Michael Kim: Hello everyone, and thank you for joining us name is Michael Kim. I’m a senior analyst here at Zacks Small Cap Research. And today I’m happy to have with us again, Steve Snyder, Co-Chief Executive Officer of CareCloud, a company that we have followed since the beginning of the year.
So CareCloud is a leading technology company providing a comprehensive suite of proprietary cloud-based solutions to healthcare providers across the US. And in August, the company announced the acquisition of Medsphere Systems, a business services provider to over 600 small and middle market hospitals across 50 states. So with that, welcome back, Steve. Great to see you again, and really appreciate your time today.
Stephen Snyder: Great to see you, Michael. Thank you.
Michael Kim: Yes, so it’s certainly been a busy couple of quarters on the acquisition front for CareCloud. I believe you guys have closed four acquisitions since the first quarter of this year. So maybe first, it would be great if you could share an overview regarding your latest transaction this year, Medsphere.
Stephen Snyder: Sure, yeah, I’d be happy to. Again, Michael, thanks again for the invite here. So, as you mentioned, we’ve closed four acquisitions so far year to date. If we step back even further, since going public back in 2014, we closed a total of more than 25 acquisitions. In terms of our overall growth strategy, we view acquisitions as being a key component to particular, in our end-of-the-market, we see a unique opportunity for us to be able to leverage our global infrastructure and our AI expertise in such a way that enables us to acquire smaller companies and then to be able to deploy our technology and our team and add value to the overall relationships.
More particularly with regard to Medsphere, as you mentioned, we closed Medsphere back in August of this year. It’s the largest acquisition we’ve done this year. And Medsphere brings with it, as you alluded to, both the inpatient acute care solutions together with some ambulatory solutions that provide some additional capabilities for us to cross-sell. Also, some of these solutions give us an additional opportunity to be able to pursue some new opportunities in the market. So maybe just if we step back for a minute, we’ll talk a little bit about the overall solutions.
From an inpatient solutions perspective, the key solutions include a product called CareVue, which is an integrated inpatient EHR that combines clinical and financial, and patient accounting workflows. The second inpatient EHR that was part of the overall suite of solutions that we acquired through the Medsphere acquisition is Wellsoft, which is a class-recognized, best-of-class, emergency department information system, and it’s also leveraged for behavioral health. Another key component of these inpatient solutions includes RCM, which is a cloud-hosted revenue cycle management platform, and performs some of the same sorts of functions that we perform for customers today on the ambulatory side. But this one in particular is focused on some of the unique workflows and aspects with regard to the inpatient, the hospital-based clients. HealthLine, which is a supply chain management, inventory management tool for hospitals.
Then the final key component of the product solutions for the inpatient space is called Marketware, which is an analytical platform that’s also used for recruiting and also has a PRM component to it as well, which manages the discussions with providers and manages the relationship management associated with those new providers who they’re looking to recruit into the hospital system. So this is the inpatient part of the part of the solutions from an ambulatory perspective.
We also have two key products, ChartLogic, which is their ambulatory EHR, which is very similar to the sorts of solutions that we also have in terms of talk EHR and CareCloud charts, provides a practice management suite that’s clinically oriented with a real focus on orthopedics and some other key specialties in the ambulatory space. And then finally, we have IT managed services, and a key part of the IT managed services, and those solutions are focused on the ambulatory space. They also have a secondary focus in the hospital space.
So that’s kind of the high-level overview. We acquired this company for about $16.5 million, which again, we’d estimate to be within the historical range from a valuation perspective of one times or less of the ARR of the assets we acquired.
Michael Kim: Got it. It’s very, very helpful. Appreciate that. And you talked a bit about it at a high level, but just curious if you could talk a bit more about some of the growth opportunities associated with Medsphere.
Stephen Snyder: Sure. Yeah. I would maybe break up those growth opportunities into two key components: one being the inpatient, and then the second being the ambulatory. From an inpatient perspective, maybe I’d further group them into cross-selling, upselling, and then net new.
So if we can talk first about the cross-selling and upselling in the inpatient space, we see a significant opportunity to be able to roll out end-to-end inpatient revenue cycle management, especially in the critical access hospital space of the market. Those are hospitals with 25 or fewer beds. And also in the smaller segment that kind of goes beyond the critical access thresholds. So we see a significant opportunity in terms of the end-to-end inpatient RCM.
Also, with regard to the inpatient RCM, there are other ancillary services like coding and credentialing, and handling a segment of the overall revenue cycle management that we also find to be attractive with regard to further expanding the wallet share in the inpatient space. Also, we talked some about Marketware, so some of this opportunity that we believe will come from more deeply selling the existing solutions to the existing customers and then finding opportunities to be able to take the Marketware customer base and to upsell or cross-sell them to the other solutions, even beyond revenue cycle management. And then our AI solutions, too. We’re excited about the opportunity to deploy and to more fully integrate our AI solutions across of software solution base.
From an outpatient or ambulatory perspective, again, some of the opportunities are similar, which is end-to-end revenue cycle management. So we have a customer base who’s already leveraging our clinical application, ChartLogic, for all the clinical aspects of running their practice. But there isn’t a similar offering that will enable them to manage the revenue cycle management part of the overall solution. And to the extent that we can take in and cross-sell or upsell an EHR-only customer and expand that wallet to include RCM as well, we’re able to take every $1 of revenue and increase that to probably $2.50 or $3 worth of revenue. So, an interesting opportunity to meet an existing need that these providers have.
Also, another thing in the ambulatory space is the practice management component of the overall offering. So we see real opportunity to be able to provide a sort of solution that’s a best in class type solution like we have, and we offer to our other EHR users the ambulatory space, and also the application that’s used by the majority of our existing base, the talk application, and to use that same PM and the same functionality and then to deploy that to the same base.
And then finally, AI solutions, being able to roll out our AI solutions. With regard to all of these, we’ve really just focused this discussion so far on the opportunities to upsell and cross-sell this existing base. But there’s the same opportunity to be able to sell these exact same solutions as standalone solutions or integrate solutions into the market. And in particular, for the inpatient space, we’re excited about the fact that for many of these inpatient opportunities, this is giving us new entry points into the market, into parts of the market where we haven’t in the past had a critical mass of relationships. We’re excited about that opportunity and looking forward to leveraging that new position in the inpatient space in a way that will be to the advantage of our customers and also to our shareholders.
Michael Kim: Understood, makes a lot of sense. And then maybe turning to your latest acquisition of MAP App, just wondering how that might fit into your overall growth strategy.
Stephen Snyder: Great question, Michael. MAP App is the most recently closed acquisition. We closed that and announced October 1st. So, MAP App is an application that we acquired from a group in the market called HFMA. HFMA is one of the leading nonprofit membership organizations for hospitals and health systems, with a real focus on the financial leaders in those organizations. They have about 140,000 members today. For 80 years, they’ve been focused on education when it relates to managing the finance functionality with regard to hospitals, and they provide certification and tools. They’re a very well-respected organization, and they’ve earned that respect because they deliver a phenomenal product in terms of equipping these hospitals to be excellent when it comes to managing their overall finance functionality.
So, MAP App is the application that they have developed, and we were able to acquire this MAP App. It’s a hospital benchmarking tool that’s used to measure and provide analysis with regard to the revenue cycle management performance of those hospitals. Things like denials, the cost to collect, cash acceleration, and the like, with the ultimate goal of then being able to position them and to guide them in terms of remedial steps, things that they can do to further improve their overall ability to collect and to avoid denials and the like. So we’re particularly excited about this opportunity.
This opportunity, part of it is the acquisition of this application. The other part of it, which is equally exciting, is a joint marketing agreement that we’ve entered into with them. It’s a robust, long-term joint marketing agreement through which we’ll be involved in both cross-marketing and cross-selling. Their team members will be continuing to sell together with memberships, and they’ll continue to be able to sell this MAP App application. And we, on the flip side, will be focused on selling MAP App, but also introducing new providers and hospitals to HFMA. Secondly, from a marketing perspective, we have a whole variety of different things that both parties have agreed to and are excited about, including joint webinars, placement on HFMA’s website, and conference presence. So, booths at their various conferences, hoping to lead an annual conference that focuses on revenue cycle management and the MAP App component of that overall conference, and the like.
We couldn’t be more excited about the joint marketing opportunities here. Coming back, though, to the application, most fundamentally, we’re interested in beginning to explore how we can incorporate AI into this application. A second key win will be building out bidirectional interfaces, which will help address one of the concerns that they have more in the sales cycle, which is the ability for it to be easily implemented. And then secondly, beyond implementation, to provide an ongoing mechanism to make sure that the data that’s being pulled from the hospital’s existing EHR system seamlessly flows into the application and provides those analytics. We’ve been doing that sort of thing for 20 years.
So we’re excited to be able to bring our capabilities to bear in this solution to the benefit of these existing customers. And then by extension, to be able to significantly expand the universe of addressable hospitals in the market. There are many kinds of top-tier marquee names that are using this application, but we actually see an opportunity in the lower end of the market, in particular, as well, where they haven’t focused quite as much because they haven’t had the bandwidth and the capabilities to do that. But we’re excited to be able to focus on the lower end of the market in addition to the larger hospitals.
Michael Kim: Got it. And then maybe just finally, and I know this has certainly been an area of focus for CareCloud, but just wondering if you could talk a bit about what CareCloud is doing regarding AI and the use cases there.
Stephen Snyder: For AI, we previously announced this, our new AI Center of Excellence at the beginning of the year. And we’ve made great strides. So you can break up the AI key components, maybe into two primary buckets.
The first one being the back-office automation. That’s the place where clients won’t see, at least directly see the AI, but it’s increasingly assisting us with backend data entry, helping to manage referral flows, eligibility, coding, denials, appeals, things like that. And it’s significantly streamlining the overall kind of back-office automation and functions. And again, it will just continue to do that as we continue to develop and to deploy these solutions.
On the front end of the market, the second key category would be things like cirrusAI notes, which captures the essence of the clinician-patient conversations and then draft structured documentation or structured data within the EHR that memorializes that conversation. Once upon a time, that would be done in a patient chart. That progressed from a patient chart to an EHR, but the EHR still required a significant amount of data entry. So that was kind of the second phase. Well, this is the third phase of that, utilizing AI to actually capture the essence of that conversation, the essence of that encounter, and then having AI actually populate that chart. I’d say Guide would be another key area, an application that’s embedded within our EHR and assists with real-time data entry and evidence-based suggestions that uses AI to improve the overall decision-making, and also makes the data more easily developed summaries and the like for a clinician.
I’d say that maybe the third key component of this would be something that we’re going to more formally announce relatively soon, which is what we call FDA, or our Front Desk Assist. And this is a tool that would enable both hospitals and doctors’ offices to automate inbound calls and handle things like prescription refills, helping to schedule an encounter based upon the availability of the office or the hospital and the availability of the respective patient. It’ll help with regard to ensuring eligibility, processing eligibility verifications, and the like, provide a kind of triaging with regard to a variety of these other things, and be the front line of support so that the office staff can focus on other key responsibilities as opposed to handling these patient calls.
Michael Kim: Got it, that’s super helpful. This has certainly been great, Steve. Appreciate the time. Certainly seems like you guys continue to be busy on the acquisition front, and look forward to continuing to follow the company’s progress. If anyone has any follow-up questions, please feel free to contact me at [email protected], or you can reach the company directly at [email protected]. Thanks again, Steve. Thanks, everyone, for joining in, and have a great day.
Stephen Snyder: Thanks, Michael. Thanks, everyone.
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