Startups, Health Services

One Medical expands into Medicare with $2.1B Iora purchase

Primary care startup One Medical is buying Iora Health for $2.1 billion. The deal will give One Medical a bigger geographic footprint, and crucially, a bigger presence among people covered by Medicare. 

One Medical, a concierge primary care startup building sleek clinics targeted at millennials, may soon be caring for their parents and grandparents. The company recently struck a deal to acquire Medicare-focused provider Iora Health for $2.1 billion in stock.

“This gives us tremendous opportunity to further grow and expand. We can extend Iora’s Medicare model into One Medical markets and similarly move One Medical’s commercial business into Iora’s markets,” One Medical CEO Amir Dan Rubin said in a Monday investor call. “Moreover, this gives us tremendous opportunity to extend our lifetime relationships with our members.”

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Like One Medical, Iora takes a similar approach of building out in-person clinics coupled with its own technology platform. The Boston-based company currently has 38,000 members across 10 markets, more than half of whom are covered by Medicare Advantage plans.

San Francisco-based One Medical is substantially larger, with 598,000 members, most of which it has drummed up through contracts with employers and direct subscriptions.

“Some of those members are aging into Medicare today and have been,” Dan Rubin said.

Combined, the two companies would have a presence in 28 different markets. In addition to being able to reach people at different stages of their lives, One Medical would get access to Iora’s risk-based Medicare contracts.

They expect the deal will yield a total of $350 million in synergies by 2025, a number larger than Iora’s current revenue. The two companies chalked this up to potential cross-selling, with One Medical members bringing in their parents and grandparents, and Iora members recommending the service to younger family members.

JPMorgan Managing Director Lisa Gill wrote in a research note that she saw the deal as a “good strategic fit,” noting both companies have dedicated primary care locations and virtual care capabilities. She added that the acquisition should expand One Medical’s overall market opportunity and allow it to enter a growing Medicare market.

This year, One Medical expects to make $475 million in revenue, and Iora expects to make $299 million, according to an investor presentation.

One Medical will acquire the company for a total of $2.1 billion in an all-stock deal, based on One Medical’s $35.59 stock price on Friday. After the deal closes, Iora Health shareholders will own just short of 27% of the combined company.

Iora CEO Dr. Rushika Fernandopulle will become chief innovation officer of the combined company, and a designee of Iora Health will join One Medical’s board. The deal is expected to close later this year.

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