Verscend Completes Acquisition Of Cotiviti For $4.9 Billion

Verscend Technologies has announced the acquisition of Cotiviti Holdings for $4.9 billion, with the combined company seeking to have a greater impact in the healthcare IT market.

Following the acquisition, the combined company will continue operating as Cotiviti.

The statement said the new Cotiviti seeks to “operate as a healthcare information technology company able to apply multidimensional analytic insights, deep market expertise, and high-performance services to help its clients reshape the economics of healthcare.”

Deal First Announced In June

The deal was first announced in June and received approval from Cotiviti shareholders on August 24.

Verscend Technologies, a portfolio company of Veritas Capital, has carved its niche in data driven health solutions, while Cotiviti was described as a “leading provider of payment accuracy and analytics-driven solutions focused primarily on the healthcare industry.”

“The new Cotiviti sits at the intersection of payers’ most critical programs that affect financial performance: payment accuracy; fraud, waste, and abuse management; risk adjustment; quality improvement and reimbursement; population health management; and high-value network performance. By combining some of the most robust financial and clinical data in the industry, Cotiviti will have unique insight into the healthcare system,” the company said in a statement on its website.

Verscend’s president and CEO, Emad Rizk, who will head the new Cotiviti said: “With our new capabilities across payment, quality, risk and the combination of clinical and financial data, Cotiviti will be unmatched in its ability to create differentiated value for its clients.”

He said the two companies were customer-driven innovators sharing a vision “to help our clients improve healthcare affordability, reduce waste, and identify the best path to better outcomes.”

When the deal was first announced in June, Cotiviti CEO, Doug Williams, said he expected the “transaction to deliver compelling value for Cotiviti shareholders and allow us to continue to execute our strategic growth plan.”

Veritas Capital’s Managing Partner and CEO, Ramzi Musallam said he saw the “combination of Cotiviti and Verscend as bringing much needed precision and insight to the healthcare system.”

“We expect that the two companies’ complementary datasets, analytical capabilities, and industry expertise will accelerate forward momentum for the new Cotiviti through smarter, faster solutions that address rising costs, eliminate waste, and speed quality  improvement for the healthcare industry overall,” Musallam said in a statement.

Under the terms of deal, Cotiviti shareholders will receive $44.75 for each share of Cotiviti common stock, while Verscend will assume all the latter’s debt.

The acquisition of Cotiviti underlines Verscend’s desire to utilize data to produce smarter and effective analytics to help “payers, providers, and employers work together to shape the new currency of health and improve the healthcare landscape.”

American Stock Transfer and Trust was appointed as the paying agent for the merger.

The Global Legal Chronicle said Goldman Sachs and William Blair acted as financial advisors to Cotiviti, while Latham & Watkins LLP represented Cotiviti as legal advisers. Skadden, Arps, Slate, Meagher & Flom LLP served as legal advisor to Veritas. Fried Frank advised Goldman Sachs.

Up To $1 Trillion Could Be Wasted on Healthcare Spending

Cotiviti estimates that nearly $1 trillion is wasted annually on healthcare spending across the United States, with $600 billion of that being attributed to unnecessary care and inappropriate payments.

“To bend this cost curve, the healthcare market must shift from rewarding volume to rewarding value. Specifically, it must promote High-value care – care that demands providers make the most efficient and judicious choices that deliver patients the best outcomes while rewarding providers and saving systemic costs,” the company says on its website

Recently, Veritas Capital, Verscend’s parent company, finalised the acquisition of GE Healthcare’s Value-Based Care Division for $1.05 billion and has previously invested in Truven Health Analytics.

According to Business Wire, Veritas Capital has “a robust track record of strategically transforming businesses in the space by working closely with management teams to enhance customer benefits through accelerated growth, improved efficiencies, and the development of innovative products and services.”

Veritas has a wide-ranging portfolio of investments covering aerospace and defence, communications, education, energy, national security, healthcare, government services and technology.

On its website, Veritas says it partners “with excellent management teams to deploy value-building strategies that target larger addressable markets and high-growth market niches, as well as to enrich the technological sophistication and differentiation of their solutions offerings.”