts says. The company had multiple suitors from other private sector investors but the best offer was to unite two top revenue cycle vendors, he adds.

And the timing was right for Navicure, Denny notes. There’s always downward pressure on pricing, and providers are consolidating to get more leverage with insurers, so combining the companies gave both an enterprisewide revenue cycle process and an infrastructure. The company will be bigger and in position to serve larger provider organizations.

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Together, the companies plan to offer technology and services to help providers regain as much as $80 billion annually that they lose by failing to capture charges or identify and recoup lost charges, which is hurting large health systems, Butts explains. For example, 49 percent of patient payment responsibility is being written off, and the combined company will have a technology platform to deal with that.

Asked about the degree to which the new company will compete with Change Healthcare, a new and large revenue cycle entity formed by the merger of McKesson’s technology solutions unit and Change Healthcare Holdings in June, Butts says while consolidation has mostly occurred, Navicure and ZirMed may look for strategic fits with smaller vendors. But the combination of the two companies will give other vendors an alternative to Change Healthcare.

For now, both companies will operate independently for at least a few months and no additional information on the corporate structure and leadership will be announced until the deal is closed.

The merger of Navicure and ZirMed makes perfect sense, according to John Osberg, a mergers and acquisition specialist at the Informed Partners consulting firm. Navicure gains a competitive advantage because ZirMed has patient payment engines with analytics and tools to improve revenue capture.

A few months ago, ZirMed laid off about 60 employees and sold an analytics business, as part of preparations for the merger in a move that Navicure and ZirMed confirm. Both companies over the years have grown and become quite profitable, Osberg notes.

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