Devoted Health raises $1.2 billion, with plans to expand across the country

Ed Park, cofounder and chief executive officer of Devoted Health.Devoted Health

Devoted Health, the Waltham health insurance startup, announced Friday that it has raised $1.2 billion from investors to expand its services across the country.

Devoted Health aims to improve the health care system for seniors. It was founded in 2017 by brothers Todd and Ed Park, veterans of the electronic medical records company athenahealth. The new funding is the largest round ever raised by a private company in Massachusetts, according to PitchBook, and a source with knowledge of the deal said investors now value the startup at $12.7 billion.

The health tech startup focuses on Americans who use Medicare Advantage, a program supported by the federal government that tends to cover additional services, such as visits to a dentist or eye doctor. Devoted Health uses its software and data to try to make more informed decisions about the cost and delivery of care, acting as both an insurer and a provider.

“Today, after four years of painstakingly building Devoted Health from scratch, we’ve seen the impact,” Ed Park wrote in a blog post. “We are now ready to bring the Devoted Health experience to people nationwide.”

Bryan Roberts, a partner at Venrock and a founding investor in Devoted Health, said the company is expanding faster than it previously planned to “because we now no longer worry about getting things wrong.” Roberts was also an early investor in athenahealth.

The source close to the deal said the company planned to raise about $500 million, but excitement from investors more than doubled that target. The round was led by Uprising, with SoftBank Vision Fund 2 co-leading with the largest investment. Several existing investors, such as GIC, Andreessen Horowitz, Premji Invest, and Maverick participated, and new investors including General Catalyst and Emerson Collective also joined. Devoted Health has raised nearly $2 billion to date.

The company has been growing quickly and now has a presence in Arizona, Florida, Ohio, Texas, and Illinois. Devoted Health nearly doubled the number of people it serves over the past year, reaching 40,000 members as of June 30.

Devoted Health said it generated about $247 million in revenue during the first six months of the year, up 128 percent from the same period in 2020. Roberts said its revenue mostly comes from the money the government pays the company on a per-person basis for coverage, a price that varies based on factors such as where a person lives.

The company is not yet profitable, but Roberts said that is because it is investing in growth. Devoted Health plans to expand deeper into its existing markets, as well as enter new states.

“Some hospitals are very fee-for-service based, very monopolistic, and those are harder places to go,” he said. But he thinks consolidation of insurance companies opens an opportunity where “most health care provider organizations are very eager to have another independent, very high quality organization in their market.”

Going after Medicare Advantage members — more than 26 million people enrolled in the plan this year — also means going up against large incumbent organizations. The Kaiser Family Foundation found that 70 percent of the market is controlled by four companies: UnitedHealthcare, Humana, Blue Cross Blue Shield, and CVS Health.

It’s been a busy year for Medicare Advantage health startups that, like Devoted Health, are trying to use technology to make the system more efficient. Boston’s Iora Health, which also works with older patients on Medicare, was acquired in June by San Francisco-based One Medical in a deal valued at about $2.1 billion. Competitors Clover Health, Bright Health, and Oscar Health all went public this year.

Roberts noted the significance of Ed and Todd Park starting another company worth billions of dollars, after building athenahealth.

“The Boston tech scene is under total resurgence,” he said. “The success of a prior generation of companies is creating a new generation of entrepreneurs.”