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Up-and-Comers 2018: Aledade and Arcadia

June 5, 2018
by David Raths
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The first two of this year’s six up-and-coming health IT vendors, as selected by Healthcare Informatics

Each year, to accompany our Healthcare Informatics 100 list of the largest companies in U.S. health information technology, we profile fast-growing companies that could very well make the list in the future. Below are write-ups of the first two companies that made this year’s Up-and-Comers rendition. The remaining write-ups will be published throughout this week.

Aledade Thrives by Partnering with Physicians to Build ACOs

From 2009 to 2013, perhaps no one had a better view of the evolving health IT and value-based payment landscape than Farzad Mostashari, M.D., the national coordinator for health IT during that period. So when he left ONC (the Office of the National Coordinator for Health IT) to become an entrepreneur, Mostashari was interested in building a business where the incentives are aligned with keeping people healthy.

His company, Bethesda, Md.-based Aledade Inc., offers a new model of primary care by partnering with physicians to build and lead accountable care organizations (ACOs) that allow doctors to stay independent, practice medicine like they’ve always wanted to, and thrive financially by keeping people healthy. Aledade makes money by taking a percentage of the shared savings the ACO earns. “We are at risk with everybody else,” Mostashari says. “In fact, we are probably more at risk because we finance the startup costs.”

Mostashari notes that much of the work he did around EHR (electronic health record) adoption was with the hope that EHRs would be the means of moving toward population health.

Farzad Mostashari, M.D.

“What was frustrating to me and became more and more clear was that healthcare didn’t have the right business model for population health, and trying to solve the business model problem through a technology solution wasn’t going to work,” he says. “I either needed to find or create someplace in healthcare where keeping someone healthy and out of the hospital is more profitable than waiting until they get sick and then treating them. Then we will have the right business model for all the tools I have been working for 15 years to build and get rolled out.”

He believed it was important to work with physicians rather than ACOs that are hospital-centric. “There are ACO models where if you keep people healthy and out of the hospital you get to keep some of the savings,” he says, “but it is really complicated to do that as part of a hospital system, where doing so will reduce your revenue directly. It is much simpler to do it with independent physicians. So that is our focus. I have always had a real soft spot for the smaller physician practices.”

After raising some money, Aledade hit the ground running in 2014. “We launched the company in June and we only had until the end of July to get enough practices to sign up to send in our application to CMS (Centers for Medicare & Medicaid Services),” he recalls. “And they did, and they continue to do so. We have grown tremendously. For many startups, the hardest thing for them to do is to find the product/market fit. From day one we have been off to the races. Clearly this is something that small, independent practices desperately want.”

Aledade has had several rounds of funding for a total of $97.5 million, the most recent in December 2017. The company has expanded beyond Medicare contracts to working with commercial payers, Medicaid and Medicare Advantage as well. Although its staff is only around 200 people, it is now working with providers in 18 states and with more than 260 practices.

“Within a few short years we have grown to manage $2.5 billion of medical expenditure and we are going to grow that by $1 billion this year,” he says. “If you think about it in terms of lives under risk contracts, we are going to be adding probably 100,000 Medicare lives in risk contracts.”

“Ultimately, we are a national company and we intend to be everywhere,” Mostashari says. “It is a question of where the greatest pull from the practices is coming from, and the supply of practices that are independent and want to stay that way. There are some parts of the country where the big health systems have gobbled everybody up. There are still a lot of independent physician groups left, and those that do get gobbled up don’t tend to like it. We are open to practices coming back out of those health systems, too.”

Aledade has developed its own population health platform for its partners to use. One of Aledade’s co-founders is Edwin Miller, who has helped develop cloud-based EHRs including CareCloud and athenahealth. He and Mostashari started out thinking they would use a best-of-breed population health platform. “We kept looking at the tools people were pitching to us, and looking at each other and saying, that is not how I would do it,” Mostashari says. So they started small and built pieces as they needed them. “It turned out we built what I think is the best population health workflow tool that exists in the country,” he says. So would Aledade ever market that separately and get into the software business? “We get asked that all the time, and the answer is no,” he says. “If you want the tools, you've got to be a partner.”

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