One Medical raises full-year guidance with surge in membership, confronts high medical loss ratio in Q3

Staff and executives at One Medical ring the Nasdaq opening bell January 31
One Medical also reported $151.3 million in revenue in the third quarter, exceeding Wall Street’s expectations of $125.7 million. (One Medical)

Tech-enabled primary care provider One Medical outpaced membership expectations in its third quarter, reporting a total membership count of 715,000, a 40% jump year over year.

Previously, the company had projected the high end of its third-quarter membership guidance at 697,000.

One Medical also raised its full-year guidance for revenue, membership and adjusted EBITDA. The company reported $151.3 million in revenue in the third quarter, exceeding Wall Street’s expectations of $125.7 million and raising its full-year revenue guidance to $606 million to $615 million.

Amir Dan Rubin, chair, CEO and president of One Medical, said during the company's third-quarter 2021 earnings call Wednesday that the revenue boost was driven by membership growth and the total increase in the number of patients seeking primary care relative to last year, when primary care volumes sunk during the COVID-19 pandemic.

Full-year membership guidance was raised to between 728,000 and 736,000 members, a surge from the previous estimates that projected 723,000 members at the high end of the range.

The company’s stock price rose 2.2% in premarket trading Thursday.

One Medical’s acquisition of primary care provider Iora Health, which focuses on Medicare patients, closed Sept. 1, meaning the third-quarter financials include one month of contributions from Iora’s business.

The company said the acquisition will allow it to broaden its market reach to care for people across a widened age range, opening the provider to reach 40% of Americans.

RELATED: One Medical to acquire Iora Health in $2.1B all-stock deal

Several investors in Wednesday’s earnings call raised concerns about the company’s high third-quarter medical loss ratio, at 87%.

Bjorn Thaler, chief financial officer of One Medical, attributed the increase to the jump in membership and a “modest tailwind” from the COVID-19 pandemic.

“The folks who are coming in unmanaged this year, they’re certainly running at medical claims expense ratios that frankly are higher than what we’ve typically seen,” he said. “I think that’s a little bit where we see some of that catch-up here on the deferred care and also some of the challenges as a result of COVID coming in here.”

In October, the company announced the launch of Impact by One Medical, a virtual chronic care management platform, competing with other big hitters in the space like Livongo and Lark Health.

The new offering provides patients with access to multidisciplinary care teams for virtual or in-person care as well as educational materials and platform integration with wearables like Fitbit. The company said the program's integration with primary care gives it a differentiated approach to the market.

RELATED: One Medical launches new program to target chronic care management market 

The company also opened into a new market this quarter in the Raleigh-Durham areas in North Carolina in partnership with Duke University’s health system.

“This past quarter, we were excited to open our doors in the Raleigh-Durham, North Carolina region for consumer and enterprise members and to expand our in-person presence with new locations in a number of our existing markets,” said Rubin.

Rubin noted that the company expects to expand into five more markets in the coming months: Columbus, Ohio; Milwaukee; Miami; Houston; and Dallas-Fort Worth.

RELATED: One Medical expands reach with employers, plans to grow to 22 markets in 2021

The company raised its adjusted EBITDA guidance for October through December to a loss of $37 million to $32 million, from previous guidance of a loss of $43 million to $38 million.

Yet the primary care provider deepened its losses in the third quarter, with a loss per share of 51 cents, more than double Wall Street’s projections of a loss of 25 cents per share.

Thaler expressed optimism toward the membership increase and also noted the company’s opportunity to retain the thousands of members who joined One Medical for employer-mandated COVID vaccine verification purposes.

“I think that’s going to be a great opportunity for us over time to get them familiar with our service offerings and really have them use us for their day-to-day longitudinal care needs,” he said.