Farzad Mostashari’s Aledade Raises $30 Million on the Back of the Switch to Value Based Care

Posted on June 15, 2015 I Written By

John Lynn is the Founder of the HealthcareScene.com blog network which currently consists of 10 blogs containing over 8000 articles with John having written over 4000 of the articles himself. These EMR and Healthcare IT related articles have been viewed over 16 million times. John also manages Healthcare IT Central and Healthcare IT Today, the leading career Health IT job board and blog. John is co-founder of InfluentialNetworks.com and Physia.com. John is highly involved in social media, and in addition to his blogs can also be found on Twitter: @techguy and @ehrandhit and LinkedIn.

On Aledade’s 1 year anniversary, they just announced that they’ve raised a $30 million Series B round of funding from new investor ARCH Venture Partners and return investor Venrock. That brings their total funding to $35 million. For those not familiar with Aledade, it was Founded by Farzad Mostashari and Mat Kendall soon after Farzad left ONC. They work with independent, primary care physicians who want to participate in ACOs and value based reimbursement programs.

Farzad’s blog post announcing the funding says that by end of the year Aledade will have 100 physician practices managing 75,000 Medicare Patients. With such small numbers, this should illustrate what a huge opportunity value based reimbursement will be for many companies that get it right.

Aledade has an interesting business model. They take about $500/provider as a membership fee and then they split the value based reimbursement commission with the provider. 60% of the reimbursement goes to the provider and 40% goes to Aledade. I’ll be interested to see how well this commission structure holds up. While certainly not an Apple to Apples comparison, doctors are use to paying 5-10% commission to billing companies. Will they be ok with paying 40% to what will feel like a billing company to many? Is this an opportunity for medical billing companies?

I have no doubt that physicians and hospitals are going to need a great mix of technology and healthcare knowledge to be successful in this new world of value based reimbursement. Aledade is on the cutting edge of this trend. Time will tell if they’re too early or right on time for the change.

In a recent article in the Palm Beach Post, they said the following about Aledade:

Thanks to Aledade’s focus on data analytics and physician reminders, Mostashari’s doctors became five times more likely to give recommended preventative care to their older patients, such as annual wellness visits and vaccinations against pneumonia.

This sounds great on face. It’s great that primary care physicians are interested in the wellness of their patients. I also think it’s great that we have a method for incentivizing these kinds of actions. However, my fear with this trend is that we’ll push out guidelines for “wellness care” without knowing if those guidelines actually improve someone’s health.

One lesson Mostashari should have learned well from meaningful use is that if you regulate something too early, you might freeze something in regulation that adds a lot of burden without actually improving healthcare. I’m glad they’re on the cutting edge of this trend. Let’s just be thoughtful that we don’t give our doctors more hoops to jump through that don’t actually provide value. That’s the massive challenge we face with the shift to value based reimbursement and we’re just getting started.

Aledade and company are explorers of a new land. I think we’ve only found the Bahamas. Most of us believe the Americas are still out there to be discovered, but we haven’t found it yet. So, let’s be careful drawing the final maps.