Health benefits platform Accolade is buying telehealth startup 2nd.MD for $460M

Accolade plans to pay $460 million to acquire 2nd.MD, a company that helps patients get expert medical opinions via video or phone.

The deal will create the most comprehensive, integrated healthcare navigation experience in the industry, Accolade officials said.

By adding 2nd.MD's services, Accolade will help employers address the urgent medical needs that face employees in 2021.

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 last year and works with 60 corporate customers including Comcast, United Airlines and Lowe's.

The deal to acquire Houston-based Innovation Specialists, the parent company of 2nd.MD, is a combination of stock and cash. Under the terms of the agreement, the purchase price of up to $460 million will consist of $230 million in cash, $130 million in Accolade common stock and up to $100 million of Accolade common stock payable upon the achievement of defined revenue milestones following the closing.

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The transaction is expected to close by the end of February, subject to customary closing conditions.

2nd.MD works with more than 300 employers and the country's top health plans and connects more than 7 million people to over 900 nationally recognized, board-certified medical specialists. The company automates the process of getting second opinions so they happen within three to five days over video or phone. That compares to the industry average of waiting several weeks to get medical advice.

On average, 2nd.MD employer-customers save over $5,000 per consultation and $27,000 per consultation when surgery is involved, the company said.

For the calendar year ended Dec. 31, 2nd.MD reported unaudited revenues of approximately $35 million.

Offering expert medical opinions as a benefit is becoming increasingly standard among large employers, with 73% planning to provide it in 2021, according to a Business Group on Health survey.

“We share a common vision to help every person live their healthiest life by dramatically improving quality and accessibility of care through a people-focused, clinically-driven support model," said Rajeev Singh, CEO at Accolade, in a statement. "Bringing 2nd.MD’s world-class care team and digital approach with expert medical consultation into Accolade, and continuing to offer it on a stand-alone basis, will have an immediate and measurable impact for our customers, their employees, and the health plans we work with."

Singh noted that both companies have built deep relationships with employers and health plans by helping employees navigate the increasingly complex and inconsistent healthcare system.

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The addition of 2nd.MD will expand Accloade's addressable market by an estimated $22 billion, according to Steve Barnes, chief financial officer at Accolade.

"We expect 2nd.MD to be accretive to our revenue growth rate in fiscal 2022 at a similar gross margin profile, and plan to invest in integration between our companies to maximize the value of our combined offerings," Barnes said.

When patients or a loved one face a serious health decision, waiting for weeks to receive a second opinion from an expert isn’t acceptable, said Jason Melton, CEO at 2nd.MD.

The company's care team is comprised of highly specialized nurses and medical record retrieval specialists who coordinate all the details to eliminate friction in the process and ensure the employee can remain focused on their health.

“Combining our care teams and technology with Accolade will enhance the reach and quality of support to members from the moment of crisis to the other side of treatment on the path to wellness. We share a common business vision, our cultures are highly aligned around employee purpose and we share a common mission to change healthcare for the benefit of all consumers," Melton said.

Goldman Sachs & Co. LLC acted as the exclusive financial adviser, and Cooley LLP acted as legal adviser to Accolade in the transaction. Balch & Bingham LLP acted as legal adviser to 2nd.MD.