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The Medical Billing Industry
The medical billing and accounts receivable management
industry is approximately $4.1 billion in size and is very
fragmented. The largest company in the industry has a
market share of approximately 10%. The top five companies
have only about 20%. Most of the business is in the hands
of companies under $15 million in annual revenue.
The industry is ripe for consolidation. There are several
hundred larger companies with good profitability, whose
owner/managers are at or nearing retirement age.
The medical billing industry began to develop after the
Second World War. As physician incomes began to grow
dramatically, increasing numbers of them opted to contract
with small, local businesses to take over their practice
billing functions. Many of these companies grew
consistently over many years.
By the late '80's, there were many companies in the $15-40
million size range. In the early '90's, the first wave of
serious consolidation took place with Medaphis becoming
the dominant player by 1994. In '95 and '96, events
occurred that caused Medaphis stock to take a very
serious dive. Medaphis (later renamed Per Se
Technologies- now part of McKesson) spent several years
dealing with lawsuits and profitability problems, but was
able to put the worst of the problems behind it by 2002 and
has more recently shown a consistent improvement in
performance.
Over the past five years, most of the smaller companies in
the size range of $4+ million in annual revenue have grown
significantly - and become much more profitable. Some
companies, having aggressively implemented new
Internet-based software and having made effective use of
off-shore processing, have seen profitability grow into the
20-35% range. However, many of the companies have
grown and become more profitable using their old systems
and not doing off-shore processing. It has generally been
a very good time to be in this business.
Current trends show that, both in growth and profitability
terms, the larger companies seem to be doing better than
the smaller ones, at all levels. The second largest company
in this industry has grown from $30 million to $145 million
over the past eight years. The third largest has grown to
about $130 million in the past six years.
There is an opportunity to consolidate $200 million or more
in business over the next 3-6 years and still leave room for
other consolidation plays. That is the opportunity that
AnchorMed is focused upon.
industry is approximately $4.1 billion in size and is very
fragmented. The largest company in the industry has a
market share of approximately 10%. The top five companies
have only about 20%. Most of the business is in the hands
of companies under $15 million in annual revenue.
The industry is ripe for consolidation. There are several
hundred larger companies with good profitability, whose
owner/managers are at or nearing retirement age.
The medical billing industry began to develop after the
Second World War. As physician incomes began to grow
dramatically, increasing numbers of them opted to contract
with small, local businesses to take over their practice
billing functions. Many of these companies grew
consistently over many years.
By the late '80's, there were many companies in the $15-40
million size range. In the early '90's, the first wave of
serious consolidation took place with Medaphis becoming
the dominant player by 1994. In '95 and '96, events
occurred that caused Medaphis stock to take a very
serious dive. Medaphis (later renamed Per Se
Technologies- now part of McKesson) spent several years
dealing with lawsuits and profitability problems, but was
able to put the worst of the problems behind it by 2002 and
has more recently shown a consistent improvement in
performance.
Over the past five years, most of the smaller companies in
the size range of $4+ million in annual revenue have grown
significantly - and become much more profitable. Some
companies, having aggressively implemented new
Internet-based software and having made effective use of
off-shore processing, have seen profitability grow into the
20-35% range. However, many of the companies have
grown and become more profitable using their old systems
and not doing off-shore processing. It has generally been
a very good time to be in this business.
Current trends show that, both in growth and profitability
terms, the larger companies seem to be doing better than
the smaller ones, at all levels. The second largest company
in this industry has grown from $30 million to $145 million
over the past eight years. The third largest has grown to
about $130 million in the past six years.
There is an opportunity to consolidate $200 million or more
in business over the next 3-6 years and still leave room for
other consolidation plays. That is the opportunity that
AnchorMed is focused upon.
Contact:
Richard W. Pendleton
AnchorMed Corp
1651 Geary Road
Walnut Creek, CA 94597
(925) 930-9981
(925) 930-8270 - fax
rwp@anchormed.com
Richard W. Pendleton
AnchorMed Corp
1651 Geary Road
Walnut Creek, CA 94597
(925) 930-9981
(925) 930-8270 - fax
rwp@anchormed.com