Scoop: PE-backed Zelis buys Spectrum's Payer Compass

Zelis Healthcare, backed by Parthenon Capital and Bain Capital, has agreed to acquire Payer Compass for roughly $180 million, sources familiar with the matter tell Axios.

Why it matters: Zelis aims to remove friction from transactions and simplify payment processes to drive more affordable and transparent health care, and acquiring Payer Compass furthers that mission.

Deal details: Zelis CEO Amanda Eisel confirmed the transaction to Axios, but declined to comment on financials.

• The deal is valued at around 18x the company's about $10 million of EBITDA, concluding a Triple Tree-run sale process, sources tell Axios.
• Exiting Payer Compass investors include Spectrum Equity and Health Enterprise Partners (HEP), which recapitalized the reimbursement technology and price transparency company in January 2019.

What they're saying: Many other players are tackling different aspects of what Zelis does, but Eisel thinks doing everything under one house is better.

• "We very deliberately are growing across payment processing, [claims] communications, and payment integrity," she says.

Yes, and: This isn't just a roll-up play — it's all about feeding continued growth, Jay Deady, who leads Zelis’ Claims Cost Solutions business, tells Axios.

• Zelis's strategy is centered around a "price, pay and explain" framework which covers three key stakeholders: payors, providers and members. (Zelis got into the latter end-market through its 2021 acquisition of Sapphire Digital.)

Zoom in: In adding Plano, Texas-based Payer Compass, Deady says Zelis gains the following:

• Contract management pricing capabilities that can be leveraged as a new separately licensed product.
• Pricing capabilities for 23 Medicaid states, where it doesn't currently play.
• Supporting services that will "exponentially expand" on the digital member engagement tools and tech inherited via the Sapphire acquisition.
• SaaS-delivered capabilities that will open new doors among both the "Blues" health plans and national plans.

Catch up quick: In 2019, Parthenon merged two portfolio companies — Zelis Healthcare and RedCard — bringing in fellow Boston investor Bain Capital as a significant new shareholder.

• The deal valued the new entity at approximately $5.7 billion, with Parthenon remaining the largest shareholder and Bain assuming an around 35-40% stake, sources told Sarah then.
• The marriage of the two companies accounted for pro forma EBITDA of about $300 million, including synergies, sources said then. Today, sources estimate Zelis is generating EBITDA in the $450 million zip-code.

💭 Our thought bubble: If and when Change Healthcare successfully unloads its payment integrity business ClaimsXten to TPG (which remains contingent on the closure of its tie-up with UNH ), the sale could have a domino effect on peers like Zelis.

• If the IPO markets re-open, we expect to see Zelis backers pursue a dual-track IPO and sale process. Either way, the company, characterized by sources as both a high-margin and high-growth asset — and operating at the nexus of healthcare, tech and payments — should attract strong interest.