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R1 RCM touts domain expertise in Intermedix deal, updates guidance

Buying Intermedix Corp. would broaden R1 RCM Inc.'s care coverage in patient billing technology service and ramp up the company's growth trajectory, according to President and CEO Joseph Flanagan.

The acquisition would add a "deep domain expertise" in analytics, automation and clinical insights, Flanagan said during a conference call to discuss the deal, according to a transcript of his remarks.

R1 RCM announced the agreement in tandem with a related deal reached to provide patient service tracking and billing, or revenue cycle management, for Ascension Medical Group. R1 RCM signed a term sheet for a 10-year contract to provide patient billing services to Ascension Medical, a St. Louis-based healthcare provider with 141 hospitals, some 2,500 healthcare sites and 36,000 aligned providers. The agreement with Ascension is contingent on the Intermedix deal going through, Flanagan said.

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The transaction between R1 RCM and Intermedix is the latest in a spate of outsized U.S. healthcare technology deals. According to S&P Global Market Intelligence data, there have been 14 healthcare technology deals that have U.S. targets and values of more than $400 million since the start of 2015. Far and away the largest such deal was Quintiles' merger with IMS Health Holdings. The 2016 merger, which was viewed by industry observers as a first-of-its kind, "transformational" deal, came with an announced value of $9.00 billion.

In light of the deal, R1 RCM adjusted its full-year 2018 outlook and now expects revenue to fall in the range of $850 million to $900 million, up from previous guidance of $675 million to $725 million. The company anticipates a GAAP operating loss in the range of $30 million to $55 million, compared to previous guidance for income of $5 million to $15 million. Adjusted EBITDA is now expected to be $50 million to $55 million, up from $40 million to $50 million.

The company's outlook for 2020 now calls for revenue of $1.20 billion to $1.30 billion, compared to the previous guidance of $800 million to $900 million. The outlook for GAAP operating income for the year is now for $115 million to $155 million, up from $80 million to $100 million. Adjusted EBITDA is expected to come in at $225 million to $250 million, as compared to the previous outlook of $120 million to $135 million.