Oak Street Health expands virtual specialty care with $130M deal for RubiconMD

Green van that says "Oak Street Health"
RubiconMD’s network of more than 230 specialists covers all major specialties, including cardiology, nephrology and pulmonology. The company, launched in 2013, primarily focuses on web-based eConsults, serving more than 5,000 primary care providers. (Oak Street Health)

Value-based primary care network Oak Street Health picked up virtual specialty care provider RubiconMD for $130 million.

The deal enables Oak Street Health to integrate virtual specialty care into its existing care model, which will significantly streamline the referral process and better manage costs while also enhancing the patient experience and providing comprehensive care far beyond traditional primary care, company executives said in a press release.

The deal also includes up to $60 million, subject to achievement of defined performance milestones, to be paid in cash or cash and stock combination, according to Oak Street Health.

RubiconMD’s specialist network of over 230 specialists covers all major specialties, including cardiology, nephrology and pulmonology. The company, launched in 2013, primarily focuses on web-based eConsults, serving more than 5,000 primary care providers.

Gil Addo, co-founder and chief executive officer of RubiconMD said the two companies share "similar cultures and values, as well as a commitment to delivering high-quality patient care and lowering costs."

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"This represents an important step forward for Oak Street Health's platform and will be a differentiator in the experience we provide our patients," said Geoff Price, co-founder and chief operating officer at Oak Street Health, during a call with investors Thursday.

Oak Street Health is focused on rebuilding healthcare by driving more resources into the primary care setting, according to Mike Pykosz, CEO of Oak Street Health.

"Specialty care in this country is broken," said Price during the conference call, noting that specialty care is expensive for payers and patients, has a high level of waste from duplicative tests and unneeded procedures and is extremely uncoordinated, resulting in patients having multiple care plans.

"The average patient experience to access specialty care is poor; it's frustrating, confusing and slow to navigate health plan networks and jump through hoops for authorizations and billing," Price said.

It's estimated that 40% of specialty visits are entirely avoidable while, at the same time, 1 in 4 patients who need care have poor access to specialists, he said.

To improve patients' access to specialty care, Oak Street Health has built high-value, local specialty care networks, executives said. The acquisition of RubiconMD will integrate and virtualize specialty care into Oak Street Health's care model, which will enable all of its centers to share a curated network of specialists nationally, Price said.

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"This approach has the potential to meaningfully improve patient care and outcomes, patient experience and convenience and Oak Street financial performance," Price said, noting that the integration of virtual specialty care builds on a successful model to bring psychiatry services to all Oak Street Health centers.

"RubiconMD is an organization that is focused on bringing specialist expertise to the primary care setting using technology. They will supercharge our virtual specialist network," he said.

RubiconMD provides clinical insights from specialists on specific patient cases, enabling primary care providers to directly manage and coordinate more of a patient’s care needs.

The integration of RubiconMD's platform will improve the company's patient-level economics and will lead to significant cost savings, according to executives.

Specialty care services are a substantial part of the company's overall third-party medical spend, about 15% of total costs. Oak Street anticipates a 10% reduction in specialist spend by decreasing duplicated or unneeded care, and expects to realize these cost savings starting in the second half of 2022, Price said.

The acquisition also could lead to other medical expense savings, Price said, as hospitalization costs should decrease as specialty care is integrated and coordinated earlier in a patient’s disease progression.