Lessons from Farzad Mostashari, CEO and Co-Founder of Aledade, on Empowering Independent Primary & Value-Based Care

Aledade CEO and Co-Founder Farzad Mostashari was recently a guest on the Pear Healthcare Playbook podcast. In the talk, Mostashari discusses his journey to healthcare, how he started Aledade, the importance of independent physicians in value-based care, and how Aledade scaled as a profitable health tech company, and goes on to share some advice for founders of startups.

Mostashari’s journey into medicine began when during his childhood, his father fell ill and required hospitalization. He got his MD from the Yale School of Medicine, and a Master’s degree in Population Health from Harvard’s T.H. Chan School of Public Health.

He describes himself as a person who experienced being pulled in different directions, partly because he straddled the worlds of public health and medicine. “When I was in public health, I constantly thought about medicine, and when I was in medicine, I consistently thought about public health. I have been living in those boundary areas, tirelessly striving to bring those two fields closer together,” he says.

While he was launching the Bureau of Epidemiology Services at the New York City Health Department, he realized that financial incentives were playing a crucial role in medicine: You make more money by treating a stroke than you do by preventing it.

That meant real change could only come from shifting the focus from compliance to outcomes-driven incentives. The initial phase of the Medicare Shared Savings Program did some of that, but the program’s original design was flawed, particularly in accurately calculating savings. Aledade was formed during this time, and Mostashari and his colleagues leveraged their experience as policymakers to foresee the program’s inevitable changes aimed at enhancing its effectiveness.

“It all started with the goal of getting as many patients served under a new payment and delivery model that incentivizes prevention and saves the most lives,” Mostashari says. “Do you work with hospitals, health systems, or nonprofits? Or do you go upstream and to primary care. The clear answer was to go upstream and prioritize primary care.”

This brought accountable care organizations (ACOs) into the picture. They can combine financial incentives with technology investments. Aledade was founded on this premise, along with the idea that a network of 100 primary care providers can be a billion-dollar business. How? The average primary care physician has a panel of 2,000 patients, each of whom incurs roughly $5,000 in annual medical costs. This implies that a network of just 100 PCPs manages patients accounting for about $1 billion in healthcare spending.

“It wasn’t rocket science,” Mostashari says. “You start with the assumption that the regulators know a lot, and want to do the right thing for America, then build your business such that if they did the right thing, you would benefit.”

And Aledade is benefiting. Today the company works with more than 11,000 physicians across 40 states, accounting for 1.7 million patients under management in Medicare, Medicare Advantage, commercial, and Medicaid contracts. Just this week, Aledade secured a $260 million Series F funding round.

Mostashari also has a warning for startup founders: “Never confuse your valuation with your value. Market dynamics can sometimes cause our valuation to be ahead of or behind the value we’re actually creating. Instead of fixating on valuation, you and your team should focus on the tangible outcomes you’re bringing about. For us, it’s about the number of hospitalizations we’ve prevented and the amount of savings we’ve been able to return to providers.

Read the full interview here.