Medical billing startup Cedar to accumulate Ooda Well being for $425M, shifting into insurance coverage market

Diving letter:

• Medical billing startup Cedar is acquiring health tech company Ooda Health for $ 425 million in a mixture of cash and equity, thereby entering the insurance market for the first time.
• Cedar, based in San Francisco, works in the complex billing process between patients and providers and can now also integrate insurance bills into its platform.
• The move is intended to help the fintech player expand its products to focus on new functionality built into both the payers and providers, Cedar said, and to more automate the billing workflow. The transaction is expected to close this month, subject to required regulatory approvals.

Dive Insight:

Medical costs in the US have skyrocketed for years, causing more patients to go through a fragmented and complex billing process that is slightly confusing at best and a direct detriment to their financial health at worst. One in ten US consumers says they won’t pay their bills if they don’t understand the administrative process. This comes from a 2020 study that Forrester Consulting conducted on behalf of Cedar.

Streamlining the payment process can then make consumers more likely to pay their bills, which can reduce administrative burdens for payers and providers and contain rising costs. According to studies, administrative costs account for between 8% and 25% of all national health expenditure.

These high costs could be reduced if the numerous routine transactions were digitized, according to a McKinsey report from 2019.

This is a major destination for healthcare fintech startups like Cedar. With the acquisition of Ooda, Cedar will bring both the provider and payer side of the billing process into its payment platform, which is currently used by more than 12 million patients annually to pay a pending bill, review their insurance, or review their copayment before a doctor’s visit.

Ooda enables consumers to receive a single statement from their payer, which includes deductibles and various payment options, rather than a few records of performance, itemized invoices and other documentation.

Ooda’s platform connects workflows for approximately 20 organizations including CommonSpirit Health, Arizona Blue Cross Blue Shield, and Massachusets Blue Cross Blue Shield. Cedar currently works with 35 providers across the country including Summit Health, Yale New Haven Health, Novant Health and ChristianaCare.

Cedar, which was founded in 2016, saw significant growth over the past year during the digital health boom of the coronavirus pandemic. Cedar said the size of its business quadrupled over the course of 2020, and investor interest also increased. Recently, a $ 200 million Series D funding round was closed. That brings total funding to more than $ 350 million and valuation of $ 3.2 billion, the company said.

Florian Otto, CEO of Cedar, will continue to serve as chief executive for the combined company, while Seth Cohen, CEO of Ooda, will continue to serve as President and join Cedar’s Board of Directors. The combined company will be headquartered in New York City with additional offices in San Francisco and Salt Lake City.

The board of directors of Cedar and Ooda and the shareholders of Ooda have already approved the transaction.