Primary care chain One Medical became one of the few health startups to go public late last week, and has seen early success.
The company is raising capital as it looks to expand its current markets and to add more locations, the chief financial officer told Healthcare Dive. He responded to critics who have raised questions about whether One Medical is truly breaking the mold — saying the focus on what patients want, including quick access and easy virtual care, can be a force for disruption in the primary care space. That sector, however, is becoming more crowded with the likes of competitors Iora Health, Forward, Medcor and others.
One Medical's IPO was for 17.5 million shares of common stock at $14 (the low end of its range) per share for gross proceeds of $245 million. On the listing day Jan. 31, shares jumped to about $20. Since then, the stock price has continued to rise, hitting $25 on Thursday.
San Francisco-based One Medical, trading on Nasdaq as ONEM, launched in 2007 and now runs 70 primary care clinics across nine U.S markets. It uses a membership model, touting a tech-savvy experience, and also contracts with businesses (such as Google, which represents 10% of One Medical's revenue) to provide care to employees.
Healthcare Dive talked to One Medical CFO Bjorn Thaler recently about the company's plans for 2020 and beyond.
This interview has been edited for clarity and brevity.
HEALTHCARE DIVE: Why is One Medical focused on primary care in particular?
BJORN THALER: Frankly, because it's ripe for disruption and nobody else does it. When you think about, if you need a primary care provider, if you need something taken care of, it takes you 29 days on average to actually get an appointment at a family physician. And once you go into that appointment, you're going to be sitting in a somewhat dingy waiting room for a while and you're going to be filling out a clipboard with information that frankly they had since the first time you were at that provider's office.
But you do it the first time, the 10th time, the 20th time, they still make you fill the damn thing out. So after that you get like five or seven minutes with the actual provider before you're shuffled back out the door. Every other industry that we can think of got disrupted by technology, so it's finally ripe for healthcare, and particularly the primary care area, to be disrupted by technology as well.
Is technology how you're looking to differentiate? Because there are a lot of people looking at this area.
THALER: There are a lot of people looking at this area, you're absolutely right, but we think that by actually combining the physical footprint that we were just talking of with a virtual offering that's really seamless and making sure that those two pieces seamlessly integrate, I do think we're going to be very differentiated.
[Our offices] actually look very, very nice. They look like people's living rooms. But the best thing is you don't have to come in. As part of your membership you actually get access to 24/7 virtual care that's unlimited. And if you want to chat with us, if you want to have a video chat, if you want to send us text messages, if you want to email us or call us, that's all part of that membership and we integrate it seamlessly with our technology in the back end. We really make sure that we get you healthy and on your way as quickly as possible. And I do really think that that's a big differentiator.
What was your pitch to investors?
THALER: It's about what makes this model differentiated. And what makes it differentiated is the fact that we have a membership and that we use technology to tear down the barriers between the digital interaction and the in-person interactions. And the fact that we really address the needs that are unmet, frankly, across the ecosystem, across the healthcare system.
So in other words, we 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. We take 8% of the costs out for the employers so the employers are very, very happy. We also, through the fact that we have built our own technology, take 41% of the electronic health record tasks off of the shoulders of our providers. That makes them so much more productive, that's sort of me as the CFO speaking, but at the same time it really increases their quality of life and satisfaction in their roles. And then partnering with health systems, which helps us on the membership front, to really provide the service that, frankly, they're expecting to get and that they have a right to get. So doing some technology, having a membership model, addressing those four key components of the system that frankly today are not advanced. That's really the pitch.
How do you respond to some of the criticism that it's not so much that you're offering a different model — you're working with the same companies, getting money from the same health systems — it's just packaged differently?
THALER: I'm not sure if I would necessarily agree with that, frankly. I think we have changed the incentive system around quite a bit, and this is really what's important here. In the traditional system, the provider is being paid on a fee-for-service basis so what are they going to do if they want to maximize their income? They're going to see as many patients as possible. [They're] not talking about members, by the way, they're talking about patients. They want to see as many of them as possible.
We've turned this, frankly, on its head and so we have a membership model. So we want to get to know you, who you are as the member, figure out what your health goals are and then longitudinally follow you and help you become your best self. And at the same time, we actually changed the incentive system for the provider and said, no you are not being paid on a fee for services basis, you're on a straight salary basis and we want you to spend more time with our members.
So if you're coming in, whether it's on the phone, on the video chat or in person, we know exactly who you are.
What are your plans for this year, for the next five years?
THALER: I'm sure you've heard that we're in nine different cities and markets today. We're actually going to open up three additional cities over the next 12 months here. So we're going to go into Atlanta, we're going to go into Portland, Oregon, and going to open up another in Orange County in Southern California. So we're going to continue to grow this business model, we're going to continue to go into new geographies. We're also going to continue to build out our existing footprint in our largest and most well established market, which is really the San Francisco Bay area. We've only got 3% market share today and we certainly continue to grow in that area as well as new geographies and, frankly, that was a big part of the rationale of the IPO as well.
What were your concerns going into this IPO and what led to your decision to pull the trigger?
THALER: We think we have a really differentiated model, right. So this is not a model that's just like another company. We're different. We are, as we like to say, disrupting healthcare. We're disrupting it from within. So one of the big focus areas that certainly was important for us is let's tell our story, let's make sure people understand what is One Medical, why is it different, why do our members stick with us. We've got an 89% membership renewal rate year over year on the consumer side. So, what is it that makes that experience so different from anybody else out there? We spend a lot of time educating most recently our investors, but frankly, it's something we spend a lot of time educating our members and employees about.
What do you consider when you look for more geographies to go into?
THALER: It's a whole host of things. On the one hand, one of the things that we are increasingly finding is that our employers that work with us want us to go into more geographies. They'll say, I love your service, I love what you do for us in D.C., but we have a lot of people living in other cities and we want you to cover them as well. So to some extent, we are being called by our customers to, frankly, grow and grow faster. Certainly the other piece that we are thinking about is we are getting health system partners in many geographies that call us up and say, 'Hey, we really love what you're doing in primary care, would you be interested in actually joining us in creating a network in the network that we already have in our geography?' So that's another growth area in how we think about new geographies we enter.
When you are considering partnering with a health system, what do you assess?
THALER: It starts with: What is their reputation in the marketplace? We want to make sure that, frankly, that we deliver on the brand promise that we have as One Medical for our members. So we want to make sure that we partner with some of the best hospital systems in the country, point one. Point two, a big part of why we partner with our hospital systems is what we're hearing from our members is they want to get access to specialists if and when they need specialist care. So having that openness on behalf of that partner to say: Yes, I am going to interface with you, and the technology. Yes, I'm going to exchange data with you. Yes, I'm going to maybe even let you talk directly to my system. That willingness and openness is very, very important to us because otherwise we can't deliver on what our members and our enterprise customers need us to do.