Waystar continues buying spree with acquisition of prior authorization company Digitize.AI

private equity investment
Waystar's move to acquire Digitize.AI comes amid rumors of Waystar's own impending sale by private equity firm Bain Capital. (Natee Meepian/Getty Images)

Revenue cycle management technology company Waystar has acquired Charlotte, N.C.-based startup Digitize.AI, a company that applies artificial intelligence to the prior authorization process.

The deal, the company's fourth acquisition since September, comes amid rumors of Waystar's own impending sale by private equity firm Bain Capital. 

The anticipated sale also comes two years after Bain Capital created the business by combining revenue cycle management companies Navicure and ZirMed in 2017. The company was renamed Waystar in February 2018.

Bloomberg reported in April that the private equity firm has held early-stage discussions about a potential sale of the business, citing people familiar with the matter.  

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Bain also has hired J.P. Morgan Securities and Deutsche Bank for financial advice, according to Buyout. Waystar has in the past contemplated an initial public offering, sources told Buyout.

Waystar could attract interest from companies such as Oracle and Visa, according to several publications.

The Louisville-based healthcare technology firm could sell for billions of dollars by the end of this month, reports PE Hub, citing sources familiar with the discussions. "Final bids for Waystar are due in late July, with a transaction expected to be signed before the end of the month, according to people familiar with the matter," PE Hub reports.

Current deal discussions value the health IT company between $2.7 billion and $3 billion, according to PE Hub's sources.

Waystar provides revenue cycle management software-as-a-service designed to improve and streamline billing, claims and patient payment processes. The company serves more than 450,000 providers, 750 health systems and 5,000 payers and health plans, the company said.

With the acquisition of Digitize.AI, Waystar is going to expand its technological capabilities. By embedding Digitize.AI's technology, Waystar's platform will take a unique approach to prior authorization using machine learning and AI to reduce administrative work, Waystar executives said.

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Currently, prior authorization is largely a manual process that's both time-consuming and error-prone, resulting in a $30 billion annual cost in wrongful denials, inefficiencies and clerical errors. The startup uses AI and machine learning to automate prior authorizations, resulting in faster authorizations at less cost and and with fewer denials, according to the company.

Waystar CEO Matt Hawkins said prior authorization poses a significant challenge for the company's clients. "Digitize.AI is taking a truly different view with trailblazing technology, automating prior authorizations with better results than legacy solutions," he said.

"We believe Digitize.AI has an enormous potential to change the industry, and we were looking for a partner who had a shared view of the ability of technology to improve healthcare," Justin Adams, Digitize.AI CEO, said in a statement. "Waystar immediately stood out to us as a company with a forward-looking vision for simplifying the revenue cycle, as well as an established reputation and broad network of clients across the spectrum of healthcare."

The deal to buy Digitize.AI follows Waystar's acquisition of PARO in June. PARO uses predictive analytics to fast-track recommendations for potential charity-care cases at nonprofit hospitals.

In November 2018, the company bought the transaction services technology business—specifically claims monitoring capabilities—owned by Ovation Revenue Cycle Services, part of healthcare provider and insurer UPMC. In September, Waystar bought predictive analytics solution Connance.