- Medical billing startup Cedar is acquiring health tech company Ooda Health for $425 million in a mix of cash and equity, foraying into the insurance market for the first time.
- San Francisco-based Cedar works in the complex billing process between patients and providers, and now will be able to integrate insurance bills into its platform, too.
- The move is aimed at helping the fintech player broaden its products to focus on new features integrated with both payers and providers, Cedar said, and automating more of the billing workflow. The transaction is expected to close this month, subject to required regulatory approvals.
U.S. medical costs have skyrocketed for years, leaving more patients to navigate a fragmented and complex billing process that is at best mildly confusing and at worst a direct detriment to their financial health. One in 10 U.S. consumers say they won't pay their bills if they don't understand the administrative process, according to a 2020 study conducted by Forrester Consulting on behalf of Cedar.
Streamlining the payment process may then mean consumers are more likely to pay their bills, with the potential to cut administrative burden for payers and providers, too, curbing rising expenses. Studies suggest administrative costs make up anywhere from 8% to 25% of all national health expenditures.
Those high expenses could be lowered if the numerous routine transactions involved were digitized, a 2019 McKinsey report found.
That's a major goal for health fintech startups like Cedar. Through the Ooda acquisition, Cedar will be incorporating both the provider and payer side of the billing process onto its payments platform, which is currently used by more than 12 million patients annually to pay an outstanding bill, verify their insurance or check their co-pay before a doctor's visit.
For its part, Ooda allows consumers to get a single billing statement from their payer that incorporates deductibles and different payment options, in lieu of a smattering of statements of benefits, piecemeal bills and other paperwork.
Ooda's platform connects workflows for roughly 20 organizations, including CommonSpirit Health, Blue Cross Blue Shield of Arizona and Blue Cross Blue Shield of Massachusets. Cedar currently partners with 35 providers nationwide, including Summit Health, Yale New Haven Health, Novant Health and ChristianaCare.
Cedar, which was founded in 2016, experienced significant growth last year during the coronavirus pandemic's digital health boom. Cedar says the size of its business quadrupled throughout 2020, and it saw rising investor interest as well, recently closing $200 million in a Series D funding round. That brought its total funding to more than $350 million and its valuation to $3.2 billion, according to the company.
Cedar CEO Florian Otto will continue to serve as chief exec for the combined company, while Ooda CEO Seth Cohen will stay on as president and join Cedar's board of directors. The combined company will be headquartered in New York City, with additional offices in San Francisco and Salt Lake City.
The board of directors of both Cedar and Ooda, along with Ooda's stockholders, have already approved the transaction.