HMS Holdings Corp. announced Monday it will acquire privately held HealthDataInsights, which identifies and recoups improper payments for health plans and government payers, for approximately $400 million.

The transaction is not contingent upon financing and is expected to close by year's end, subject to regulatory approvals.

Applying rules approved by the Centers for Medicare & Medicaid Services (CMS) and commercial health plan clients to identify fraud, waste and abuse, HDI reviewed more than $300 billion in paid claims last year.

The firm is the exclusive Medicare Recovery Audit Contractor (RAC) in 17 states and three U.S. territories, covering approximately 22 percent of all Medicare claims in the nation. According to CMS, HDI’s efforts accounted for 47 percent of the total dollars collected by all four Medicare RACs.

After applying HMS’s revenue recognition methodology, HDI is projected to contribute approximately $85 million of revenue to HMS in 2012.

“HDI is one of the few strategic opportunities we have seen with revenue growth rates and profitability comparable to our own,” said Bill Lucia, chief executive officer of HMS.

“We believe this acquisition aligns perfectly with our long-term plan and is significantly positive for HMS and all our stakeholders,” he added. “The HMS/HDI combination will create the nation’s premier provider of improper payment identification services for federal, state, and commercial health benefit programs.”

Moreover, Lucia said, HDI’s assets "will accelerate our multi-year strategy of investing in new but related products and markets, and program integrity in particular. As the Medicare RAC with the highest recoveries and highest accuracy scores, HDI has best-in-class processes and technology, purpose-built for recovery auditing. Like HMS, HDI’s services are primarily offered on a contingency-fee basis. In addition to expanding our Medicare business, the acquisition of HDI will provide us with expertise we can leverage in our state Medicaid RAC business.”

The acquisition of HDI "will also extend our reach into the commercial health plan market, and in addition, provides us with an opportunity to expand service offerings to our existing Medicaid managed care plan clients," said Lucia. "As the government programs we serve continue to shift lives to managed care, HMS and HDI together provide a compelling solution for health plans seeking claims integrity and cost containment services.”

“I'm delighted that HDI is joining HMS,” said Andrea Benko, president, CEO and founder of HDI. “Together we can build on our proven track record in performance-based claims integrity and our excellent relationships with healthcare payers and the provider community. We look forward to the opportunity for our employees to become part of this fast growing company in healthcare claims integrity and cost containment.”

HMS will pay a total of $400 million for HDI. The $400 million will consist of $384 million in cash paid at closing and approximately $16 million in consideration in the form of assumption of unvested options.

HDI, which employs approximately 400 people located at their headquarters in Las Vegas and facilities in California and Florida, will become a wholly owned subsidiary of HMS Holdings Corp. Benko will continue in her current role and will join the HMS executive team.