The health tech M&A wave continues just one week into 2025.
Private equity firm New Mountain Capital plans to acquire Machinify, a software platform streamlining healthcare payments with artificial intelligence, following its merger of The Rawlings Group, Apixio’s Payment Integrity business and Varis last fall.
New Mountain Capital will combine Machinify with those three health tech companies to take on AI-powered payment integrity, and the new organization will take on Machinify as its name, the company announced exclusively to Fierce Healthcare Friday morning.
The combined entity of four companies will bring together "cutting edge technology, clinical expertise and data to transform healthcare payments and build a frictionless foundation for healthcare administration among stakeholders," executives said.
Financial terms of the acquisition were not disclosed.
A source with knowledge of the deal said that the newly combined company is valued at $5 billion. Bloomberg previously reported that the company was valued at $3 billion following the original merger of The Rawlings Group, Apixio’s Payment Integrity business and Varis in September.
The merger is subject to regulatory approvals, and the company expects the deal to close in the first quarter of this year.
Now with a much larger footprint among payer clients, the combined entity will have revenue of more than $500 million, according to the company.
Upon closing, David Pierre, who was tapped to lead the organization following the three-way merger last year, will now lead Machinify, while the company's founder and CEO Prasanna Ganesan will assume the role of EVP and Chief Product Officer.
Rawlings, Apixio PI and Varis will maintain their respective legacy sub-brand names, according to the company.
"This transaction will now make us the most tech-advanced payment integrity company in the industry and will allow us to identify errors more quickly and accurately, eliminating waste and ultimately reducing the cost of healthcare," Pierre told Fierce Healthcare. "More specifically, the combination will enhance our healthcare intelligence capabilities including proactive data mining, which will be new with Machinify, itemized bill review, clinical and coding validation, subrogation, coordination of benefits, pharmacy payment integrity, and other complex payment solutions."
The combined company will have more than 2,000 employees serving more than 60 health plans, including 13 of the top 20 payers, according to the company.
The Machinify rebrand highlights the company's commitment to "leading with technology," Pierre said.
"AI is one capability of a suite of tools that we are leveraging. We are not abandoning the importance of human intervention. We are using technology to move upstream in the payments process to prevent errors from occurring in the first place. We are coupling technology with human expertise. This will always be our model," he said.
Founded in 2016, Machinify has developed a suite of applications using AI-powered software built to enhance and transform the entire healthcare claims lifecycle. Healthcare organizations use Machinify’s technology to improve the accuracy and speed of claims management processes.
With the addition of Machinify’s technology and team of researchers, engineers and data scientists, the combined entity will be well-positioned to accelerate the shift to more automated payment processes in healthcare and tackle the challenge of health plan payment accuracy using technology and artificial intelligence, executives.
The legacy way of managing payments is ripe for disruption, Pierre noted, and health plans are looking for alternatives to multiple payment solutions and inflexible deployment options.
As health tech companies increasingly build out AI-based tools and capabilities, the acquisition gives the newly rebranded Machinify a leg-up in the market and puts it in a more competitive position against other health tech companies that focuse on payment accuracy solutions, like Optum and Cotiviti.
"Machinify brings a proven and high performance, AI-powered platform to complement our market-leading solutions that will deliver an advanced level of automation, efficiency and accuracy within the healthcare payments infrastructure," Pierre said. "And they bring a highly accomplished team of developers, data scientists and AI experts to our already established team who will help us accelerate our product roadmap. This transaction allows us to move at the speed of a Silicon Valley company with innovation for our clients that will benefit all of us as consumers of healthcare."
The addition of Machinify accelerates the combined company's ability to meet the demands of the market by positioning it to deliver incremental value at lower costs with the most flexible delivery models in the market, according to Pierre.
"With the technology, platforms and capabilities we now have, we’re forging a new and differentiated path with fresh solutions that are characterized by transparency, flexibility, collaboration and speed that payers increasingly need to best serve their members, providers and other stakeholders," he said.
The combined company took shape in September when New Mountain Capital brought together The Rawlings Group, 40-year-old company with a large industry footprint working with health insurance companies to identify third parties responsible for paying medical claims, Apixio's payment integrity business and Varis, which specializes in overpayment identification solutions including diagnosis related groups (DRG) and ambulatory payment classification (APC) prospective payment system.
Centene sold Apixio's payment integrity business to the PE firm in 2023.
That three-way merger was a strategic move to leverage its size and scale to compete in the fast-growing payment integrity market.
"Our thesis remains the same as it was when we announced the initial coming together in September – stakeholders across the healthcare industry are burdened by complexities that impact performance and affordability, and are tired of relying on the entrenched players and status quo approach to payment integrity," Pierre said. "Our clients have been clear they are seeking to consume solutions in different ways, with new business models and more flexible technology. Machinify clearly enhances our model in all of these areas. This combination moves us further toward our goal of simplifying the payment process for patients, payers, and providers and ensuring the right parties pay for the appropriate care in a timely and accurate manner. Achieving our goal drives an outcome that benefits the entire ecosystem by bringing down the cost of healthcare."
Ganesan, Machinify's founder, said the company has been building AI technology to transform claims processing for eight years and the merger gives it "unprecedented opportunity to expand both the scale and scope" of what the companies are able to accomplish together.
The merger pairs "Machinify's AI technology with the operational, clinical and coding expertise of PI NewCo to build something the world hasn't seen before," he told Fierce Healthcare.
"Our charter is not just to scale what Machinify has already built but to create transformative new offerings across the entire spectrum of claims processing," he said.
Pierre said the newly formed company will continue to evaluate other possible acquisitions that can help "turbo-charge its mission and scale the business in 2025 and beyond."
Ganesan said all of Machinify's employees will be retained. "We are, in fact, hiring aggressively and doubling down on R&D. We are living through a unique era of rapid technological progress and this is a moment for intensive investment in building amazing products," he said.
“New Mountain has had a longstanding sector thesis around the transformative potential for technology to drive greater efficiency in healthcare payments and we believe that the combined company is the platform to enable this,” said Matt Holt, managing director and president, private equity, at New Mountain Capital, in a statement. “We are confident that this business will disrupt the status quo and improve outcomes for all stakeholders.”
J.P. Morgan Securities LLC served as financial advisor and Ropes & Gray LLP served as legal advisor to New Mountain. Deutsche Bank served as financial advisor and Cooley LLP served as legal advisor to Machinify.