Health Tech Startup Aledade Raises $64M Series C With An Eye Toward Profitability

Aledade, an operator and service provider for a national network of primary care practices, has raised a $64 million Series C round of funding led by new investor OMERS Growth Equity 1.

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Strategic investors Echo Health Ventures and California Medical Association, and returning backers Meritech Capital and GV also participated in the financing. With the latest round, Bethesda, Md.-based Aledade has raised a total of about $195 million since its 2014 inception, according to Crunchbase data.

Primary care practices jointly work together with Aledade to improve outcomes so that both parties share in the payments from Medicare and other payers for getting better outcomes and quality measures at lower costs of care, according to Dr. Farzad Mostashari, CEO and co-founder of Aledade and former national coordinator for health IT at the Department of Health and Human Services.

Aledade sets up value-based contracts for these primary care practices, where they are paid for outcomes, rather than a fee for service model, he explained.

“There are other ‘fellow travelers’ who have recognized the incredible potential of better primary care for managing total cost and quality of care,” Mostashari told Crunchbase News. “But we are different in that we have delivered results at scale across over a dozen different markets using our tech-enabled playbook. We don’t deliver care ourselves, we support those who do. We don’t buy practices. We empower them.”

Proven results

Aledade describes itself as a primary care company with a network of physician-led Accountable Care Organizations (ACOs) of more than 550 practices across 27 states. Combined, they care for more than 840,000 patients in value-based contracts with Medicare, MA, Medicaid, and commercial health plans. The company manages more than $7.5 billion in health care spending through 38 Medicare and 42 other value-based contracts.

The funding follows Aledade’s proven results in lowering costs while delivering better care and keeping patients healthy and out of the ER/hospital, it claims.

It has done this via its physician-led ACO model, in which the company shares in the risk and reward of value-based contracts with the participating independent practices.

“Aledade ACOs have improved quality of care and health outcomes while controlling costs in all types of public and private payer contracts,” Mostashari said. As a result, Aledade’s partner practices have received more than $47 million in shared savings revenue to date, he added.

The company has also just announced it is sending more than 500 independent practice partners PPE packages with hundreds of thousands of masks. It has also launched telemedicine services at more than 275 practices in the past few weeks.

In general, during the COVID-19 pandemic, Aledade believes it’s helped keep patients out of the ER by focusing on improving access to, and delivering, “proactive, coordinated primary care.” The company’s ACOs use advanced data analytics to gain insights on population health and conduct proactive care management for their most at-risk patients.

Growth and expansion

OMERS Growth Equity Managing Director Teresa Lee said that Aledade is poised to benefit “as the shift from legacy models of reactive patient health management to proactive value-based care gains momentum, and interest in the ACO approach continues to grow.”

Aledade’s revenue is growing over 60 percent annually and “into projected 2020 profitability,” according to Mostashari. The company is growing its patient base and health care spending under management by nearly 50 percent year over year. From February 2019 to February 2020, its headcount grew from 223 to 303 with roughly two-thirds of those spread across 42 different states.

The company plans to use the new capital to support more practices, sign more commercial contracts, save more and “take more risks.” It also plans to expand its footprint in its current 27 states, in addition to growing into new markets.

“We are super excited about the Golden State and our partnership with the California Medical Association,” Mostashari told Crunchbase News. “California is going to be a big expansion state for us this year.”

Illustration: Li-Anne Dias