Zotec Partners plans $200 million acquisition

Carmel-based Zotec Partners LLC plans to acquire an Atlanta-based medical-billing firm for $200 million, the companies announced Monday.

Zotec, which offers medical billing and practice management services, said it plans to close on the purchase of Medical Management Professionals Inc. on or before Sept. 1. It will purchase MMP from parent CBIZ Inc., a publicly-traded Cleveland-based employee benefits company.

The sale is subject to regulatory approvals.

Zotec said the combined company will be one of the largest medical management services firms in the United States, with specialties in radiology, anesthesiology, pathology and emergency medicine.

The two companies would boast $215 million in annual revenue, compared with Zotec’s current revenue of $85 million per year, said Zotec CEO T. Scott Law.

The companies combined staffs would total 1,750. Zotec currently employs 350 people, with 150 of them located in the Indianapolis area.

“This is a tremendous marriage,” Law said in an interview. “What our gaps might be in service, they fill those gaps. What their gaps are in tech, we fill those gaps.”

Law said the two companies both focus on providing back-office services to radiology and anesthesiology practices in geographies that are more complementary than overlapping. Zotec’s clients are concentrated in the Midwest, Southwest and West regions of the country. Medical Management's clients are mainly in the Southeast and Mid-Atlantic regions.

Medical Management also specializes in emergency room physicians, which will be a new growth area for Zotec.

“Combined as a company, it’s going to be a pretty dominant player in all three of the specialties,” Law said.

MMP had revenue of $138 million in 2012, down from $148 million in 2010, CBIZ said in its latest annual report. Law estimated its annual revenue this year at $130 million.

Zotec’s revenue has also declined in recent years, Law said, because the federal Medicare agency has cut reimbursement rates for many specialist physicians.  Companies like Zotec and Medical Management bill their physician clients a percentage of cash collected.

But Law expects Obamacare and the aging baby boomers to turn things around. Obamacare, also known as the 2010 Patient Protection & Affordable Care Act, will bring more paying customers to physicians by expanding insurance coverage. And the large baby boomer generation is now in its 50s and 60s—prime ages for using more radiological services.

Zotec, founded by Law in 1998, has grown through acquisitions. It acquired Coral Gables, Fla.-based Medical Business Service Inc. in 2011 and made previous mergers wirth Healthcare Management Partners, Susan J. Taylor Inc. and EmPhysis Medical Management.

Zotec’s acquisition of Medical Management will be financed entirely with bank loans, Law said. He said the two companies will consider head-count reductions and other efficiencies as part of the integration.