One Medical buying Medicare-focused Iora in $2.1B deal


Announcing Iora | One Medical

Dive Brief:

  • Google-backed One Medical is acquiring Medicare-focused primary healthcare chain Iora Health for $2.1 billion in an all-stock trade deal, the companies announced Monday.
  • The buy will give One Medical presence in 28 markets, covering about 40% of the U.S. population and is expected to generate annual revenue at $350 million by 2025. The deal will add about $700 billion in total addressable market, according to an investor presentation.
  • Under the terms of the deal, which is expected to close in the late third quarter or fourth quarter of this year, Iora stockholders will own about 27% of the combined company. One person from Iora will join One Medical’s board and Iora co-founder and CEO Rushika Fernandopulle will become One Medical’s chief innovation officer.

Dive Insight:

The acquisition aligns two key players in part of the value-based care movement that eschews traditional payer-provider arrangements in favor of a concierge membership model. Iora’s concentration in the Medicare population and related participation in CMS’ direct contracting model could be key reasons for coming under One Medical’s sights.

Jefferies analysts said they viewed the transaction as positive, particularly considering both companies’ tech and data capabilities. “Given tech orientation and emphasis on outcomes, we expect substantial derivative value from combining data and developing better treatment programs with superior outcomes across [longitudinal] care. We see this as a clear clinical and applied advantage,” they wrote.

Both companies base their business on value-based models, which some in the industry worry have suffered during the COVID-19 pandemic as cash-strapped providers avoid the risk of models not based on fee-for-service. The Biden administration’s director at the Center for Medicare and Medicaid Innovation said recently the movement is at “a critical juncture” and that more mandatory models are likely forthcoming.

One Medical has faced challenges as of late, after a first quarter that saw losses double what was expected and a controversy over COVID-19 vaccine distribution that sparked a congressional investigation. The company, however, has forged ahead in deals, including a new partnership with Baylor Scott & White.

And on the Q1 call with investors, executives highlighted a membership increase of 31% year over year.

One Medical, founded in 2007, lead the pack of recent healthcare IPOs, going public in January 2020.

The company touts its direct-to-consumer model buts also contracts directly with employers and partners with several health systems. CFO Bjorn Thaler told Healthcare Dive at the time of the IPO its pitch to investors focused on highlighting a differentiated model.

“[W]e provide the member with a very, very valuable service. They don’t have to wait 29 days to get care. They can get care oftentimes in an instant, digitally,” he said.

Boston-based Iora, which was founded in 2011, has raised nearly $350 million over seven funding rounds, according to Crunchbase. It has contracts with major payers including UnitedHealthcare, Cigna and Humana.

The deal extends One Medical into full-risk Medicare reimbursement. Iora began the direct contracting model in April across all its markets. The program ties reimbursement to spending and quality for all Medicare fee-for-service beneficiaries across a geographic region.

About 60% of Iora’s members are in the fast-growing Medicare Advantage program, which has now reached about 40% of the Medicare population.

Iora had expected revenue this year to reach nearly $300 million and as of the first quarter had 38,000 members, compared to nearly 600,000 members at One Medical, according to the investor presentation.

One Medical stock was trending slightly down in early morning trading Monday.

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