MSP Recovery, Inc. (MSPRZ)

When someone gets injured in a car accident and goes to the hospital, Medicare might pay for the emergency treatment. But the car insurance company is supposed to pay Medicare back—that is the rule. The problem: no one connects the dots. The hospital sends bills. Medicare might pay. The insurance company never hears about it. That money just sits there, uncollected.

MSP Recovery is a company that connects those dots using software and lawyers.

The problem they solve

Every day, hospitals and health plans lose money because the wrong payer covered medical bills initially. A patient’s primary insurance doesn’t cover something, so Medicare steps in. Later, a lawsuit settlement comes in that should have paid for the medical care. No one tells Medicare. Or a worker gets injured in a car accident—workers’ compensation pays the hospital, but the auto insurer actually owes it. The hospital gets paid, but by the wrong company, and the right company never pays back what it legally should.

These situations are called “Medicare Secondary Payer” cases or “secondary payer recovery” situations. The law says the primary responsible party (the one who caused the injury, or whose insurance should have paid first) must reimburse Medicare or the payer who fronted the money. But pursuing these claims requires:

1. Finding all the relevant medical records and claim data
2. Figuring out which party is actually responsible
3. Hiring lawyers to send demand letters and, if needed, sue to recover the money

Most hospitals and health plans don’t have time or specialized staff to do this. MSP Recovery does it for them.

How they make money

The company earns money in two ways:

Recovery-based fees. MSP Recovery analyzes a hospital’s or health plan’s claims data, identifies cases where secondary payers owe money, and pursues those claims. When they win or settle, they take a percentage—often 20–40% of what they recover. If they don’t win, they get nothing. This is called “contingency” work.

Software subscriptions. MSP Recovery built LifeWallet, a platform that collects and organizes patient health records and claim data. Hospitals and employers subscribe to use it. They pay a monthly fee whether or not any money is recovered. This is more reliable income than contingency work, because you get paid every month regardless of outcomes.

The company is trying to shift more toward the subscription model because it is more predictable and the money comes in whether cases succeed or not.

What makes them distinctive

MSP Recovery has built up a large database of healthcare claims and health records. They also have relationships with hospitals and health plans that feed them data. Having accumulated lots of historical claims data, their software can spot patterns and find cases other people miss. They employ lawyers who specialize in secondary payer law, so when they find a case, they can actually pursue it in court.

Most hospitals do not have dedicated staff for secondary payer recovery. They lack the data analytics, the legal expertise, and the bandwidth. MSP Recovery offers all three.

The risks

The biggest risk is legal and regulatory. Secondary payer recovery is governed by complex federal law. Changes to how Medicare calculates what it is owed, or new regulations around settlement agreements, could shrink the size of recoverable cases. Lawyers working on these cases must be licensed in each state, and regulations differ. Some law firms and companies already do secondary payer work, so there is competition.

Another risk is data: the company relies on having accurate health records and claims data. If data is incomplete or wrong, they miss recoverable cases. They also handle sensitive patient health information, which means they must comply with HIPAA and other privacy laws.

The software business is also competitive. Other companies are building claim-management and billing software, so LifeWallet must stay ahead on features and ease of use to retain customers.

How the business works in practice

A hospital approaches MSP Recovery with hundreds of cases where they received payment but suspect another party should have paid first. MSP Recovery’s software analyzes the cases, ranks them by likelihood of recovery, and identifies the liable party. MSP Recovery’s lawyers send demand letters and, if the liable party refuses, file suit. The process can take months or years. When they win or negotiate a settlement, the hospital and MSP Recovery split the recovery amount.

Alternatively, a large employer or health plan subscribes to LifeWallet. They upload claims data. The platform helps them identify secondary payer cases and simplifies the process of documenting what Medicare or the health plan paid out.

What investors track

People investing in or analyzing MSP Recovery watch several things:

• The number of cases in their pipeline and settlement rates (higher rates mean more reliable recovery revenue)
• LifeWallet subscription growth and retention (do customers keep paying, or do they cancel?)
• The mix of contingency versus recurring revenue (recurring is more valuable because it is predictable)
• Legal and regulatory changes that might make secondary payer cases larger or smaller
• How much it costs them to acquire customers versus how much they earn

The core question: can they grow the software business fast enough that it becomes the main part of the company, or will they remain dependent on unpredictable legal recoveries?