Patient financial engagement company Cedar is beefing up its platform by purchasing OODA Health, a healthcare administrative platform for payers and providers, for $425 million.

The combined company will bring together Cedar’s patient-facing platform that creates a personalized billing experience for each user with OODA’s platform that seeks to cut back on administrative waste by enabling back-end communication between payers and providers.

"Cedar's mission has always been to transform healthcare and deliver the best possible financial experience for consumers," Florian Otto, CEO and cofounder of Cedar, said in a statement.

"We've made great progress toward that goal, but consumers still need greater financial clarity and more affordable healthcare — and the experience with one's provider or one's payer is just part of the issue. Both Cedar and OODA Health are forward-thinking when it comes to putting consumers first, and we believe that by bringing our companies together, we can identify new opportunities to help consumers — as well as payers and providers — navigate an increasingly complicated healthcare system, leading to better outcomes for all parties involved."

With the acquisition, Cedar’s platform that connects with more than 300,000 patients a day will grow to support OODA’s partnerships with nearly 20 payer organizations and more than 35 healthcare providers across the U.S.

Otto will head the combined company, with OODA Health’s cofounder and co-CEO Seth Cohen stepping into the president role as well as joining Cedar’s board of directors. Cedar cofounder Arel Lidow and OODA cofounder Anshul Amar will serve as co-chief makers.

The company will be headquartered in New York City, with additional offices in San Francisco and Salt Lake City as a result of the acquisition. The deal is expected to be finalized this month, subject to regulatory approvals and satisfaction of other customary closing conditions.

WHY THIS MATTERS

Healthcare spending for patients in the U.S. has increased more than 31-fold in the last four decades, according to the Peterson-KFF Health System Tracker. In 1970, health spending averaged $353 per person and has since grown to $11,582 per person in 2019.

Because of these rising costs and the fact that medical bills are notoriously confusing, 84% of U.S. adults are worried about paying their healthcare bills in the next year, according to Cedar’s 2020 Healthcare Consumer Experience Study.

It’s gotten to the point where one in 10 patients said they won’t pay their bill if they don't understand the administrative process, according to the study.

Cedar and OODA hope that by joining forces, the company can alleviate some of the problems that lead to poor consumer financial experiences and administrative waste in healthcare.  

"Payers and providers recognize the importance of working together to fix the broken consumer financial experience, and are more committed than ever to unlocking administrative efficiencies that drive accessibility and affordability," Cohen said in a statement.

"We're tackling healthcare administration and billing head-on by building the most comprehensive technology and services platform for providers and payers. We're thrilled to unite our two teams with that goal in mind and are excited to make a more positive and meaningful impact on the lives of consumers."

THE LARGER TREND

OODA was founded in 2017 in part by Castlight Health founder Dr. Giovanni Colella, who has since stepped into an executive chairman role. The company raised $40.5 million in a Series A round in 2018.

Cedar scored a whopping $102 million last year in its Series C round for expanding its offerings. The company has raised a total of $350 million and boasts a $3.2 million valuation.

Other companies creating solutions for medical billing include Inbox Health, which raised $15 million in Series A funding earlier this year; Cleveland-based MedPilot, which landed $1.5 million in funding last February; and digital medical payment company PatientPay, which collected $6.15 million last April.