What's up with the third party biller auction?
The two major third party billers have been on the block for a few months. The first round of queries went out to financial buyers and lately they've opened the process up to potential strategic buyers as well. Why?
Asking prices and account receivable and business model concerns. We'll take them in order.
Word is that the DirectCompRx/TPS (Third Party Solutions) combination has an asking price of $275 million+. That's pretty steep for any asset, especially one with significant questions about accounts receivable. While WorkingRx is significantly less expensive, the asking price is purportedly in the $40 - $50 million range.
The valuations appear to reflect the sellers' attempt to position themselves as transaction companies. That's fine, except they are really factors.
And valuations for factors are about half those for transaction firms.
Interest may also be sketchy due to A/R concerns. Third party billers have seen their average receivables age significantly over the last couple of years, to the point that a significant portion of the receivables still on the books could be many months in arrears. Financial investors look very closely at the basics, and A/R is about as basic as it gets.
Now that the initial round has passed without success, the companies are now wooing potential strategic buyers. These were avoided in the initial round due to concerns about sharing market intelligence and potential competitive issues. Those concerns appear to have gone by the board in the quest for financial reward.
Meanhwhile, payers are getting increasingly tough with the TPBs. Some are rejecting inflated bills outright, others are refusing to pay TPBs, remitting payment instead to the dispensing pharmacy, and still others are just slashing bills to what they believe is an appropriate level and cutting the check.
What does this mean for you?
The days of "just pay them to make them go away" are dissappearing. This will continue as more payers realize the overpayments to TPBs are not responsible from a fiduciary perspective.
Comments
Joe, great post. A post like this doesn't get as many comments as one on universal health care because we all believe we know something about universal health care and have something to say, whereas in this case I suspect most people are learning about issues for the first time. Thanks for the insider's view of a segment of the industry I know little about.
Posted by: jd | March 22, 2007 12:29 AM
I have thought if you get a bill and jusy pay it, it goes away. Not so, I have heard far too many stories of third party billers that seems to ignore that fact and you get hit twice if not careful.
Posted by: auction sites | July 1, 2007 10:08 PM