By Somesh Dash, Michael Miao, Becca Faust, and Jules Maltz
The ongoing health crisis brought on by COVID-19 has made us especially appreciative of the contributions of our healthcare professionals. Stories of the tireless attention that providers have given to those felled by the disease, despite considerable personal risk, have moved us through the course of the pandemic. Our gratitude for the unflinching commitment of healthcare professionals and our recognition of the support that they deserve makes IVP particularly proud to announce our investment in Aledade. Aledade empowers primary care physicians nationwide by providing technology and services to facilitate the delivery of high-quality health care.
Since its founding in 2014, Aledade has enabled hundreds of independent primary care physicians to adopt value-based care. Aledade partners with primary care practices to build and lead Accountable Care Organizations (ACOs), sharing in both the risk and reward of value-based contracts with commercial and government payers and demonstrably enhancing results. Through its proprietary tech platform combined with its local, hands-on support teams, Aledade has empowered the practices within its ACOs to improve health outcomes for patients while simultaneously reducing costs to the healthcare system. IVP is participating in the company’s $100M Series D financing, and we look forward to partnering with the Aledade team along with our co-investors, including Meritech Capital, OMERS Growth Equity, and Tiger Global Management.
Here is why we invested:
Value-Based Care is the Future of Health Care
The U.S. healthcare system has long created misaligned incentives. Traditionally, the sicker patients get, the more profitable they become for healthcare providers. This is not because of malevolent motives; rather, our system rewards the treatment of disease rather than its prevention. As a result, our national healthcare system suffers from both wasteful spending and suboptimal outcomes. The U.S. spends more on health care as a share of its economy than any other high-income country. Even then, our average life expectancy and rate of avoidable mortality do not compare favorably to other affluent countries.1
Value-based care has the potential to change this. Over the past fifteen years, policymakers have worked to shift the healthcare system’s financial incentives by aligning compensation with quality, as opposed to quantity, of care.2 The movement towards value-based care has spread across the country, and we believe that it is poised to reshape the priorities of communities large and small. If thoughtfully designed and carefully coordinated, value-based care programs can deliver improved care for individual patients, improved population health, and reduced costs of care. The Aledade ACO model achieves all three of these outcomes.
It All Starts With Primary Care
Aledade recognizes that primary care physicians are the quarterbacks of the healthcare system. While they account for only six to seven percent of health care spending, primary care doctors can influence up to 85 percent of downstream costs.3 Proactive blood pressure control can prevent a heart attack or stroke down the line; A1C tests can help patients take measures to prevent or manage diabetes. These are all small but impactful steps that begin with primary care. As a result, primary care physicians are uniquely positioned to lead the transition to value-based care. Moreover, while larger hospitals and health systems lose a significant revenue stream if they prevent emergency room visits and hospital admissions, primary care physicians have little to lose—and much to gain—in value-based care arrangements.
Despite being best positioned to lead the transition to value-based care, primary care physicians are often the least well-equipped to do so. To succeed, value-based care arrangements require significant investment in regulatory, technological, and analytical expertise, and independent primary care physicians simply cannot shoulder this burden alone. That’s where Aledade comes in. By leveraging technology to help practices effectively manage their patient populations, Aledade enables physicians to stay independent and, moreover, to thrive financially while delivering personal, proactive care.
Significant Traction and Proven Success
Aledade is scaling rapidly, and its model is working. The company now partners with over 800 independent primary care practices, including over 100 federally-qualified health centers, and its practices have received more than $115M in shared savings revenue. Aledade ACOs have successfully reduced emergency department visits, inpatient hospitalizations, and readmissions across hundreds of practices, in addition to improving clinical quality measures.
Aledade has also proven that this model works across payers. The company has value-based contracts not only with Medicare and Medicaid, but also with commercial payers from Blue Cross in North Carolina to Regence in the Pacific Northwest and substantial new growth in Medicare Advantage, where Aledade covers nearly 100,000 patients today. This means that physicians in Aledade ACOs will be able to provide value-based care to their entire patient population, no matter who pays for their care.
We believe that Aledade has just begun to scratch the surface of its market opportunity. With this new funding, we are excited for Aledade to scale its ACO network and to establish additional value-based contracts with health plans across the country, especially expanding further into Medicare Advantage. This will lower costs for more payers, increase revenue for more providers, and deliver better outcomes for more patients.
With highly relevant experience from prior work as policy analysts, technologists, and clinicians, the Aledade management team is among the most talented collections of domain experts and operators with whom we’ve ever partnered. Aledade’s CEO, Farzad Mostashari, is the former National Coordinator for Health IT at the Department of Health and Human Services and served as a distinguished expert at the Brookings Institute’s Engelberg Center for Health Care Reform. Given Farzad’s extensive work on issues affecting health IT, ACOs, and health care policy and delivery, he is uniquely qualified to lead the national movement to value-based primary care.
Just as an alidade helped celestial navigators to keep course on their journeys, as Aledade navigates the transition to value-based care, its exceptional team will steer communities across the nation on a course that serves payers, providers, and patients. We look forward to working with the team as it continues to deliver on its motto — “good for doctors, good for patients, good for society.”
Somesh Dash, Michael Miao, Becca Faust, and Jules Maltz are investors at IVP, a later-stage venture capital firm based in Menlo Park, CA.