What’s behind the rapid rise of RCM companies

Modern Healthcare – Monday, September 15, 2025
By Hayley DeSilva

Hospitals and health systems are looking to revenue cycle management companies to help them level the playing field with insurers.

Payers have been increasingly using artificial intelligence to speed up their processes, particularly with prior authorization and denials. Meanwhile, most providers handle revenue management functions internally and are behind on adopting AI and other technologies, leaving them outmatched and scrambling to keep up.

Other recent industry trends like inflation, staffing shortages, layoffs of nonclinical workers and regulatory changes are exacerbating the troubles.

Enter RCM-focused companies like R1 RCM, Ensemble Health Partners, Smarter Technologies and Knowtion Health. These companies and others help providers with their billing and collection processes for medical services, either offering an end-to-end program or a solution for specific parts of the cycle.

The platforms can take the burden of those processes off providers for what they market as an often-lower cost than what providers would spend handling things on their own — and with more up-to-date technology.

The size of the revenue cycle management market was estimated at $172.2 billion last year, according to Grand View Research, and it’s expected to record a compounded annual growth rate of about 10% during the next five years as hospitals and health systems look for partners with automated, AI-enhanced solutions. The increased interest from providers has caught the attention of private equity.

Providers had been investing heavily in their RCM programs and were getting a return on their investments but the pandemic turned that model on its head, said Christopher Kerns, CEO of Union Healthcare Insight, owned by New Mountain Capital.

“From the early 2000s up through the mid 20-teens, there was a pretty strong hydraulic that the more resources you devoted to revenue cycle, the better performance you could get on [accounts receivable] days, even if cost went up,” Kerns said. “What we have been seeing over the last few years is this scorched earth phase of the healthcare payment cycle. Right now, everyone seems to be losing. The health plans are losing. The health systems are losing.”

Kerns said the top revenue cycle challenges for providers are increased denials, underpayment from health plans, regulatory friction and cost containment at a time when health systems must shift labor spending from back-office functions to clinical staff.

In addition, providers find themselves dealing with ever-changing tech needs that require additional inhouse investments.

“When you talk about AI, it’s changing from somewhat of a task-based worker saying, ‘Hey, bill this claim, hit this button’ to a much higher skill set around deductive reasoning,” said Judson Ivy, founder and CEO of RCM company Ensemble Health Partners. “Providers are struggling a little bit with this evolution — and the friction from payers is real. If you just look at the denial increase in the last three years nationally, providers don’t necessarily have the scale to deal with it.”

The trend ticked up even more following the signing of the tax law, which calls for more than $1.1 trillion in cuts to Medicaid over the next 10 years. It is going to shift more of the financial burden for healthcare onto patients, leading to greater medical debt and potentially less revenue for providers.

All of this has created a perfect storm that means opportunities for RCM vendors to reach out to providers of all sizes.

“To some degree, it’s been a tailwind for us,” said Dr. Mike Gao, president of RCM vendor Smarter Technologies. “Because of this need, we’ve more than doubled the number of health systems that we partner with just so far this year.”

Investors are keen to get in on the action and there has been a flurry of activity.

Last year, private equity firm New Mountain Capital, the largest shareholder in publicly traded R1 RCM, sought to acquire the remainder of the firm for $5.8 billion and take it private. Instead, the company was acquired months later by TowerBrook Capital Partners and Clayton, Dubilier & Rice in a deal that valued R1 RCM at $8.9 billion.

Also last year, private equity firm Arsenal Capital Partners acquired Knowtion Health in October for undisclosed terms.

New Mountain combined three of its portfolio companies, Access Healthcare, SmarterDx and Thoughtful.ai, in May to create Smarter Technologies. While financial details were not disclosed, New Mountain said it made strategic growth investments in each individual company earlier this year prior to the platform’s launch.

Commure, an AI-powered health technology company, raised $200 million in growth financing in June through General Catalyst’s Customer Value Fund, which it plans to use toward building its own RCM platform.

And just Friday, EqualizeRCM acquired the assets of Revenue Cycle Services. Terms were not disclosed.

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