Revenue cycle management firm R1 RCM said on Monday that it plans to acquire Cloudmed in an all-stock deal that values ??Cloudmed at about $4.1 billion.

Cloudmed uses artificial intelligence and automation to analyze medical records, payment data, and health insurance models for revenue cycle management. The company has more than 3,100 healthcare provider customers.

R1 President and CEO Joe Flanagan Press Releases.

Upon completion of the transaction, R1 shareholders will own approximately 70% of the combined company. Cloudmed shareholders will own approximately 30% of the shares.

Cloudmed, a Johor Bahru Capital portfolio company, is a privately held company.

R1 officials expect the transaction to be accretive to R1’s earnings per share in the first year following the closing of the transaction with $85 million in cost synergies at the end of the third year. Flanagan will remain CEO of the combined company, and Cloudmed CEO Lee Rivas will serve as company president.

Post-acquisition R1 will expand its board to include three new members nominated by New Mountain Capital.

The transaction is expected to close in the second quarter of 2022.

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The acquisition will expand R1’s artificial intelligence and automation capabilities.Flanagan has said before R1 seeks to differentiate itself from other revenue cycle management vendors through its technology and automation efforts, which use robotic process automation, machine learning, and natural language processing.

The deal follows R1’s acquisition of VisitPay, a company that sells patient billing tools, last year, and SCI Solutions, a developer of scheduling and other patient engagement tools, in 2020.It’s part of a growing number of mergers and acquisitions in the digital health space, with 203 deals Report for the first three quarters of 2021, according to Digital Health Business and Technology. This is up from 132 M&A transactions during the same period in 2020.

R1 reported third-quarter 2021 revenue of $379.7 million in November — the most recent quarter for which it released earnings results — up 23.6% from a year earlier, with operating income of $31.1 million, up 193.4% year-over-year.