When healthcare billing works seamlessly, hospitals, clinics and physicians can focus on helping patients and growing their practices.
But navigating the massive US healthcare process between a doctor, a patient and insurers is a complex challenge.
That’s why tech-forward healthcare CEOs are taking the cost-efficient path of outsourcing their billing functions to an industry innovator like Kovo HealthTech Corporation (TSX-V:KOVO), which takes care of solving digital healthcare billing headaches and inefficiencies.
In a short span, Kovo, which is a billing-as-a-service (BaaS) company, has become a critical part of the US healthcare industry, processing US$200 million in claims annually. Kovo specializes in offering SaaS-style recurring revenue contracts and software to over 1,700 US healthcare providers and offers an industry-leading sub-30 days to payment cycle.
Currently, through its clients, the Vancouver, British Columbia-based healthcare technology company digitally processes billing transactions for over 3.5 million patients.
“The US healthcare billing system is very complex,” Kovo founder CEO Greg Noble told Proactive. “Kovo helps healthcare clinics, hospitals, and practitioners digitally track and manage complex patient care registration, services, billing, and payments in a seamless way using our industry-leading OneRev technology platform.”
A health-tech visionary, Noble is an authority in the medical billing-as-a-service, revenue cycle management, and practice management system fields. He has over two decades of experience in revenue-based transactional systems and medical software.
Interestingly, Noble is a trained accountant, but he has also written code for Medworxs, a cloud-based medical software solutions company, which he co-founded with his wife and Kovo’s Chief Compliance Officer, Jeana Noble. Medworxs now operates successfully as a wholly owned subsidiary of Kovo.
“You can’t build and sell health technology without deep operational experience, insights, and understanding – and that’s really helped Kovo continue to innovate, grow and acquire new client partners,” said Noble.
Sticky recurring revenue
In June 2021, Kovo accomplished its public listing and quickly completed two immediately accretive acquisitions. Investors love Kovo’s sticky recurring revenue model, which generates predictable monthly revenue cycle management (RCM) revenue and software-style margins.
Kovo’s revenue has grown steadily and predictably throughout the pandemic, illustrating the long-term stability of the global BaaS healthcare industry, which will touch $250 billion by 2028, growing at an expected average compound annual growth rate of 11.2%, according to Verified Market Research.
“We have now hit a milestone where the company is generating strong organic and accretive growth – and our RCM business is now driving consistent, positive cash flow every month, which is helping Kovo improve our working capital to fuel our next phase of expansion,” pointed out Noble.
Kovo recently beat its revenue targets for 2021, closing out the year with 96% year-over-year revenue growth. Noble said Kovo is on-track to meet its initial 2022 guidance target of 30% year-over-year organic growth – and anticipates 2022 pro forma revenue of C$15 million (US$12 million) with adjusted EBITDA, or earnings before interest, taxes, depreciation, and amortization, expected to be in the range of 10%.
“It’s important to know that our 30% initial target does not include the growth impact of future acquisitions,” said Noble.
Kovo’s focus in 2022 is to create synergies from previous acquisitions while leveraging its OneRev technology platform to add topline and bottom-line efficiencies.
"Typically, the BaaS market operates on very long-term contracts," Noble said. "Thanks to our team's ability to help take the strain off healthcare providers by simplifying their back office medical billing systems and ensuring they get paid more quickly, we've grown to support over 1,700 healthcare providers in more than 40 states.”
Thanks to Kovo, clinics and healthcare providers get paid within 30 days or less, compared to 60-to-90 days when they use their own admin staff. Pertinently, wrongly coded requests get denied by insurance firms and in-house processing only averages a 60-to-70% success strike rate on their first submission of bills.
As a result, Kovo's OneRev technology platform and related BaaS services are in high demand because it simplifies US medical billing for healthcare providers. The US healthcare billing system is complex as healthcare service providers need to deal with multiple payer systems. This is vastly complicated by the fact that there are over 6,500 insurance providers with different submission rules.
Souped-up OneRev
After a two-year development process, Kovo launched its upgraded OneRev platform to several of its larger healthcare BaaS clients in mid-February this year.
"OneRev is a key competitive advantage for Kovo and powers our industry-leading sub 30 days cash conversion cycle on medical billing reimbursement," said Noble. “Kovo’s upgraded OneRev application programming interface (API) provides fintech-level sophistication and the configurability required by larger US medical billing clients.”
In addition, Kovo’s next-generation OneRev technology platform streamlines the complex process of healthcare billing for clinics, hospitals, and physicians, while substantially reducing labor costs.
“On average, it helps Kovo and our customers benefit from up to 60% reduction in back-office staffing requirements,” said Noble. “This is even more important now as the healthcare industry continues to deal with staffing shortages.”
Acquisition hungry
Noble relies on mergers and acquisitions to fuel the company’s growth. He and Kovo CFO Inder Saini zero in on cash flow generating revenue cycle management acquisitions in the $1-to-$10 million range. Noble has leveraged the relationships he has built in the industry for over 20 years to transact quickly when he sees a profitable healthcare billing-as-a-service business or system that fits the bill.
“Acquisitions are absolutely part of our growth strategy. One of Kovo’s proven key strengths is our ability to target, integrate and optimize acquired companies,” pointed out Noble. “So far we’ve completed 10 acquisitions successfully by following a disciplined strategy that looks to buy $1 of Annual Recurring Revenue (ARR) for every $1 investment of debt or equity.”
There are roughly 30,000 revenue cycle management companies in the US healthcare industry, and they account for $130 billion in annual revenue.
The market is ripe for consolidation and Kovo sees a significant need for a rollup of the smaller practitioners that lack capital, technology, or expertise to grow independently. As a result, Kovo is looking at 15,000 potential US revenue cycle management companies in its target size.
Growth fast track
“As a technology-based company, we’re seeing strong accelerated adoption of digital healthcare solutions, especially in the back office for medical billing-as-a-service in which Kovo specializes,” said Noble. “That combined with our platform efficiency and strategic acquisitions are fueling rapid growth.”
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
Follow her on Twitter: @UttaraProactive