Transcarent, a digital health and benefits management startup, is acquiring portions of virtual primary care company 98point6 in a deal valued up to $100 million, the companies said Monday.
Transcarent is buying 98point6’s virtual care platform and clinical customer base of 3.5 million people through portions of cash, equity and performance incentives. The sale price will reach $100 million if 98point's customer-related targets are met.
Under the deal, Transcarent will make a separate investment in 98point6’s streamlined technologies business while 98point6 will take an undisclosed percentage of future stock in Transcarent.
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The acquisition will more than double Transcarent’s user base, which consists of consumers and enterprise customers. Prior to the deal, Transcarent had around 1 million members. The company connects patients to a text-based conversation with a provider in under 60 seconds.
Transcarent CEO Glen Tullman expressed confidence 98point6 users' experience will improve with the deal. He said 98point6 was the best front-end texting clinical app it researched in the buying process and adding Transcarent's capabilities could take the service to the next level.
“I personally [have] met with most of [98point6's] large clients already face-to-face,” Tullman said. “All [98point6] can do [right now] is throw people back into the existing broken system. With us, every one of their clients is now going to be offered our full suite without having to make any changes.”
Tullman and 98point6 CEO Jay Burrell were both happy with the deal.
"When you do good deals, both parties feel good about it, and I think that's where we ended up," Tullman said. "If we paid only cash then I think you could make [the] claim [Transcarent received a better deal], but the fact that [98point6 is] going to be [a] partner, and they're taking stock, we think our stock has enormous upside."
Tullman was the former founder and CEO of Livongo before selling it to Teladoc for $18.5 billion. Before Livongo, he was the CEO of electronic health record company Allscripts.
In addition to text-based conversations for primary care, Transcarent provides pharmacy, behavioral health, surgery scheduling and manages more complex care as well as at-home care through its physician group exclusively treating Transcarent members.
According to Tullman, fewer than 5% of all telehealth appointments require an in-person consultation. If an office visit is required, Transcarent will funnel members to nearby providers.
“At that point, we're going to work with our local partners in the market because we aren't competing with health systems,” Tullman said. “We're going to direct care to them.”
What's next for 98point6?
Once the deal closes, 98point6 will retain a business where it licenses its technology platform software to third-party health systems. The product helps health systems scale up a virtual care operation with software, professional services and support. Implementation also includes a client-branded app and assistance in configuring the platform.
The acquisition of its patient care business comes at a turbulent time for 98point6. The company endured layoffs last year after raising a Series E round worth more than $100 million in late 2020. CEO Jay Burrell admitted capital markets had changed, but said the idea to sell the virtual care platform business was not out of desperation.
“It became super hard for us to think about how it can be incredibly successful at patient care and keep that market advantage on technology," Burrell said. "It's just a very hard calculus."
Burrell said it was the right time to sell the virtual care business to Transcarent.
“I would say it was 100% opportunistic,” Burrell said. “If we didn't have this conversation with Glen [Tullman], we would be continuing to chug ahead with where we were going [building both portions of the business]."
In January 2022, Transcarent raised $200 million from venture capital firms Kinnevik and Human Capital. The round included support from well-known digital health investors General Catalyst and 7wireVentures, along with a list of health system investors that included Northwell Health, Intermountain Healthcare and Rush University Medical Center.
This story first appeared in Digital Health Business & Technology.