Aledade CEO Dr. Farzad Mostashari

Value-Based Care

Aledade Raises $123M to Fuel MA Growth

Medicare Advantage. Value-based care. Positive earnings. Aledade is hitting all the right themes with the announcement for the close of its $123M Series E funding round.

The raise lifted the value-based care enabler’s private valuation to $3.1B, and it intends to push its advantage at a time when many health tech startups are cutting back due to frothy-at-best market conditions.

Aledade partners with independent practices and health centers to establish tech-enabled accountable care organizations. It uses data analytics and guided workflows to help better manage high risk patients, then shares in the success of its partners’ value-based contracts.

• The company currently works with over 1k independent primary care practices to generate more than $300M in annual revenue, and it ranks among the coveted digital health startups consistently turning a profit.

• Aledade’s nearly 150 value-based care contracts collectively cover over 1.7M lives, including 220k Medicare Advantage patients. At this scale, Aledade says that a 1% increase in the savings rate attained by its risk-bearing partners would generate an additional $100M in revenue.

The fresh funding will help Aledade expand deeper into the Medicare Advantage market, while also enabling it to deliver more services directly to patients under its new Aledade Care Solutions branch formed during the January acquisition of Iris Healthcare. 

• Aledade Care Solutions provides wraparound services like Iris’ advanced care planning solutions to Aledade’s partner practices. 

• The business unit lets Aledade leverage its existing data platform to identify and deliver care to the patients that would benefit the most from additional services, and Aledade CEO Dr. Farzad Mostashari lists kidney care and behavioral health as possible expansion areas.

The Takeaway

Aledade’s software-led model for enabling risk-based arrangements is highly scalable, allowing it to be more capital efficient than competitors focused on building value-based primary care clinics from the ground up. Although these efficiencies have led to two years of positive earnings that probably indicate Aledade could have held off on a funding round, the difficult conditions of the current market have created the perfect moment for Aledade to take on new capital and gain ground in key areas like Medicare Advantage while its competitors are on their heels.

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The Wire

• CareMax Acquires Steward VBC: Medicare Advantage primary care company CareMax is acquiring Steward Health Care System’s Medicare value-based care business for $25M and 23.5M shares of CMAX stock, representing a meaningful 21% ownership stake in exchange for 171k senior VBC patients (5x the 34k seniors CareMax currently covers). CareMax will serve as the exclusive management services organization across Steward’s Medicare network and will aim to reduce costs through its tech-enabled hybrid care model, and CareMax expects to make the acquisition a major success for both sides by transitioning Steward’s 387k MA FFS patients to global cap arrangements.

• Out-of-State Telehealth: A Health Affairs study found that while interstate telehealth use increased in 2020, out-of-state telehealth made up only 0.8% of all outpatient visits and just 5% of all telehealth visits. The researchers discovered that most out-of-state telehealth use was for established care for rural patients and varied widely by state (between 0.2% and 9.3%), suggesting that future regulatory decisions should be left up to individual states following the end of pandemic licensure flexibilities.

• Teladoc Lawsuit: “Unrealistic” financial guidance has landed Teladoc in the hot seat after a New York district court filed a class-action lawsuit alleging that the virtual care company knowingly misled investors regarding the level of competition affecting its BetterHelp mental health unit, resulting in “significant losses” for shareholders. Teladoc holds that there is “no factual basis to the suit whatsoever,” and while poor forecasting isn’t in itself illegal, the fact that Teladoc shares have fallen nearly 90% from their pandemic highs makes it easy to see why investors are upset.

• Text-to-Video Login: A small study of 22 patients at a UCSD stroke clinic found that patient satisfaction with telehealth visits improved when using a Doximity text-to-video service that texted patients a log-in link to join their appointment when the physician was ready, rather than having them sit in a virtual waiting room. During the 2.5 month study, 55% of the patients were able to be seen early thanks to the text-to-video login letting providers see patients “in order” as opposed to having appointments tied to an “exact time,” promising results that led to UCSD health system’s decision to roll out the tool to its primary care and surgical care clinics later this year.

• LeanTaaS Acquisition: Bain Capital recently acquired a majority stake in cloud software company LeanTaaS alongside a “significant” growth capital investment to fuel expansion, marking the private equity firm’s second major healthcare transaction within the past year following November’s acquisition of athenahealth. LeanTaaS aims to become the “air traffic control center” for health systems by providing AI-enabled solutions that help optimize the use of constrained resources like operating rooms and inpatient beds.

• Facial Recognition Rollout: Pennsylvania-based Geisinger health system is set to roll out CERTIFY Health’s biometric facial recognition technology to check in patients throughout its entire health system after a successful 3-month pilot. The “positive patient identification (PPID) tech lets patients scan their face when they enroll in the Geisinger system, allowing the facial scan to be stored in their EHR so that hospital staff can easily verify their identity at all future check-ins.

• Skipped Health Screenings: A Harris Poll survey of nearly 900 US men found that 33% of respondents skip their annual health screenings, while 65% believe they’re naturally healthier than other men. One of the physicians that conducted the survey was quick to point out that “it is statistically impossible for the majority of men to be healthier than the majority of men,” and recommended that providers consider sending more personalized messages educating and empowering male patients to build positive patient-provider relationships.

• I’m a Mac, I’m a PC: Zus Health CEO Jonathan Bush published a great blog post outlining how healthcare might be having its Mac vs. PC moment, a reference to Apple’s early 2000s TV commercials. Bush compares traditional office-based medicine to the PC (reliable, understood, dominant), then questions whether digital-first care is more like the Mac (a better-designed facsimile of the same thing) or the iPhone (an always-on innovative resource that creates an entirely new market). Worth checking out for the full analysis or at least a laugh.

• Pandemic Cancer Screenings: A survey of 480k US adults led by the American Cancer Society found that preventative cancer screenings dropped by as much as 80% during the first few months of the pandemic (vs. 2018), with full-year 2020 screenings declining 6% for breast cancer, 11% for cervical cancer, and 16% for colorectal cancer. One positive note from the study was that the drops in colorectal cancer detection were offset by a 7% increase in stool testing utilization, highlighting how at-home testing can maintain preventative screenings during major disruptions.

• Surgeon General Takes on Burnout: The US Surgeon General issued a call to collectively address rising healthcare worker burnout and resignations. Dr. Murthy’s burnout recommendations include: (1) involving workers in process and culture improvement initiatives; (2) eliminating punitive policies for seeking mental health care; (3) ensuring sufficient compensation, labor levels, and safety; (4) reducing administrative burdens so workers can focus on patients; (5) prioritizing social connection and community as healthcare system core values; and (6) increasing public health focus on social determinants of health.