Navient Corporation NAVI will divest its healthcare revenue cycle management business to CorroHealth. The move aligns with NAVI's plan to streamline its business operations.

Doing business as Xtend Healthcare, Navient’s healthcare revenue cycle management organization is headquartered in Hendersonville, TN. CorroHealth will continue to operate Xtend from its Hendersonville offices.

Financial Details: NAVI’s Healthcare Services Arm Divestiture

Per the agreement signed in August 2024, the purchase price for Navient’s Healthcare Services business was set at $365 million cash consideration. The company also stated that the final financial statement's impact on the sale would be based on several factors, including net sale proceeds and book value at closing.  As of June 30, the book value of the Healthcare Services business was approximately $136 million, including $113 million of goodwill and acquired intangible assets.

More than 925 Xtend employees joined the CorroHealth team as part of the agreement.

Strategic Implications of NAVI’s Divestiture of Xtend

The divestiture of its healthcare revenue cycle management business marks a significant milestone in NAVI’s initiative to explore strategic options for its Business Processing Solutions segment and strategic objectives to simplify the business, lower expense base and enhance flexibility.

Navient’s Xtend adds significant scale to CorroHealth's existing RCM products while also introducing new patient engagement capabilities. The addition of Xtend, in particular, will allow for multichannel patient communications, which were previously unavailable in the CorroHealth suite of services.

Mike Morris, Xtend Healthcare President, stated, “The entire Xtend team is excited to join a world-class revenue cycle management leader like CorroHealth.” He added, “As part of the CorroHealth team, we now have a broader scope of capabilities and automation tools to offer our customers.”

Per CorroHealth's top management, the addition of Xtend will allow the company to offer an even more fully-rounded suite of solutions to customers, further strengthening their financial position and empowering them to focus on providing high-quality health care.

Navient’s Efforts to Improve Operating Efficiency

The company aims to improve operating efficiency by undertaking various cost-control initiatives. Its expenses declined at a compound annual growth rate of 4.9% over the last four years (ended 2023), with the declining trend continuing in first-half 2024. Ongoing efforts by the company for expense reduction remain encouraging. In January 2024, it announced its plans to undertake strategic initiatives, including three major actions to reduce overall costs.

In line with this, NAVI entered into a servicing outsourcing agreement with MOHELA in April. Outsourcing is a key facilitator of its ability to achieve lasting expense reduction. Nearly 900 Navient employees have now transferred to MOHELA and its variable cost-servicing model is in effect.

The company implemented a flatter organizational structure in the second quarter to achieve its strategic objectives, focusing on servicing and BPS transitions, expense reductions and preparing for an 80-90% decline in employee count. Such moves are likely to reduce its expense base and spur bottom-line growth.

In the past three months, shares of NAVI have gained 10.3% compared with the industry’s rise of 8.6%.

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Currently, the company carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Financial Firms Taking Similar Steps

This month, Citigroup Inc. C has agreed to divest its global fiduciary and trust administration services business, Citi Trust, to JTC, one of the global professional services providers, for $80 million. This strategic move aligns with the bank’s focus on concentrating resources in areas that drive growth in its wealth business.  

JTC will leverage C’s experienced senior management team with more than 150 years of collective trust experience, supported by a skilled global employee base.

According to a Reuters report citing a source familiar with the matter, The Goldman Sachs Group, Inc. GS is close to finalizing a deal to transfer its General Motors credit card business to Barclays as part of its strategy to enhance its focus on consumer services.

GS’ decision to quit the commercial agreement with General Motors, which had approximately $2 billion in outstanding balances, is part of the firm's strategy to restrict its focus on the strength of investment banking (IB) and trading operations.

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