One Medical's clinics are an option for almost 400,000 people. Photo: Smith Collection/Gado/Getty Images

One Medical has filed paperwork to go public, and the growing chain of physician offices has made it clear to prospective investors that large, dominant hospital systems are becoming a lot more crucial to its business.

The bottom line: "Our growth depends on maintaining existing, and developing new, strategic affiliations with health network partners," One Medical executives wrote in their IPO filing.

How it works: One Medical, which preaches convenient and lower-cost primary care, earns money in three main ways.

  • Employers, most notably Google, pay a membership fee so their workers can have unlimited access to One Medical's clinics. Or, a membership on your own costs $199 annually.
  • Hospitals, large medical groups and employers pay fixed monthly rates for a certain population of people, and One Medical is responsible for that group's care.
  • Health insurers create traditional "fee-for-service" agreements where they pay One Medical for each service it provides.

Between the lines: Hospitals are essentially finding a new way to buy patient referrals. They pay fixed sums to One Medical, and patients who need more intensive and expensive care will go to those hospitals instead of competitors down the street.

  • But One Medical benefits, too. In some instances, instead of fixed rates, hospitals "extend their health insurance contracts to us," according to One Medical's filing.
  • One Medical partners with hospital systems that hold a lot of market or brand power — places like Emory Healthcare in Atlanta, Mount Sinai in New York and UCSF Health in San Francisco — which allows One Medical to piggyback on those hospitals' lucrative contracts with insurers.

What they're saying: "Our providers are salaried, and not on a fee-for-service mindset," One Medical CEO Amir Dan Rubin told me in 2018.

  • Having salaried doctors, however, does not mean One Medical is casting aside the current system. It's merely building within it.

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