Zelis Healthcare continues to grow in an increasingly consolidated market
The specialist began by commenting on the state of bad debt in the US healthcare market, which amounts to a “pretty substantial portion” of the healthcare space. The burden of payment is often on the consumer or employee rather than insurance companies, making it difficult for consumers to be reimbursed. The specialist identified this as an area of “real potential” for Zelis, which could help with the collection of this bad debt.
The specialist also discussed the impact of the No Surprises Act, which comes into force in the US on 1 January 2022. Despite initial cautiousness, the specialist said the act should “be a positive” for the company, given its extensive product set.
Zelis faces competition from a potential joint venture between UnitedHealth’s Optum and Change Healthcare, but the specialist was bullish on the company’s overall position. Zelis has substantial cross-selling opportunities that continue to drive revenue growth, and the specialist said it has forged a strong relationship with its customers thanks to the “stickiness” of its contracts.
Although Zelis’ operations are “pretty well run”, the specialist told Third Bridge that there were opportunities for it to become more efficient. The specialist suggested the company should partner with a “high class group” to outsource its call centre operations, and expand its use of AI to diversify its services further.
Zelis’ recent acquisition of Sapphire Digital was also considered a positive by the specialist, who claimed that it would blend nicely with Zelis’ partnership with Amino and give the company an array of solutions that will become more beneficial for customers.
However, the specialist was less optimistic on an acquisition of Zelis given its valuation had soared in recent years, making it too expensive for competitors to purchase. A potential IPO offering was, however, not out of the question, with the specialist calling it the “only real outcome” for the company in the future.
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The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.
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