R1 RCM expects the Ascension ransomware attack to drag down its revenue by between $75 million and $95 million in 2024, primarily because of a delay in timing of revenue from the second half of 2024 into the first half of 2025, executives said Aug. 7 during the company's second-quarter earnings call.
"Our base fees lag the timing of cash collections, so any cash collected by Ascension after August will be recovered in our 2025 net operating fees," CFO Jennifer Williams said. "Although less material, we also expect some impact to our modular and other fee revenue as Ascension does contract for some of our modular solutions and was unable to transmit volumes to our platform during their outage."
The revenue cycle management company also expects to see an increase in expenses of up to $15 million related to the IT outage at Ascension, its largest customer.
"We expect this will mostly be driven by overtime and incremental labor as we have added several hundred onshore contractors on-site across many facilities of Ascension to assist in the backlog of paperwork created from manual processing," Ms. Williams said. "This effort is critical to recover the backlog of claims accumulated during the outage."
R1 RCM said the ransomware attack will have a significant effect on its financials in the second half of 2024, but does not expect it to have a long-term impact on its core operations or results of its business.
The company believes most of the recovery will occur in 2025 and its business will return to normal cash collection cycles over the course of the 2025 calendar year.
"The customer and vendor cyber events this year have proven the value that we provide to the healthcare industry," she said. "Providers need our services, scale and technology more than ever, and we remain focused on the opportunities in front of us."
R1 RCM reported $29.1 million in operating income on revenues of $627.9 million in the second quarter, comapred to a $23.9 million operating gain on revenues of $67.2 million in the second quarter last year.
Private equity firms TowerBrook Capital Partners and Clayton, Dubilier & Rice plan to acquire R1 RCM in a deal valued at $8.9 billion this year.