Streamline Health Solutions, Inc. (NasdaqCM:STRM)

Curing the Revenue Cycle Flaws

Status: Acquired | Initiation Price: $6.26 | Result: -17.3%

Coverage ended on August 11, 2025, after the company was acquired. The final update, communicated through a performance review on July 23, 2025, is reproduced below for reference:

STRM, the most painful pick so far, was a lone player in the mid-RCM space, with Oracle, trying to outpace Epic, heavily promoting its solutions. Amid restructuring efforts, CHS, its top client, notified the company of its intention to not renew its contract. With the concentration risk gone, I jumped in. Still, more churn followed due to lower hospital IT spend, with some hospitals poorly choosing to outsource or under-staff their mid-cycle functions. The stock dropped ~50% in a day, just a month after pitched.

When I initially analyzed STRM, I underestimated the non-renewal risk, assuming it was minimal due to the lack of client concentration following the CHS notification. Additionally, renewals had previously been a focus area, with management never indicating them as a material risk. However, from September onwards, I kept pitching STRM in multiple occasions, citing “the thesis remains fully intact, and my conviction is as strong as ever.”

Continuous pitching was rooted in my belief that “the expected return is hugely skewed to the right, and thus, underestimating churn will ultimately be nondetrimental.” Just like with IDN, this name was eventually picked up by other accounts. The result? STRM signed a definitive agreement to be acquired by MDaudit for $5.34 per share in cash, a premium of 138% to Streamline’s closing price on May 28, 2025, still below my entry price, but bringing this painful journey to an end with a pyrrhic victory.

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STRM has unique "multibagging" capabilities, with even more favorable dynamics at play compared to PAR. Both companies share several similarities, such as having multiple growth levers where not every single one needs to happen for the investment to be worthwhile. Additionally, both are on the brink of a major profitability inflection point. Last year, STRM received a termination notice from CHS, a legacy client with a $4.5mm annualized revenue run rate, which sent the stock to a fifth of its 2023 peak. With that generous entry point, STRM has the potential to quadruple if most of the thesis points hold true.

In short, STRM’s flagship solutions, RevID and eValuator, aim to maximize revenue capture for hospitals and health systems in North America. For context, there are over 130k ICD-10 billing codes that are frequently processed incorrectly, leading to revenue leakage. According to Optum, nearly half of denials are caused by front-end revenue cycle issues, with 80% of these being avoidable. RevID ensures all medical services provided during a visit are billed, while eValuator reviews coded data, flagging any under- or over-coding. As a result, hospitals that adopt STRM’s solutions experience substantial ROIs.

The future for STRM and RCM vendors in general, is beyond promising. In a survey of 201 US healthcare provider executives conducted in June 2023 by Bain & Company and KLAS Research, a staggering 94% of the respondents were open to consider third-party RCM vendors. For STRM specifically, to name just one of its several growth levers, an opportunity similar to CHS exists within its client base. Some time ago, the company announced it has expanded “its existing relationship with a Southwest-based healthcare system with more than 60 acute care facilities,” with this prominent health system choosing to implement RevID “in six initial facilities.” A system-wide RevID roll out would represent a $5mm+ opportunity. For context, as of December 2023, there were only 11 systems with 60+ hospitals.

The opportunity outlined is just one way STRM can offset the CHS non-renewal. For 6-7 more growth pathways, including a “mysterious” channel partner, check out the full write-up below.

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