Zelis scoops up Spectrum's Payer Compass

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Scoop PE-backed Zelis buys Spectrum' s Payer Compass

, author of Illustration: Annelise Capossela/AxiosExit Content Preview Zelis Healthcare, backed by Parthenon Capital and Bain Capital, has agreed to acquire Payer Compass for roughly $180 million, sources familiar with the matter tell Axios. Why it matters: Zelis aims to remove friction from transactions and simplify payment processes to drive more affordable and transparent health care, and acquiring Payer Compass furthers that mission. Deal details: Zelis CEO Amanda Eisel confirmed the transaction to Axios, but declined to comment on financials.The deal is valued at around 18x the company's about $10 million of EBITDA, concluding a Triple Tree-run sale process, sources tell Axios. Exiting Payer Compass investors include Spectrum Equity and Health Enterprise Partners (HEP), which recapitalized the reimbursement technology and price transparency company in January 2019. What they're saying: Many other players are tackling different aspects of what Zelis does, but Eisel thinks doing everything under one house is better. "We very deliberately are growing across payment processing, [claims] communications, and payment integrity," she says. Yes, and: This isn't just a roll-up play — it's all about feeding continued growth, Jay Deady, who leads Zelis’ Claims Cost Solutions business, tells Axios. Zelis's strategy is centered around a "price, pay and explain" framework which covers three key stakeholders: payors, providers and members. (Zelis got into the latter end-market through its .) Zoom in: In adding Plano, Texas-based Payer Compass, Deady says Zelis gains the following: Contract management pricing capabilities that can be leveraged as a new separately licensed product. Pricing capabilities for 23 Medicaid states, where it doesn't currently play. Supporting services that will "exponentially expand" on the digital member engagement tools and tech inherited via the Sapphire acquisition.SaaS-delivered capabilities that will open new doors among both the "Blues" health plans and national plans. Catch up quick: In 2019, — Zelis Healthcare and RedCard — bringing in fellow Boston investor Bain Capital as a significant new shareholder. The deal valued the new entity at approximately $5.7 billion, with Parthenon remaining the largest shareholder and Bain assuming an around 35-40% stake, sources told Sarah then. The marriage of the two companies accounted for pro forma EBITDA of about $300 million, including synergies, sources said then. Today, sources estimate Zelis is generating EBITDA in the $450 million zip-code. Our thought bubble: If and when Change Healthcare successfully unloads its payment integrity business ClaimsXten to TPG (which remains contingent on the closure of its tie-up with UNH ), the sale could have a domino effect on peers like Zelis. If the IPO markets re-open, we expect to see Zelis backers pursue a dual-track IPO and sale process. Either way, the company, characterized by sources as both a high-margin and high-growth asset — and operating at the nexus of healthcare, tech and payments — should attract strong interest.

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