Farzad Mostashari, Aledade, on the power of primary care

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Farzad Mostashari, co-founder & CEO of Aledade

Our guest on this episode is Dr. Farzad Mostashari. Farzad is the co-founder and CEO of Aledade, a primary care enablement company that partners with independent PCPs to transition to value-based care and, as a result, maintain their independence. Founded in 2014, Aledade works with 11,000 physicians across 40 states and DC, accounting for 1.7M patients under management in Medicare, Medicare Advantage, Commercial and Medicaid contracts. Farzad previously served as the National Coordinator for Health IT in the Department of Health and Human Services, he completed medical school at the Yale School of Medicine and a Master’s in Population Health from Harvard’s T.H. Chan School of Public Health. Earlier this year, Aledade raised a $123M Series E round of funding led by OMERS Growth Equity.

In this episode, I spoke with Farzad about:

  • His journey to starting Aledade and the role policy expertise and evidence have played in the company’s success
  • Why he and the company are betting on independent physicians as the drivers of change in value-based care
  • How Aledade became the rare profitable health tech company

Beginning to 9:29: Farzad’s journey to starting Aledade and how Aledade model differs from competitors

How do we save the most lives through healthcare?….I reluctantly came to the realization that I had to think about the financial incentives in the system…technology wasn’t enough.

  • At the New York City Department of Health, Farzad and Aledade co-founder Mat Kendall worked together on the Primary Care Information Project, an initiative designed to implement electronic health records in physician practices. They then worked together to implement the HITECH Act in the Department of Health and Human Services in the Office of the National Coordinator of Health IT, where Farzad would take over as National Coordinator. Through the PCIP and at the ONC, Farzad came to see that technology and regulation wasn’t sufficient to shift the healthcare system, and that financial incentives would be necessary.
  • With this in mind, accountable care organizations presented an opportunity to blend those incentives with technology investments. Aledade is built on this idea, and the misconception regarding the healthcare dollars influenced by primary care physicians. The average primary care physician has a panel of 2000 patients, each of whom incurs roughly $5,000 in annual medical costs. This implies that a network of just 100 PCPs manages patients accounting for $1B of healthcare spend. Aledade helps these PCPs take risk on the total cost of healthcare for these patients and shares in the cost savings with those providers.
  • Aledade uses a technology platform and coaching to guide practice workflows and implement the interventions to affect healthcare costs and outcomes, such as providing urgent primary care, follow-ups after emergency room or hospital visits, and annual wellness visits.

We’re all fellow travelers…dedicated to the mission of reducing the total cost of care with a focus on enhancing primary care and business models focused on risk.

  • Other primary care companies such as Oak Street Health, Chenmed and Agilon Health are similar to Aledade in the high-level goal — taking on total cost of care risk and reducing health care costs to drive revenue — but differ in their operational and business models. Specifically, Aledade doesn’t build or buy practices, they partner with existing physician practices. This is more similar to Agilon’s model and, unlike Evolent Health, Aledade doesn’t work with health systems. Oak Street and Chenmed build their own practices and employ healthcare professionals. Aledade also has leaned into building their own technology.
  • Additionally, Aledade launched the company with a focus on Medicare fee-for-service beneficiaries in the Medicare Shared Savings Program rather than Medicare Advantage members, which is more common in other primary care companies. One of the key implications of this is that focusing on risk-adjustment is much less immediately lucrative in MSSP, which requires more investment into reducing emergency and inpatient utilization.

9:29 to 20:03: Primary care physicians as drivers of change and how Aledade supporting this group through policy and practice

In fee for service health care, success is a function of your negotiating leverage over payers…you get bigger and bigger and bigger and more and more and more expensive….the more successful you are in the fee for service world, the less successful you’ll be in value based care.

  • Aledade’s core thesis requires flipping the perceptions of power in healthcare. While the “center of healthcare” is often thought of as high-tech intensive care units at large health systems, this doesn’t necessarily mean the “center” of value-based care represents the same setting. The most powerful player in fee-for-service healthcare may not be the most powerful player in value-based healthcare.
  • What makes an entity in healthcare powerful is also important in this context — high prices charged to payers in a fee-for-service setting count against risk-bearing entities in value-based contracts. For this reason, independent primary care has the most to gain from pivoting to VBC; they influence a massive proportion of healthcare costs while accounting for a small percentage themselves. Aledade provides the technology and infrastructure that independent primary care providers lack to leverage this dynamic, also described in a 2014 Brookings Institution op-ed written by Farzad, Mark McClellan, and Darshak Sanghavi.

…We are servants to these practices…if they needed PPE…we went and we figured out how to get that imported and in their hands and donate it to them. If they needed telehealth…over a weekend we stood up 150 practices on telehealth, because that’s what we had to do. If they needed help navigating the loan programs or the grant programs or the [paycheck protection program], if they needed someone to advocate for them, there were over 50 news articles and interviews where we were advocating for independent community primary care…whatever it takes.

  • Like the rest of the healthcare system, Aledade’s providers faced a crisis at the start of the COVID-19 pandemic. ACO participants still bill as fee-for-service providers throughout the year, so when patients stayed home, it was immediately felt. Aledade provides scale to independent providers through contracting and technology, and took the same approach to addressing issues such as PPE procurement and telehealth implementation.
  • Farzad also spoke to the importance of independent providers adding competition to healthcare markets, the idea being that independent providers joining larger health systems will reduce competition and raise prices, and said that physicians have drifted towards joining larger physician groups rather than hospitals or health systems. Alongside health economists Martin Gaynor and Paul Ginsburg, Farzad published a series of recommendations and Forbes op-ed detailing policy changes that would improve competition in the healthcare industry.
  • In a similar vein, Aledade recently announced that they were partnering with RIP Medical Debt to abolish the medical debt of 85,000 patients in Mississippi and Louisiana. A “few hundred thousand dollars” matched by the foundation will eliminate over $86 million in debt for these patients, removing the disincentive that currently exists for many of those patients to cease seeking necessary medical care.

One of the great things about hiring ‘govvies’ is that they get the mission, they get also doing things on a large scale. They’re people who aren’t motivated just by short term financial returns…that’s a hack, identifying people who are undervalued by the market.

  • Aledade has long been stacked with individuals with public sector experience. In addition to the founding team, this includes former Center for Medicare Director Sean Cavanaugh, CMS Chief Operating Officer and former North Carolina Health and Human Services Secretary Dr. Mandy Cohen, and many early team members from the Center for Medicare and the Office of the National Coordinator for Health IT.
  • There are a few key reasons individuals from government are valuable team members at a tech startup like Aledade: they are motivated by the mission of the organization, they’re skilled at working within a highly regulated industry such as healthcare, they’re used to implementing programs at extremely large scale and, interestingly, they’re often overlooked by other potential employers in the private sector. This confluence of factors gives Aledade the “hack” to identify strong contributors with relevant experience who they may not have been able to recruit otherwise.
  • It is not uncommon when a new CMS regulation is published for the health policy twitter-sphere to turn to Farzad or Aledade’s SVP of Policy Travis Broome for instant analysis. Travis’s 20-tweet thread and Farzad’s 23-tweet thread on the physician fee schedule final rule, which includes an update on MSSP distills 1,297 pages of regulation into twitter threads on the day of publication.

20:04 to 30:02: Fundraising in a down market, new investment opportunities and IPO considerations

…If you really want to figure out how to allocate resources, you have to be really evidence-based and rigorous in terms of what you can do. But…particularly once you’ve built the data infrastructure, you can build an experimentation platform that can provide some of these answers faster than the three years that took us with Iris.

  • In June 2022 at the height of market uncertainty, Aledade raised a $123M Series E round of funding led by OMERS Growth Equity to take the existing, successful operational model and give it the scale of a platform, accelerating the flywheel of signing practices, establishing health plan contracts and generating cost savings and quality improvements.
  • This capital also enables Aledade to invest in new interventions for patients. In January 2022, Aledade made its first acquisition, buying Iris Healthcare, an advanced care planning company that helps patients manage the decision and logistics of end-of-life planning. With the acquisition, they also announced the launch of Aledade Care Solutions (ACS), a new health services unit led by Mandy Cohen.
  • ACS is positioned by evidence and business model alignment to succeed — in Iris’s case, Aledade had conducted a randomized clinical trial to evaluate the impact of Iris-led advanced care planning on end-of-life costs for a targeted group of patients. While health plans were hesitant to pay Iris $800 for the service, Aledade found that the service generated $4,000-$10,000 of cost savings per patient. With a business model that rewards cost savings, acquiring a company that can drive down costs for a target population creates immediate value.

There’s a crisis of replicability…if you think back to the Camden Coalition’s randomized clinical trial of the intense hotspotting care manager program they had, it just made sense to everybody and the initial results were super strong. You’d find really high cost people and you give them a lot of these care management supports, and then their costs go down.…there was literally no benefit in that program. So one of the things that we have learned is to be humble, and skeptical and evidence-based, which means we test things all the time.

  • In evaluating new opportunities, whether it be a new intervention or new government program, such as ACO Reach, Aledade evaluates whether the opportunity will be both good for patients and generate cost savings, and produces replicable results. This goal was reinforced when the Camden Coalition put its foundational “hotspotting” program to the test. The program, widely believed to set the standard for caring for high-risk patients, was not found to be effective. This rocked the public health world — the provider group’s founder Dr. Jeffrey Brenner was profiled by Atul Gawande in The New Yorker for this work in 2011 and was awarded a MacArthur Foundation fellowship for establishing the program. It reiterated the importance of establishing evidence for new interventions and investment at Aledade — if the results of Camden Coalition’s hotspotting program can’t be taken for granted, nothing can.

Being public is not a goal; if it’s the right thing for our mission, then we’ll do it…it’s easiest to raise money when you don’t need to raise money, so the fact that we’re so capital efficient, the fact that we’ve been profitable since 2020, the fact that we don’t buy or build practices, the fact that we’re so scalable in our growth model, that means we get to choose, and we don’t have a need for raising more money or for cash or for going public.…we have optionality and we’ll do what’s best for the mission and for the company.

  • Aledade’s raise, in addition to allowing it to invest in new lines of business, also delays an IPO for the company if it’s to follow. Much like Omada CEO Sean Duffy’s answer on a previous episode of the Pulse, Farzad described this step as one of many fundraising options for the company that may make sense in the future, but is not a goal or measure of success unto itself.

30:02 to end: Key decisions and leadership as Aledade evolves, and advice for MBAs

I think we made a bunch of correct assumptions about the world in the early days: the focus on independent practice, the focus on partnership, the focus on technology, the focus on traditional Medicare, many of which were counter-convention, and those turned out [to be] correct.

  • Farzad credits Aledade’s success to a series of key assumptions around which the company was formed, followed by a long-term focus and iteration on the processes and products that drove success for ACOs. As described earlier, the focus on partnership with (rather than building or buying) primary care practices and launching with the MSSP is uncommon for competitors in the space.

In a startup, the more successful you are… it’s not necessarily just harder or easier, but just different, and so I’ve loved learning, I’ve loved being faced with the different challenges that, you have at 100 at 500, or 1000 [employees], and…if at any point I feel like I’m not keeping up with Aledade, then I need to step away and bring in someone who can serve as the best leader for this company, because what matters here is the mission.

  • Aledade has grown substantially since its founding, now to over 1000 employees, and this represents one of the major distinctions from Farzad’s public sector work, where departments and teams (though potentially massive) remain essentially the same size. This has meant that the challenges the company faces and, of course, how a CEO responds, continues to evolve.
  • While much of the role has remained the same — setting strategy, communicating the vision for the company — the responsibility to instill culture has taken on an interesting shift. Early in the company, the CEO sets culture from the top, through actions and words, but as the company grows, culture starts to form through the actions of the rest of the company. This bottoms-up dynamic allows Aledade to continue to grow beyond the vision of the founders. Farzad cites Aledade’s climate efforts, which include achieving carbon neutrality, as a key example, where once the emphasis was raised by other team members, the leadership team supported within Aledade’s evidence-based approach.
  • However, within the context of a growing company and new sources of ideas and culture, the ability to get into the weeds and continue to deeply understand the business is a vital trait for a CEO at any stage or size of company.

My advice to you would be… really build your depth, go make contact with the world, go get punched in the face. It’s just you don’t get punched in the face enough when you have a strategy job, you can always blame execution. When you’re in the P&L, you get punched in the face, and that’s what you need a little bit to go see what is really happening and challenge yourself to deal with those realities.

  • Following the importance of getting into the weeds to deeply understand the business, Farzad recommends that MBAs take the opportunity when possible to own P&L rather than taking strategy roles (but bring a mouthguard!). While strategy jobs may be a more obvious transition for MBAs, especially those coming from management consulting backgrounds, operator roles allow recent grads to be more hands-on with the problems facing the business.

To see all of the roles Aledade is hiring for, check out their careers site.

We are so appreciative to Farzad for joining us on this episode of The Pulse Podcast! Subscribe for our new releases on Twitter, Spotify or Apple podcasts.



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Alex Wess

Wharton MBA Candidate. Flare Capital Scholar. Co-host, Pulse Podcast by Wharton Digital Health. he/him.