Sept 19 (Reuters) - Smaller rivals to UnitedHealth's ( UNH )

tech unit Change Healthcare say they are signing

longer-term contracts with hospitals and other customers who had

temporarily switched from the company after February's

cyberattack shut down the unit's services.

The new contracts landed by Waystar ( WAY ) and privately

held Availity and Inovalon show a shift to healthcare practices

signing deals with multiple service providers instead of relying

on a single vendor, in what may be the first sign of needed

change in an industry. Health tech experts said the move to more

than one vendor is long overdue, but was hastened by the hack.

Change makes up only 1% of revenue at healthcare giant

UnitedHealth ( UNH ) but processes about 50% of medical claims in the

U.S. for around 900,000 physicians, 33,000 pharmacies, 5,500

hospitals and 600 laboratories. About 1 in 3 U.S. patient

records are processed in some way at Change, according to the

company.

"The industry is realizing that the single point of

failure is just too risky in the current environment," Eron

Kelly, president of Change's smaller rival Inovalon, said.

FEBRUARY HACK

In the days and weeks after the Feb. 21 ransomware

attack, many doctors and hospitals struggled to file claims,

resorting to paper to verify insurance coverage as the

electronic systems were taken offline. For months, many

struggled to be paid.

The hack hurt people doing business directly with

UnitedHealth ( UNH ), but many providers also realized they had indirect

exposure through other software vendors. UnitedHealth ( UNH ) estimates

the hack's cost at up to $2.45 billion this year.

Wall Street analysts and tech experts said it was

difficult to quantify any changes in market share or if the

market had increased, citing a lack of data.

Roger Connor, CEO of Optum Insight, the division that

includes Change, said in an emailed statement that the company

has brought back a "very secure" technology system that is

resonating with customers.

"We're not only trying to bring volume back into our

current customers. We're also working to bring new clients in,"

said Connor.

KEEPING CUSTOMERS

Inovalon's Kelly said after the hack, the company

contracted with organizations whose ranks included about 344,000

separate providers, such as doctors, pharmacists, and nurse

practitioners. That compares with more than 8 million providers

nationally, which are counted using their unique national

provider identification numbers, according to government data.

About 98% of those providers are now on long-term

contracts, Kelly said.

Some "payers" - typically health insurers and other groups

handling reimbursements to providers - who previously had

exclusive contracts with Change, had also shifted, Kelly added.

Availity, a firm backed by health insurer Elevance,

launched Lifeline, a free, scaled down version of its services

for claims processing, after the hack. The service helped

process claims for over 300,000 providers such as doctors,

hospitals and other medical practices across 120 health

organizations, said CEO Russ Thomas.

Since the hack through mid-July, Lifeline helped with

claims worth an estimated $315 billion, the company said.

Now, it is working to make the clients permanent.

"We are out meeting with the clients, sharing the full scope

of what we can do for them, and fortunately, having some good

success in converting to long-term clients," said Thomas.

The company declined to disclose how many customers became

permanent.

Recently-listed Waystar ( WAY ) also sped up how quickly

hospitals and doctors' practices could switch to its software

platform for managing their finances, allowing them to get up

and running within 72 hours of signing a contract.

It also rapidly scaled up back-end operations to deal with

more than 30,000 providers joining the company's platform.

The company has said that most of its clients have

signed standard contracts for two- and three-year terms.

ADDING VENDORS

Some providers of software for smaller, independent

healthcare practices, such as privately-held Tebra's billing

program Kareo and TherapyNotes, used by mental health practices,

are either leaving Change or adding an additional vendor.

Tebra had used Change for verifying patients' insurance

eligibility in its Kareo software, but has shifted about 99.7%

of that traffic to other service providers, according to Tebra

Chief Technology Officer Kyle Ryan.

About 10% of the company's electronic claims volume had also

moved through Change before the hack and that number is now down

to 2%, Ryan said in e-mail.

Jeremy Wall, managing director at global strategy

consulting firm Stax, said that providers are also likely adding

more vendors than switching completely.

"What we have seen and heard from people in the market is

that a pretty large portion of the people who moved over to

another vendor have stayed over with that vendor," Wall said.