Healthcare FinTech Cedar Transferring Into Insurance coverage Market With $425 Million Acquisition
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Cedar President Seth Cohen (L) and CEO Florian Otto (R).
cedar
For many Americans, trying to interpret a medical bill can be like reading a foreign language. There are CPT codes, hospital expenses, insurance discounts, random fees, deductibles, and finally the amount you actually owe. Then the ancillary bills can trickle in. A balance from the diagnostic lab. Medical Device Charges. Money to pay the doctor who saw you during the operation but was not included in the hospital bill. And on and on.
With the startup Cedar for medical accounting software, Florian Otto wanted to define one side of the equation: the financial interaction between the patient and the hospital or doctor. “We want to transfer the digital health experience on the financial side to the 21st century in order to make it personalized, immediate, transparent and convenient,” says Otto, 40, co-founder and CEO of Cedar.
Each year, more than 12 million patients across 36 healthcare systems use cedar to check their insurance, make a co-payment before the visit, and pay their outstanding bills after a visit. All billing information is retrieved from the patient’s electronic patient file and reintegrated into it, regardless of the provider. But even if the hospital or doctor’s bill makes more sense now, there is still one important sticking point: the insurance side. As a result, Cedar on Thursday announced a $ 425 million acquisition of San Francisco-based OODA Health for a mixture of cash and equity. The move was driven by a $ 200 million Series D injection in March led by Tiger Global Management valued at $ 3.2 billion for cedar. The company has raised $ 370 million to date.
Whenever you go to a hospital, doctor, or even get a prescription, insurers send confusing documents called “Statement of Benefits” that specifically state “This is not an invoice”, but very confusingly similar to an invoice. “An average patient cannot really differentiate between what comes from the provider and what comes from the payer,” says Otto. The combined company aims to make things easy for patients with a simplified bill.
When consumers have a better understanding of what they are paying and why, they are more likely to pay their bills, which reduces the huge administrative burden for everyone involved. The U.S. spends nearly $ 500 billion on health care administration for billing, insurance, and overhead costs not directly related to the provision of care.
It doesn’t make sense for hospitals and doctors to have to explain to patients how their insurance, a product developed by a completely different company, works, but that’s the strange reality of the fragmented U.S. healthcare system, says Seth Cohen, 41. Co-founder of OODA. “The way we process and manage claims hasn’t changed in decades,” says Cohen. “All of these innovations are happening all over Silicon Valley, New York, but that level of administration has not been touched.”
We have this trifecta of provider, patient and payer together.
Florian Otto, cedar
OODA takes its name from a military acronym from the 1960s that stands for “observe, orient, decide, act” and, in the healthcare context, aims to make faster, smarter decisions based on data. Cohen and his co-founder Giovanni Colella first met at Castlight, where Cohen was vice president of sales and alliances and Colella was co-founder and CEO. Castlight, which offered healthcare pricing transparency software to employers, went public at nearly $ 40 a share and is now trading at less than $ 2 a share. His spectacular blaze is now a cautionary story for digital health, even as the market enters a frothy phase of sky-high valuations. Cohen, who is on the board of directors at Castlight, said the experience made him realize that healthcare companies targeting employers have hit a cap on scaling. “What if we go into the beast’s belly, so to speak, and try to fix some of those broken administrative pieces?”
Cohen and Colella founded their company in 2017 together with co-founders Anshul Amar and Midori Uehara. They built a platform on which patients can receive a statement from the insurer, which also includes deductibles and other payment options such as a health savings account. It also offers the flexibility of payment plans so customers aren’t forced to pay a huge bill at once or end up in collections. OODA, which has raised $ 57 million, has signed contracts with major insurers such as Blue Shield of California and Anthem Blue Cross and recently entered into a corporate agreement with UnitedHealth Group. Cohen will serve as president and director of the combined company. Cedar co-founder Arel Lidow and OODA co-founder Anshul Amar will serve in leadership roles.
Cedar, which gets its name from the tree for its medicinal properties, strength, and longevity, was launched in 2016. Originally from Germany, Otto had a background in health consulting at McKinsey in Brazil, where he later founded a company that was acquired by Groupon and became the head of Groupon Brazil. It was his wife’s experience in an emergency room in New York – and the billing nightmare that followed – that got him back into healthcare. Reducing hundreds of billions of dollars in annual administrative waste in the U.S. healthcare system means it is becoming more affordable for everyone, Otto says. “Cedar is the only company that can really build this because we have this trifecta of provider, patient and payer together.”
The first step after the acquisition is to merge the provider and insurance products. Then the company will move to new products that focus on the back end of accelerating payments between insurers and providers by addressing issues like prior approval. “We want to enable the patient to take care of their medical problem and not have to worry about administrative or financial problems,” says Otto. “If you have an illness, you still have stress. We want to take this away from the patient so that he can concentrate on getting well. ”