Deal Snapshot: iContracts

During the past decade, the healthcare industry has continued to undergo rapid and widespread evolution, highlighted by a major shift from compensating providers based on activity to rewarding specific clinical processes. For healthcare providers, this requires an even greater focus on risk and compliance to help ensure they are achieving desired outcomes.

One company that has tapped into this trend is iContracts, whose comprehensive suite of cloud-based software solutions helps healthcare organizations manage risk and compliance, and life sciences organizations navigate complex revenue management processes. Harris Williams recently advised iContracts on its sale to RLDatix, a leading provider of solutions that drive patient safety, quality improvement and harm reduction in healthcare.

What makes iContracts and companies like it so attractive to strategic buyers? And what are some of the things buyers should look for in considering opportunities in this space? Sam Hendler, a managing director in the firm's Technology, Media & Telecom (TMT) Group and Dan Linsalata, a director in the TMT Group, share their views here.

1. What makes this an appealing space for buyers and investors?

icontracts.gifLinsalata: “With the growing emphasis on value-based and outcomes-focused healthcare, tools that can help facilitate compliance and better outcomes are very attractive to hospitals. In fact, compliance in healthcare is rapidly evolving from an obligation to a strategic imperative because it directly impacts profit maximization. With more powerful compliance tools, healthcare providers can go beyond a defensive posture—doing what they have to do to avoid getting into trouble—and use policies and procedures to make sure people are doing things that have the best clinical, financial, and operational impact on the organization.”

Hendler: “More broadly, beyond compliance, solutions that touch areas beyond pure clinical care—such as human capital management, staff scheduling, supply chain management, continuing education, and IT infrastructure—are also very much in demand by healthcare providers. As the care world becomes more value based, providers are taking on more financial risk for the care they deliver. That means their top line is no longer just a ‘revenue times volume’ play—i.e., number of patients treated and procedures performed. They’re now being paid on outcomes. That change in the revenue paradigm means they need to take a closer look at the cost side of the equation to optimize their operating margins.”

2. What made iContracts particularly appealing to RLDatix?

Hendler: “For RLDatix, iContracts is a great strategic fit. RLDatix is focused on patient safety incident reporting and prevention. Its core offering effectively creates a log of incidents to which analytics are applied to proactively predict and ideally head off future safety incidents. iContracts’ solution enables hospitals to craft policies to get the right people to do the right things to help minimize such incidents and maximize patient safety. It enables them to operate more efficiently and deliver better outcomes while defensively managing risks.”

Linsalata: “iContracts’ policy management solution is a web-based, software-as-a-service solution that allows healthcare administrators to draft, distribute, and collect acknowledgement of important operating policies within the hospital. The solution enables hospitals to both establish an audit trail that proves the required people have read specific policies, as well as ensure they have the right policies and procedures in place to head off any potential negative outcomes. iContracts has a very strong recurring revenue stream, consistent top-line growth, and a presence in more than 60% of U.S. hospitals, through which it sells multiple solutions to the same customer contact in the hospital.”

3. What advice do you have for other buyers and investors interested in the space?

Hendler: “They need to understand the key metrics—the percentage of recurring revenue, gross and net revenue retention rate, cross-sell and upsell. That’s what made iContracts so attractive. They also have to get a good handle on what a prospective acquisition’s customer footprint looks like, and who within a healthcare provider organization is the ultimate buyer. Vendors that can offer multiple tools to a single constituent or can sell a full suite of solutions into a single department, a single decision maker, or a single budget, position themselves very well as a strategic partner in the customer’s mind and, from an offering standpoint, can drive more revenue with incremental solutions.”

Linsalata: “Beyond metrics, buyers and investors should understand not only how vendors deliver value in today’s healthcare ecosystem, but what makes their offerings unique building blocks in the evolving healthcare paradigm. That’s what RLDatix is doing. The company is building a platform of offerings that, individually, are attractive to healthcare organizations but, together, are parts of a more valuable suite of tools. That toolset helps providers address the full spectrum of factors that can affect patient safety.”

Published June 2019