Stephens keeps Overweight on R1 RCM as stock underperforms after short report

Stephens notes that R1 RCM‘s (RCM) shares are down about 9% intraday mostly due to a short report published Monday morning. The short report’s thesis includes criticisms of Cloudmed revenue recognition policies, legacy R1 claims submission practices on behalf of clients to payors, bad debt reserves, myriad adjustments made to adjusted EBITDA, corporate governance, consensus revenue expectations, and management turnover. The report raises some points worth monitoring, but the firm believes these are mostly known criticisms and/or risks for R1 shareholders or for revenue cycle management companies broadly. Potentially amplifying the situation is small competitor Streamline Health (STRM) announcing a restructuring and pulling its guide following a customer loss. However, the issues appear more company specific than healthcare provider RCM sub-sector wide, Stephens argues. The firm reiterates an Overweight rating on R1 RCM’s shares with a price target of $22.