Looking to the Medicare space, hybrid primary care company One Medical has announced its plans to acquire Medicare-focused provider Iora Health for $2.1 billion.

Like One Medical, Iora Health offers brick-and-mortar clinician offices as well as digital tools. Geared at the 65-and-older population, Iora assigns each member a provider, nurse and health coach. Both patients and their families can be connected to caregivers through the company's platform.

Unlike One Medical, Iora is still a private company, but it has closed several rounds of funding. In February 2020, Iora scored $126 million to build a new Medicare Certified EHR system. The company has more than $350 million in funding.

One Medical said this new acquisition will help it expand its full-risk models, as well as expand into new populations. The transaction is expected to close in late Q3 or Q4 of 2021. After the acquisition closes, Iora Health's CEO Rushika Fernandopulle will join One Medical as chief innovation officer. Additionally, after the close, the joint company will be able to hit 28 markets across the U.S. 

"Together we will expand our addressable market to serve more members in more geographies with digital and in-person care across every stage of life, with further capabilities to deliver care within full-risk models. Together with Iora Health, we can deliver better health, better care, and lower costs for children, adults, and seniors,” Amir Dan Rubin, chair and CEO of One Medical, said in a statement.

WHY IT MATTERS

The percentage of Americans over the age of 65 is quickly growing. According to the CDC, in 2016 there were 49 million seniors in the U.S.; by 2030 that number is expected to reach 71 million.

One Medical is looking to tap into that growing Medicare market. In its SEC filing, One Medical said there is an $870 billion market opportunity across commercial and Medicare segments. According to the companies, Iora Health currently provides care to 38,000 Medicare patients across 47 clinics. 

“One Medical has proven its ability to drive profitable membership growth, engage with members, improve health outcomes and lower costs. I am excited at the prospect of creating even more differentiation by adding Iora Health’s Medicare-focused capabilities, expanding our reach to 28 markets, and offering our service experience to the parents and grandparents of our 598 thousand members,” Bjorn Thaler, chief financial officer of One Medical, said in a statement.

THE LARGER TREND

Both One Medical and Iora Health have been in the digital health space for some time. Iora was founded in 2010, and One Medical has been around since 2007. In early 2020, One Medical went public. The stock is now trading for roughly $35 per share on NASDAQ.

Within the last year, One Medical has had a few bumps in the road. In February, a report from NPR broke stating that the company had allowed ineligible patients, including young, healthy people as well as friends and family of company leadership, to skip the line to get a COVID-19 vaccine. Following this report, several Bay Area counties cut off their vaccine supply to One Medical, and the San Francisco Department of Public Health directed the company to return doses of the vaccine.

Shortly after this report, Congress launched an investigation into One Medical's COVID-19 vaccination practices. Rubin has refuted the allegations, calling them a gross "mischaracterization" during a recent earnings call.

One Medical and Iora Health aren't the only companies with hybrid care models. For example, Emilio Health, which focuses on pediatric behavioral health, offers in-person and digital tools. Carbon Health and Kindbody also use a similar hybrid approach.

Carbon Health has also been exploring the M&A space, with its recent purchase of Steady Health, an integrated diabetes platform that taps into continuous glucose monitoring to personalize medical care.