Accolade, a startup that helps patients navigate their health benefits, plans to acquire medical opinion platform 2nd.MD for $460 million. The idea is to give employees access to a second opinion when they have to make a big decision about their health, such as whether to have a surgery.
This benefit would build on Accolade’s current platform, where employees can ask all sorts of questions about their benefits to an assistant, such as whether a chiropractor visit is covered or how to find a local doctor. The idea is to then use that trusted relationship to encourage “good” utilization of the healthcare system, such as having a primary care physician.
Now, with the acquisition of Houston-based 2nd.MD, Accolade (Nasdaq: ACCD) will be adding expert medical opinions as an option, putting it in competition with startups like Grand Rounds. Employees gain access to a nurse or specialist within three to five days. 2nd.MD claims employers that use its service save about $5,000 for each consultation, with 35% of consultations resulting in a different diagnosis and roughly a third of surgery-related consultations resulting in patients choosing a more conservative treatment option.
Another important facet of the deal: it’s also expected to significantly expand Accolade’s customer base, given that it and 2nd.MD only share one client. The Houston-based startup has a total of 300 customers, increasing Accolade’s total addressable market by $22 million — nearly double, CEO Rajeev Singh said.
“We share a common vision to help every person live their healthiest life by dramatically improving quality and accessibility of care through a people-focused, clinically-driven support model,” Singh said in a news release. “Both companies have built deep relationships with employers and health plans by helping employees navigate the increasingly complex and inconsistent healthcare system.”
Accolade plans to keep 2nd.MD as both a standalone service and integrate it with the rest of its platform.
In 2020, 2nd.MD brought in $35 million in revenue. Accolade expects to pay a total of $460 million, including $230 million in cash, $130 million in stock and another $100 million in stock tied to revenue milestones. The deal is expected to close by the end of February.
Accolade, which went public last summer, has seen its stock increase in value over the past six months. It’s currently valued at $54.84, up from its IPO price of $22 per share. Since the start of the pandemic, more companies have turned to benefit navigation services for help, CFO Steve Barnes said in a previous interview.
For the quarter ending on November 30, the startup brought in $38.4 million in revenue, up nearly $10 million from 2019. It reported a $16.6 million net loss for the quarter.
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