Accretive Health (AH)

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Accretive Health (AH) (NYSE:AH) provides services for healthcare companies. This include optimization for healthcare companies' revenue cycle operations, including patient registration, insurance and benefit verification, medical treatment documentation and coding, bill preparation and collections. As of 3 May 2010, the company had 22 customers representing 59 hospitals with $13.6 billion in annual net patient revenue. ^[1]

The government regulations have put financial pressure on healthcare companies to reduce costs, and Accretive Health takes advantage of this trend. There has not been a product to help healthcare providers to manage all third-party payors and patients, and Accretive Health's integrated software solution covers the entire cycle. ^[1]

The company's initial public offering of stock filed on the NYSE and went public on 19 May 2010. It priced at $12, 20% below the proposed price range of $14-$16. The company offered 10 million shares to raise $120 million. ^[1]

For the FY2009 with year ended 31 December 2009, the company reported net revenue of $510.2 million, up 28.1% from $398.4 million in net revenue for FY2008. Furthermore, the company had a net income of $14.6 million in FY2009, a ten-fold increase from $1.24 million in net income for FY2008. ^[1]

Logo

Business Overview

First and foremost, Accretive Health is a “leading provider of healthcare revenue cycle management services”. The company’s main goal is to make sure that hospitals do not “leave money on the table”. The company does this by providing seasoned Accretive Health personnel and management systems to improve the existing back-office operations. Doing so the company hopes to maximize profits by reducing current costs its clients incur. Accretive Health literally embeds their technology, personnel, know-how and culture within each customer’s revenue cycle activities and serves as the customer’s on-site operational partner. ^[2]

Accretive Health was founded by J. Michael Cline and current CEO Mary Tolan in 2003. Soon after the company was founded it went public in 2010. The use of the company’s Initial Public Offering (IPO) revenue is currently being used to finance further growth. In terms of the growth the company hopes to expand by offering their clients new services and through acquisition of related businesses. Looking towards the future Accretive Health has stated that it will look to add to its customer base by exploring global opportunities. Its main focus will be to penetrate global markets through mainly large hospital systems. ^[3]

Accretive Health's Mission

To strengthen the financial stability of healthcare providers through excellence, best people, and leading technology, thereby increasing healthcare access for all. ^[4]

Contact Information

401 N. Michigan Ave Suite 2700 Chicago, IL 60611

Phone: (312) 324-7820 Email: contactus@accretivehealth.com ^[5]

Marketing Analysis

Product

Accretive Health can not be analyzed by a typical product analysis since its products are its services. Its services can only be assessed after the company has begun conducting business as the level of service all depends on its customers needs. Services include which encompass patient registration, insurance and benefit verification, medical treatment documentation, coding, bill preparation, benefit coordination, and collection managementIn addition to its total revenue cycle management services, in 2010 the company started offering a quality and total cost-of-care package, which assists healthcare providers in managing defined patient groups. The solution helps hospitals identify high-risk individuals (those most likely to experience an adverse health event) and try to keep those patients healthy and well monitored. A nice piece to their services is that they can be provided on a need basis. That means that once the contract expires, the hospital can either renew or transition to rely on its own employees, who have been trained by the infused management team. ^[6]

Accretive Health uses innovative technologies, specifically Proprietary Software Suite, streamlined processes and dedicated people, to provide clients:

■ Significantly Strengthened Financial Results

■ Enhanced Patient and Community Relations

■ Expanded Employee Opportunity

■ Improved Physician Relations

■ Increased Freedom of Focus ^[7]

Price

Accretive Health price analysis is hard to determine because it is a consulting company. Price is determined on a case by case basis but base fees are typically around 4% of hospitals' net patient revenue, with additional incentives payments collected when the hospital meets certain revenue yield improvements. User reviews claim that the price is reasonable, competitive, and pays for itself with all of the money that the company saves its customer.

Place

Accretive Health provides its services in the best way possible, by placing trained Accretive Health professionals directly in customer’s offices. This allows for the best service possible as trained representatives have the ability to provide tailor made services on a case by case basis. It also allows for efficiency and dynamic solutions to its customers. Services are hands on and effective. Typical customers that are served are hospital systems, independent medical centers and clinics, and physician practice groups such as Ascension Health, Dartmouth-Hitchcock Medical Center, and Henry Ford Health System.

Promotion

Accretive Health uses two main modes of promotion, direct marketing and publicity. It uses internet advertisement, special events, endorsements, and newspapers to advertise their product directly to healthcare facilities. Besides attracting new customers Accretive Health hopes to create positioning in the market, competitive retaliations, and a positive corporate image since the company is relatively still in the beginning stages the business cycle. Fundamentally, their main objectives are the three basic objectives of promotion. Those are to present information to consumers as well as others, to increase demand, and to differentiate their services as a leader in the industry. ^[8]

Strategic and Competitive Analysis

Industry Level: Porter's Five Forces

The Intensity of Competitive Rivalry

Moderate When looking at the competitive rivalry in the management services industry one can conclude that rivalry is moderate. Many of the consulting companies in the health care services sector simply are not competing with Accretive Health from an all encompassing approach. Never has a company taken over and dealt with all aspects of a healthcare company’s revenue cycle, managing all third-party payors and patients. Other companies offer services only for specific services for separate parts. However, there still is competition from well established companies like Deloitte Consulting LLP, and MedAssets, Inc. who have been providing services to healthcare providers for years. It is always hard to get companies to switch users. However, Accretive Health’s unique business model and due to the fact that it is service oriented makes coping it difficult. The companies compete on technology, cost efficiencies, and customer service.

Learning a ton from these neat atricels.

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Financial and Operating Metrics

Stock Market Performance

^[9]

Looking at this snapshot of Accretive Health in the first year one can draw many conclusions. Above, AH’s financial performance increased dramatically since it's IPO. The company has strong financials and investors are busy investing in the company's stock. Even though the economy is in a recession currenlty the Healthcare industry that Accretive Health serves is still going strong. People may not be visiting doctors offices as much as usual because of cut backs on expenditures, but Healthcare facilities still need assisstance cutting cost that they still do incur. There will always be a need for companies like Accretive Health to conduct business. Technical analysis shows healthy signs that Accretive Health is a high performing company, investors realize this and continue to drive the stock price up. Therefore, its financial performance is turning in higher than expected financials is benefiting AH's stock. Right now AH's is new to the market and performing exceptionally well. Hopefully it continues this tendency in the future.

Financials

Image:AccretiveHealth2010Data.jpg

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Comparison With Competitors

By looking at the data above an investor can see that Accretive Health has healthy financial statements. The company is outperforming the industry average in every category. They are also out performing their competitors. When looking just at the company by it self an investor can see that Accretive Health is returning better numbers every year for the past three years. Revenue, gross profit, operating income, and total net income continue to grow at exceptional rates. This is exactly what you want to see when thinking about investing in a company. ^{[12] [13]}

An analysis of the price/earnings ratio will show that the company is considered a growth company. Investors are will to spend $204.08 for every dollar of earnings the company makes. This is extremely high. Most P/E ratios tend to fall below 20 except for companies in the Tech industry or high growth companies. This could scare potential investors off, as this number is extremely high. Looking at market capitalization shows how much the company is worth by taking the share price and multiplying it by the shares outstanding. This number could show the publics perception of the company is worth. As this number is high, $1,540.93 million investors value the company relative to its competitors. ^{[14] [15]}

Another number of intrest is the company's employees of 2,222. This number is expected to grow dramatically over the coming years, as Accretive Health has stated in the news that it plans to grow this number drastically. ^{[16] [17]}

A huge indicator over the company performing well can be drawn from the percentages in the chart. All percentages are positive and show strength. Return on equity shows that the company is using the money raised from stocks to its advantage and that they are generating strong profits. The nearest competitor MedAssets is struggling and the industry average is somewhat behind. All in all Accretive Health is performing great in every statistical category for now and should be considered healthy. ^{[18] [19]}

References

1. ↑ ^{1.0 1.1 1.2 1.3} Accretive Health S-1/A
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