Health benefits platform Accolade is expanding into primary care with plans to acquire PlushCare in a deal valued at $450 million.
Under the terms of the agreement, the purchase price of up to $450 million will consist of $40 million in cash, $340 million in Accolade common stock, and up to an additional $70 million of value payable upon the achievement of defined revenue milestones following the closing, the company said in a press release issued Friday.
PlushCare is a virtual primary care service and Accolade plans to integrate the startup's services into its platform to provide members access to care for acute, chronic, and preventive health needs, Rajeev Singh, chief executive officer of Accolade told Fierce Healthcare.
As a result of the acquisition, Accolade will offer virtual primary care and mental health consultations directly to members, the company said.
"By adding primary care services to Accolade's advocacy and navigation platform the company will be able to extend our relationships with employees and their families to not just guiding them to the right choices, but instead actually prescribing and treating those members with the care that they need at the time when they need it in a very accessible way. We think this is going to drive even better outcomes and even more significantly lower costs," Singh said.
Through the integration of PlushCare, Accolade will be able to leverage its broad data set, which includes members' healthcare claims and medications, to "supercharge" primary care, according to Singh.
"That primary care physician is now super-powered because when they walk into the room to visit with that patient they understand every medication that patient has been prescribed, they understand every other physician that they are seeing, they have a clear understanding of what their benefits plan allows them and where they are against their deductible and how much that medication might cost if they prescribe it. Those are things that a typical primary care doctor never knows when they are treating a patient," he said.
The transaction is expected to close in early June, subject to customary closing conditions.
Piper Sandler acted as the lead financial advisor in the transaction with Goldman Sachs & Co. LLC also advising Accolade. Jefferies acted as the financial advisor in the transaction advising PlushCare.
It's Accolade's second major acquisition in 2021 as it announced plans in January to acquire 2nd.MD, a company that helps patients get expert medical opinions via video or phone, in a $460 million deal.
The addition of PlushCare will expand Accolade's addressable market nearly five-fold to more than $200 billion, according to Steve Barnes, chief financial officer at Accolade.
Founded in 2007, Accolade provides a health benefits platform for employers aimed at improving health outcomes and controlling costs by helping consumers make better, data-driven decisions. The company went public in July 2020, raising $220 million in its initial public offering.
The company currently serves 9 million members in the U.S.
Accolade expects fiscal year 2021 revenue to come in between $168 million to $169 million, according to preliminary results, representing 26% year-over-year growth from revenue of $133 million in 2020.
PlushCare, founded in 2015, built a primary care network, with access for consumers to highly skilled primary care and internist doctors and mental health experts through the ease of a smartphone. PlushCare's physicians consult with patients by video call, orders and arranges prescription pickup, order lab work, and fulfills all the regular duties of an in-person physician.
PlushCare brought in $35 million in revenue in 2020.
Expanding into primary care
There are many players trying to disrupt primary care, including Amazon with its Amazon Care virtual care and in-person healthcare services.
"Some players are reinventing the experience and building beautiful clinics and others are focused on lowering the cost of accessing a physician. Those are all interesting choices. Our view is that to really reinvent primary care, you need to power primary care with the data they need to do their job well, surround that physician with a care tam to follow up and then deliver that value on a scalable nationwide basis. That’s our strategy," Singh said.
That acquisition along with the addition of PlushCare will help Accolade to lower costs and improve outcomes for its customers' employees, Singh said. As the healthcare industry shifts from fee-for-service to value-based carem models, Accolade's capabilities will deliver incremental value in way that provides elements of value-based models to employers, he said.
In response to the COVID-19 pandemic last year, Accolade partnered with PlushCare to offer members a virtual primary care option.
Combining PlushCare’s existing business with Accolade’s core navigation and advocacy services and expert medical opinion specialists, augmented by Accolade’s data set that provides a longitudinal view of every patient, will elevate PlushCare’s business to a new level of patient engagement for their existing consumers and Accolade’s commercial customer base, according to Accolade executives.
“We are excited to join forces with Accolade to extend our services into their member base, while leveraging Accolade’s unique engagement model and vast data set to continually improve the way we service our customers. Together we will continue to reinvent healthcare for the 21st century in new and exciting ways," said Ryan McQuaid, chief executive officer at PlushCare in a statement.
"This is not about replacing the brick and mortar healthcare system, it’s about augmenting it in those moments where people need it the most," Singh said.
By expanding Accolade's clinical team of physician medical directors, nurses, specialists, and benefits experts to include primary care doctors and mental health experts, the company is responding to customers who are asking Accolade to expand its capacity to serve their employees at every step of their care journey, Singh said.
"Equally important, we extend our capacity to deliver measurable value for employers seeking coordinated, longitudinal care at scale for their workforce," he said.