RowdMap acquisition driven in part by cross-selling

Screenshot from Cotiviti’s website

Atlanta-based Cotiviti is in a deal to buy RowdMap in part because it wants access to the Louisville-based health data analytics company’s customers, a company executive told Insider.

The executive also told Insider that Cotiviti expected its clients to want to have access to RowdMap’s services.

“We think it’s a very complementary service,” said Jennifer DiBerardino, Cotiviti’s president of investor relations.

Cotiviti, a publicly traded payment accuracy solutions company, said Monday that it had entered an agreement to buy RowdMap for $70 million in cash. Cotiviti also has agreed to provide 800,000 shares — roughly $33 million worth to “certain employees” of RowdMap to entice them to stay. The company would not say to whom it would offer the stock or to how many.

Cotiviti helps clients, primarily health insurance companies, find billing errors. For example, if two parents are on separate insurance plans through their employers and one of their children gets treatment for an injury, the hospital might bill the wrong parent’s insurance company. Cotiviti flags that inaccuracy, prevents the client from being billed for the service and takes a cut of the avoided charge.

DiBerardino told Insider that health insurance companies get erroneous bills under lots of scenarios and for many reasons, including human and computer errors. In 2016, Cotiviti saved its clients $3.7 billion by finding inaccurate payments, she said.

Meanwhile, RowdMap helps its clients identify low-value care, a critical step in fostering the ongoing transition from the fee-for-service model — in which health care providers get paid for the number of procedures and services they provide — to the capitation model — in which health care providers get a flat fee per patient. Government agencies and insurers are moving away from the fee-for-service model because they say it incentivizes providers to see as many patients and perform as many procedures as possible without focusing on health outcomes, which increases health care costs in the short and long terms. However, they say a capitation model incentivizes providers to perform as few procedures as necessary and to focus more on long-term health outcomes, which would lower immediate and long-term costs.

RowdMap referred all questions for this article to Cotiviti, but RowdMap Chief Scientific Officer Josh Rosenthal, who co-founded the business, has told Insider that about $850 billion of health care provided every year can be categorized as low value, which means it costs a lot of money but provides the same benefits — or fewer — than less costly, less invasive care. Such low-value care might include an expensive procedure for back pain, when less expensive and less invasive physical therapy might have the same or a better long-term outcome.

DiBerardino said that the two companies together are equipped to address about two-thirds of that waste. She said she expected that the services provided by each company would generate interest with each company’s clients.

DiBerardino said she also expected industry dynamics, with an increasing complexity in health care payments, and demographics — aging Americans who will need more health care — to provide further growth opportunities for the companies.

RowdMap will keep its name and remain at its office near the federal courthouse, she said, and all employees will be offered jobs once the acquisition is completed. Cotiviti also will retain its separate downtown location, where it already employs about 150 of its total workforce of 3,000.

The Atlanta-based company reported net revenue of $160 million in the first quarter, up 12.2 percent from a year earlier. Net income, at $27 million, improved 234 percent.

Investors have reacted positively toward the planned acquisition: Through Thursday afternoon, Cotiviti’s shares were up about 5 percent for the week, compared to gain of about 1 percent for the S.&P. 500.