Healthcare Services: Revenue Cycle Management

Transcription

1 Industry Insights January 2011 Healthcare Services: Revenue Cycle Management RCM: Overview and Outlook Many of the themes discussed in our June 2010 report on the revenue cycle management ( RCM ) sector played out in the second half of the year. As discussed below, merger and acquisition activity was strong with the consolidation of small and mid-sized RCMs by larger companies seeking specific skills, technologies or customer relationships to add to their increasingly comprehensive end-to-end solutions. Emdeon (NYSE:EM) added expertise in patient eligibility and enrollment for government programs to its RCM service offering through the acquisition of Chamberlin Edmonds in September Ingenix (a subsidiary of UnitedHealth Group, NYSE:UNH) placed a bet on coding technology three years ahead of ICD-10 conversion by acquiring A-Life Medical, also in September. Outsourcing, which may now be at the tipping point moving from early adoption to market acceptance is the driver of growth at PHNS, which was acquired in October by The ConJoin Group. ConJoin is a private equity backed IT services company led by industry veteran Richard Garnick. (See Five Questions with Richard Garnick, starting on page 5.) We see these trends continuing into 2011 as the widely-used analogy to Y2K plays out. ARRA funding will flow as providers spend stimulus dollars to upgrade their clinical systems to promote meaningful use of electronic medical records ( EMR ) and anticipate the massive task of converting from ICD-9 to ICD-10. (More on the coding challenge in Coding Comments below.) We believe that the spend in clinical systems will create follow through spending in upgrades to RCM administrative systems and procedures as providers find that managing the revenue cycle is more important than ever. Smaller RCMs with single point solutions that have limited access to capital for growth will increasingly feel pressure to succumb to acquisition offers from larger RCMs building or adding to their end-to-end solutions. Some will transact from a position of strength while those waiting too long may do so defensively. Inside Why RCM Matters Emergence of New Healthcare Delivery Systems Implications for RCM Coding Comments Five Questions with Richard Garnick, Chairman and CEO of PHNS 2010 RCM M&A Activity Selected Publicly Traded RCM Companies Case Study: The ConJoin Group

2 Why RCM Matters Fundamentally, providing healthcare is a low margin business, especially for hospitals. A recent study by Thomson Reuters showed hospital operating margins fluctuating between 2% and 4% of revenues in the four quarters ending June 30, Providers margins are under constant assault as revenues are squeezed and costs increase. We do not see these trends abating. As an industry executive said on a recent conference call The best days of reimbursement are behind us. Implementation of the Patient Protection Affordable Care Act ( PPACA ), if not stopped by the Supreme Court or significantly diluted by Congress, will require more than 30 million people currently uninsured to carry health insurance, mostly with plans that provide reimbursement at a rate that could be closer to that of Medicaid than that of employer-subsidized commercial insurance. In addition, provider revenues are under attack by Recovery Audit Contractors ( RACs ), third-party auditors hired by the Centers for Medicare and Medicaid Services ( CMS ) on a contingency fee basis to identify improper payments under fee-for-service Medicare. Originally formed as a three year regional pilot program under the Medicare Modernization Act of 2003, RACs now operate in all 50 states and on a permanent basis. RAC audits are slated to expand into the Medicaid and Medicare Advantage programs, further pressuring revenues. Other sources of funding are also under pressure as endowment payouts and charitable giving have declined and the municipal bond market provides access to capital for only the highest rated issuers. Among other factors impacting operating expenses, providers face increased regulatory, compliance and reporting costs, including fighting waste, fraud and abuse claims arising from RAC audits. The single biggest slice of the Medicare cuts is from reductions in projected payment increases to hospitals and other providers over the next 10 years.* In this environment it is imperative that providers get every cent they can out of their revenue cycle. A large, publicly-traded RCM that works for providers on a gainshare basis (analogous to a contingency fee arrangement) reports a 400 to 600 basis point improvement in margins for its hospital clients effectively doubling operating margins. Hence the importance of RCM. More accurate patient information on the front end, more accurate transcription and coding in the middle and active management of collections (to overly simplify the cycle) is essential to provider survival. *Washington Post: Health-care law to save Medicare $8 billion through next year, report predicts Tuesday, August 3, 2010 Duff & Phelps 2

3 Emergence of New Healthcare Delivery Systems Implications for RCM In mid-january 2011 (after this has gone to press) the CMS is expected to issue proposed regulations for Accountable Care Organizations ( ACOs ) to be followed by a public comment period. While the term ACO has been in the healthcare lexicon for years, ACOs are now being formally created as a result of the PPACA. The ACO promises to be a new model for healthcare delivery that will improve outcomes and reduce costs by deploying, among other things, an integrated delivery model with a risk sharing between providers and payers. Payments will be based on the value, rather than the volume, of services provided. Cynics speculate that ACO is just another way to spell HMO, the form of managed care that peaked in the late 1990s but has declined since as patients bristled at the inflexible model with a gateway doctor. We are not among them. While CMS is the major catalyst for ACOs, there is concurrence among many healthcare providers and private insurance carriers that integrated healthcare delivery organizations tasked with managing the health of a patient population and rewarded or penalized in a risk-sharing model will be an important part of the country s future healthcare system. For example, on December 15, 2010, well ahead of the announcement of proposed ACO regulations by CMS, six major healthcare systems Cleveland Clinic, Dartmouth-Hitchcock, Denver Health, Geisinger Health System, Intermountain Healthcare and Mayo Clinic announced a data sharing collaboration. Data on outcomes, quality and costs for the combined population of 10 million for these six systems will be analyzed to determine best practice recommendations for use by providers nationwide. If successful, this collaboration could achieve the ACO model s goals of better quality and outcomes, greater efficiency of clinical care and delivery and lower per capita costs while creating alignment first between payers and providers and second, among providers, alignment between physicians and hospitals. The emergence of ACOs and similar organizations will have profound implications for RCM providers. As physicians and hospitals come together either via alliances, joint ventures or mergers to deliver care to patient populations, clinical and administrative systems will need to be reengineered. Indeed, it is hard to envision a truly integrated, multi-disciplinary organization operating in an outcomes-based environment where the RCM and clinical systems are not also integrated. Yet at a minimum, billing and claims systems will need to be unified. Whichever group is the first mover in forming the ACO the physicians or the hospitals could emerge as the owner of the all-important revenue cycle for the new organization. Duff & Phelps 3

4 Coding Comments Coding and transcription occupy the mid-level of the revenue cycle in between the front of the cycle (patient access, pre-registration, entitlement and eligibility and self-pay) and the back of the cycle (account collections). The mid-level is a point of intersection for the providers administrative RCM system and its clinical HIT system. It is also where some of the more interesting technologies are being deployed voice recognition software and powerful natural language processing ( NLP ) engines used to parse clinical information. It is also where outsourcing and offshoring are being aggressively deployed by some organizations. To make things even more interesting, coding is at the epicenter of the Y2K analogy as the 17,000 codes of ICD-9 are slated to be replaced by the 155,000 new ICD-10 codes in With coders already in short supply many question whether the industry will be ready for the 2013 conversion. With the conversion, and the almost ten-fold increase in codes, many also speculate that claim denial rates will escalate, severely impacting providers revenue cycles. (Imagine the battles over reimbursement claims between the RACs and the RCMs, both working on contingency fee bases!) The analogy with Y2K is apt. Will the world come crashing to a halt on October 1, 2013, will the conversion deadline have to be extended or will October 1, 2013 be as quiet as January 1, 2000? We believe that the combination of outsourced solutions and the application of technologies like NLP will hold the answer. As coding is so complex and critical to the clinical information system, users are generally are loath to make major changes to their coding technologies and systems. In addition, providers spending priorities have generally been first to capture ARRA dollars by embarking on what some call the EMR journey, and next to capture every penny of margin by investing in front and back end RCM solutions. However with the October 1, 2013 deadline getting closer every day, the spend on new coding solutions should accelerate. As occurred pre-y2k in 1998 and 1999, we expect deal activity to crescendo ahead of the ICD-10 implementation deadline. The spending progression described above will also have an impact. ARRA subsidies for EMR implementation will result in widespread deployment of electronic records densely packed with clinical information. Rollout of PPACA-mandated ACOs will create large pools of users of this data in outpatient and clinical environs. Add to this the looming deadline for ICD-10 conversion and one can foresee this trio of powerful forces creating an environment in which coding solutions are reevaluated and new relationships based on emerging technologies are forged. The lifecycle of A-Life Medical is an instructive case. A-Life unveiled its first NLP technology in 2005, a time when other competing NLP applications were also developed. Product innovation ensued and by the period strategic partnerships between coding technologies and large healthcare IT providers had formed. A-Life and Ingenix formed a partnership whereby Ingenix began to offer A-Life s NLP application in combination with Ingenix encoder. Competing NLP companies CodeRyte and Artificial Medical Intelligence formed alliances with 3M company (NYSE:MMM) and Dolbey, respectively. Integration between coding providers and larger healthcare IT providers further advanced in 2010: in February, Nuance Communications (NASDAQ:NUAN) acquired Language and Computing a healthcare NLP solutions company and in September 2010 the A-Life/Ingenix courtship became a marriage. It is not hard to imagine that other alliances and ventures may develop into acquisitions as coding technology bets are made ahead of the 2013 conversion date. Duff & Phelps 4

5 Five Questions with Richard Garnick, Chairman and CEO of PHNS On November 8, 2010, The ConJoin Group ( ConJoin ), a privately held transformative IT and business services company led by Richard Garnick, announced the acquisition of Dallas-based PHNS, a leading healthcare IT and revenue cycle management services provider, in a deal valued at $250 million. Rich has 25 years of experience in technology and IT services, serving in increasingly senior capacities with Texas Instruments, Arrow Electronics, Avnet, Wipro Technologies and Keane before founding ConJoin in Rich, congratulations on your acquisition and on becoming Chairman and CEO of PHNS. What makes the combination of ConJoin and PHNS so attractive for your shareholders? The acquisition of PHNS, the largest independent IT-BPO and revenue cycle management company enables us to participate aggressively in the healthcare arena. We have created a tremendous platform which builds value for our customers, employees and ultimately our shareholders. This has been achieved by combining ConJoin s global capability, and process reengineering, along with PHNS deep domain and clinical expertise built over the last 10 years serving major hospitals. A few examples of hospitals serviced are McLaren Health Care, Adventist Health Care, Detroit Medical, Valley Baptist, Erlanger, HSC Health Care System, Karmanos, Advocate Good Samaritan Hospital, Newton Memorial Hospital, Legacy Hospital Group, and many more. With the combination of ConJoin and PHNS, we emerge as one of the top 10 leading IT/BPO companies, as measured in revenue from India, and continue to be the largest independent company that provides IT/BPO services to the healthcare provider sector. We intend to build upon this platform a premier sector leading company dedicated to serving the Healthcare provider industry. PHNS counts among its customers some of the largest and most prestigious hospital groups and IDNs in the country. Is this a good combination for them? Yes, the healthcare system and our customers are all under tremendous pressure to bend the cost curve while improving patient safety and the quality of care. By applying our methodologies of business process re-engineering and applied global technology delivery, we have materially lowered cost and improved quality, which has driven significant productivity gains for many companies and sectors over the last decade. Over time, our current and future customers will benefit from these capabilities. Healthcare providers have many choices in selecting IT and RCM service providers as their partners. Why choose PHNS? We are focused on understanding our client needs. By creatively applying both deep clinical and domain expertise coupled with our global delivery platform, we are able to craft unique solutions to IT/BPO and RCM challenges in a way that meets or exceeds our client s expectations. We will continue to differentiate ourselves by focusing in a laser like fashion on the healthcare provider market and defining our offerings in a way that clearly demonstrates value versus the generic broad based providers. Duff & Phelps 5

6 Five Questions with Richard Garnick, Chairman and CEO of PHNS Rich, in your career you have a track record of being able to see around corners. In 2001 you joined Wipro when it was anything but clear that Indian IT companies would become players in the North American market. When you left Wipro four years later, its North American revenues had grown from $100mm to $2bn. How do you believe the healthcare provider landscape in the U.S. will change in the next five years? My view is that healthcare has reached an inflection point. Regardless of which direction the healthcare reform act takes, everyone is keenly aware that change in the status quo is needed in how we deliver healthcare to our communities. There are over 5,000 hospitals in the U.S. alone. They have generally been late to adopt both technology and global delivery approaches to drive operational productivity. Over the last years, other industry sectors have materially improved efficiency, effectiveness and quality while at the same time reducing cost. In studies that compare the administrative cost of healthcare providers processes vs. those of other industries with similar complexities, costs to execute average $1 for these other sectors, versus $15 for the hospital sector. Industries will be open to accepting new approaches and change when facing such compelling and clear problems. By applying our methodologies, innovation and quality approach to delivering technology and business processes, which have proven to bring material benefit to other industries, we can help hospitals truly bend the cost curve, improve patient care and help our society in general. This is our focused mission and we will integrate talent, creativity and resources to solve this challenge. It sounds like there are plenty of organic growth opportunities for PHNS, but you ve also expressed an interest in acquisitions. What is the acquisition strategy for PHNS? We intend to be a sector leader and consolidator of the fragmented service provider market. This will be most likely more poignant in the BPO sector, and we will evaluate acquisitions that align three dimensions: cultural, strategic and financial fit. Rich, thank you for taking time out during your first 45 days at PHNS to speak with us. We wish you continued success. Healthcare will be expanding in the U.S. and industrialized world based on demographic trends, thus creating increased demand which can only be met by materially increased productivity. Duff & Phelps 6

7 2010 RCM M&A Activity As stated in our 2010 June report, 2010 proved to be a busy year for RCM M&A transactions RCM transaction volume doubled as compared to 2009 deal volume, while broader U.S. M&A transactions increased 31.0%. Activity was driven by strategic acquirers continuing to amass scale and scope and financial sponsors continuing to invest in new and existing platforms. EMR continued to drive broad sector demand, with ARRA incentives taking effect January As of January 2011, providers that display meaningful use of EMR technology are eligible to receive substantial ARRA funding, paid out over a 5-year period. As antici pated, this stimulus continued to incent transaction activity. On June 9, 2010, Allscripts (NASDAQ: MDRX) announced the $1.3 billion acquisition of Eclipsys, creating a combined platform with 180,000 physician and 1,500 hospital clients. Allscripts CEO Glen Tullman announced that the industry was at the beginning of what we believe will be the single fastest transformation of any industry in U.S. history. Many firms made direct investments in the EMR sector in 2010 such as Hyland Software s acquisition of ewebhealth, AdvancedMD Software s acquisition of PracticeOne, and Ingenix acquisition of Axolotl Corporation. Even European buyers, who are not typically active acquirors of U.S. healthcare services companies, demonstrated keen interest in the U.S. healthcare IT and RCM sector, further evidence of the significant growth opportunities in the sector. CompuGroup Medical AG (DB:COP) of Germany and Cegedim SA (ENXTPA:CGM) of France made strategic acquisitions in the sector, as CompuGroup acquired American Healthcare Holdings and HealthPort s Solutions Services Division, and Cegedim acquired Pulse Systems. Insurance eligibility proved to be increasingly popular add-on for RCMs. The Outsource Group, a ClearLight Partners portfolio company primarily focused on receivables management, acquired two insurance eligibility firms in 2010 Patient Financial Medical Services and Health Care Legal Services which identify and enroll qualified patients in government healthcare programs to minimize uncompensated care and bad debts of providers. Emdeon s acquisition of Chamberlin, Edmunds & Associates is another 2010 example of an integrated RCM player acquiring a patient eligibility and cost recovery firm to enhance revenue capture product offerings. Strategic players continued to expand their scope of services, rounding out their suite of solutions. As discussed in our June 2010 report, well-established RCM firms have continued to gain scale by acquiring smaller firms with complementary services, thereby creating end-to-end solutions with integrated product suites. Emdeon made three RCM-related acquisitions in 2010 to expand the scope of its service offerings. The Chamberlin, Edmunds acquisition discussed earlier enhances Emdeon s ability to improve its clients cash flow by reducing uncompensated care and bad debts. Emdeon s acquisition of Chapin Revenue Cycle Management bolsters its offering of audit and recovery services and M&A Activity # of RCM Transactions Source: Capital IQ US M&A RCM Deals 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 # of U.S. M&A Transactions Duff & Phelps 7

8 2010 RCM M&A Activity denials management. Finally, Emdeon s acquisition of FutureVision will allow it to electronically process nearly all payments regardless of format, moving Emdeon one step closer to paperless claims processing. Overall, Emdeon s growth strategy, which includes 10 acquisitions since 2004, has resulted in one of the most complete end-to-end RCM solutions in the industry. The Advisory Board Company (NASDAQ: ABCO), a firm that has been traditionally known for its best practices consultancy and excellence in healthcare analytics, continued to build its solutions portfolio with its acquisition of Concuity in March. Illinois-based Concuity provides denials and underpayment management services to boost payer compliance. We expect that increased scrutiny and complexity of the reimbursement process will spur similar M&A investments among RCM providers. NLP coding continued to build momentum, in anticipation of the ICD-10 October 2013 deadline. As mentioned in the Coding Comments section of this report, NLP deals continued to gain momentum in 2010, in what we believe may be an arms race for coding technology as the ICD-10 deadline approaches. Nuance Communications acquisition of Language and Computing and Ingenix acquisition of A-Life highlight two examples of industry juggernauts placing their bets on NLP coding technology. Anticipate continued deal activity in this sector. Outsourcing drove several transactions in the RCM/BPO sector. Outsourcing remains a highly actionable strategy for providers to reduce costs. Several acquisitions in 2010 evidence the growing propensity of hospitals to utilize outsourced services. The $250 million acquisition of PHNS by The ConJoin Group was predicated upon a transformative outsourcing model. Under new leadership, PHNS plans to aggressively pursue healthcare RCM/BPO transactions. (See Five Questions with Richard Garnick, in this report.) NightHawk Radiology Holdings sale to Virtual Radiologic Corporation created a dominant player in the offshore teleradiology sector. Currently the teleradiology sector involves offering off-hours preliminary reads of images in partnership with local radiologists; however, with continued quality improvements, the growing acceptance of offshore practices and the emergence of the ACO model, it may only be a matter of time until these offshore firms increase their penetration of the U.S. healthcare system by contracting directly with hospitals and bypassing local radiologists. The sale out of Chapter 11 bankruptcy of medical transcription specialist Spheris is another outsourcing and offshoring example, with MedQuist (NASDAQ: MEDQ) and CBaySystems Holdings (AIM: CBay) winning the auction despite stout competition from Nuance and Transcend Services (NASDAQ:TRCR). The final price was nearly 50% above the initial stalking horse bid of $78.3 million. Nearly half of Spheris medical transcription specialists are based in India. Most Active Buyers by Number of RCM Transactions Company Name Emdeon 3 imedx, Inc. 3 Ingenix 3 The Outsource Group (ClearLight Partners) 3 Advantedge Healthcare Solutions, Inc. 2 CompuGROUP Holding USA, Inc. 2 Equation Consulting, Inc. 2 Hyland Software, Inc. 2 Thomas H. Lee Partners, L.P. 2 Waud Capital Partners 2 VIVA Transcription Corporation 2 Transactions occurring in calendar year 2010 Source: Capital IQ # Deals Duff & Phelps 8

9 2010 RCM M&A Activity Financial sponsors remain active in the sector. From the private equity side, Thomas H. Lee Partners made the year s biggest splash in healthcare IT and RCM. In August, it completed the acquisition of Intermedix Corporation from Audax Group, Glenview Capital Management and Parthenon Capital. Waud Capital Partners increased its investment in the sector, as its Medicaid eligibility portfolio company, Adreima, expanded its geographic footprint by acquiring Florida-based Hospital Inpatient Services in September; Waud also announced the formation of Optimum Outcomes Healthcare Management, LLC, a partnership the private equity firm developed with industry veterans Mike Jacoutot and Mary Ann McLaughlin to pursue opportunities in the healthcare BPO/RCM sector. Founders Equity platform company Advantedge Healthcare Solutions acquired AHP Billing Services and Medical Account Services, bolstering its billing and coding offerings. ClearLight Partners also made the three aforementioned add-on acquisitions to The Outsource Group, primarily focusing on patient insurance eligibility. Sector valuations are still healthy. High buyer demand and attractive growth opportunities continue to support pricing for M&A transactions. EBITDA multiples for controlling-interest investments in high quality RCM assets remain in the double digits, while revenue multiples exceed 1.0x. However, we believe that multiples may peak in the next months, as deadlines for ICD-10 and meaningful use EMR approach, and as incumbent firms buy or build solutions to their current product offering needs. Financial Statistics for RCM Transactions ($ in millions) Enterprise Value (EV) Enterprise Value/ Revenue EBITDA Median $ x 14.1x Mean $35 1.2x 11.2x Transactions occurring in calendar year 2010 Source: Capital IQ Duff & Phelps 9

10 Selected Publicly Traded RCM Companies Selected Publicly Traded RCM Companies Given that RCM processes often blend with other healthcare IT solutions, we have compiled an index of eight revenue cycle management companies and six healthcare IT / BPO providers ( RCM Index ). Valuations remained strong at year end, with many firms in the RCM index closing out 2010 at near 52-week highs. Average RCM Index EBITDA multiples for Q continued their upward trend, reaching levels unseen since pre-financial crisis conditions. Since 2004, the RCM index has increased by 215.0%, while the S&P 500 has increased 13.5%. Revenue Cycle Management Index Company Information Market Data LTM Operating Performance Multiples Company Name Ticker Price as of 12/31/10 % of 52-Week High Equity Value (mm) Enterprise Value (1) (mm) Revenue (mm) Revenue Growth Gross Margin EBITDA Margin (2) EV (1) / LTM REV EV(1) / LTM EBITDA (2) Revenue Cycle Management Accretive Health, Inc. AH $ % $1,479.8 $1,355.2 $ % 20.6% 5.1% 2.4x 46.4x Advisory Board Co. ABCO % $ % 48.7% 15.3% 2.7x 17.9x Allscripts Healthcare Solutions, Inc. MDRX % 3, , % 55.2% 17.8% 5.7x 32.0x athenahealth, Inc. ATHN % 1, , % 59.6% 12.9% 5.7x 44.3x Emdeon Inc. EM % 1, , % 39.1% 23.3% 1.9x 8.4x HMS Holdings Corp. HMSY % 1, , % 46.6% 28.0% 6.1x 21.8x MedAssets, Inc. MDAS % 1, , % 77.4% 28.5% 3.6x 12.5x Merge Healthcare Incorporated MRGE % % 64.7% 17.2% 4.5x 26.0x Healthcare IT / BPO CBaySystems Holdings Limited CBAY % % 36.9% 16.8% 0.8x 4.7x Cerner Corp. CERN % 7, , , % 83.2% 26.1% 4.1x 15.6x Computer Programs & Systems Inc. CPSI % % 40.6% 18.4% 3.5x 18.8x MedQuist Inc. MEDQ % % 33.3% 19.3% 1.1x 5.9x Transcend Services, Inc. TRCR % % 35.5% 16.1% 2.0x 12.3x Quality Systems Inc. QSII % 2, , % 62.7% 27.2% 6.0x 22.2x Mean $ % 50.3% 19.4% 3.6x 20.6x Median $ % 47.7% 18.1% 3.5x 18.3x (1) As shown, enterprise value is calculated as market capitalization plus preferred stock, less net debt. (2) EBITDA reduced to account for minority interest expense. EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization; LTM = Latest Twelve Months; EV = Enterprise Value Source: Capital IQ Duff & Phelps 10

11 Selected Publicly Traded RCM Companies RCM Index Average Enterprise Value to EBITDA Multiples (Q Q4 2010) 30.0x 25.0x 25.1x 21.9x 20.0x 15.0x 14.9x 13.6x Historical Median: 15.4x 16.5x 15.4x 14.5x 15.4x 12.7x 11.4x 16.0x 17.9x 18.8x 10.0x 5.0x 0.0x Q4'07 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 RCM Index Historical Median *Multiples calculated based on the average daily LTM EBITDA multiple for the preceding twelve months. Source: Capital IQ RCM Index vs. S&P 500 ( ) S&P 500 Index RCM Index Jan-04 May-04 Source: Capital IQ Oct-04 Mar-05 Jul-05 Dec-05 May-06 Sep-06 Feb-07 Jul-07 Nov-07 Apr-08 Sep-08 Jan-09 Jun-09 Oct-09 Mar-10 Aug-10 Dec-10 Duff & Phelps 11

12 Recent Duff & Phelps RCM Transactions Case Study: The ConJoin Group Financial Advisor The ConJoin Group has acquired PHNS Financial advisor to The ConJoin Group Company The ConJoin Group is a strategic transformative IT and business services company with a unique operating model focused on improving performance using transformational leadership along with cost optimization to make a rapid positive impact. ConJoin is led by Rich Garnick, an industry veteran who, among other things, served as CEO - Americas for Wipro Technologies from 2001 to ConJoin maintains operations in Boston, Toronto, Dallas and its centers of excellence in Mumbai and Hyderabad. Transaction Description On November 8, 2010 ConJoin announced the $250 million acquisition of PHNS. PHNS provides revenue cycle management, information technology and business process services to hospitals and healthcare providers in the United States. PHNS IT services include implementation, maintenance and support of clinical, financial and administrative applications; data centers; help desk; and telephony and local wide area networks for hospitals. Its business process services include end-to-end revenue cycle management, and health information management services (including medical record management and storage, transcription, coding, release of information and electronic medical record services). PHNS core strength lies in its clinical domain expertise. As a combined entity, The ConJoin Group and PHNS will deliver world-class integrated solutions under the PHNS name. Role of Duff & Phelps ConJoin engaged Duff & Phelps as its investment banker to identify acquisition targets that could benefit from application of ConJoin s operating model. Duff & Phelps initiated the transaction and served as ConJoin s exclusive financial advisor. Representative Duff & Phelps RCM Transactions Due Diligence Due Diligence The Advisory Board Company has acquired Southwind Health Parnters, LLC The Advisory Board Company has acquired Concuity Served as financial advisor and rendered financial and tax due diligence services for the transaction Rendered financial due diligence and purchase price valuation services on behalf of the acquirer Duff & Phelps 12

13 For more information about our industry expertise or to subscribe to Industry Insights, visit: Industry Insights Contributors Brooks Dexter Managing Director Chris Mercier Managing Director Sean Sullivan Director Brad Hileman Vice President About Duff & Phelps As a leading global independent provider of financial advisory and investment banking services, Duff & Phelps delivers trusted advice to our clients principally in the areas of valuation, transactions, financial restructuring, dispute and taxation. Our world class capabilities and resources, combined with an agile and responsive delivery, distinguish our clients experience in working with us. With offices in North America, Europe and Asia, Duff & Phelps is committed to fulfilling its mission to protect, recover and maximize value for its clients. Investment banking services in the United States are provided by Duff & Phelps Securities, LLC. Investment banking services in the United Kingdom and Germany are provided by Duff & Phelps Securities Ltd. Duff & Phelps Securities Ltd. is authorized and regulated by the Financial Services Authority. Investment banking services in France are provided by Duff & Phelps SAS. For more information, visit (NYSE: DUF) Copyright 2011 Duff & Phelps Corporation. All rights reserved. DP101182