Health IT, Startups, Health Services

ACO-builder Aledade raises $64M

Aledade, a health IT company founded by former national health IT coordinator Dr. Farzad Mostashari, raised $64 million in funding. Aledade operates ACOs with more than 550 independent physician practices.

Aledade, a health IT company building a network of Accountable Care Organizations (ACOs), closed a $64 million series C round. The Bethesda, Maryland-based company, led by former national health IT coordinator Dr. Farzad Mostashari, plans to use the additional funds to grow its network of physician-led ACOs.

Toronto-based private equity firm OMERS Growth Equity led the funding round. Echo health Ventures, the California Medical Association, and previous investors Meritech Capital and GV also participated in the round. Prior to the round, Aledade had raised more than $130 million in funding to date.

ACOs are intended to improve the quality of care by encouraging physicians and hospitals to create networks to better coordinate patient care.  Under the Medicare Shared Savings Program, ACOs are rewarded for keeping costs down while improving patient outcomes. To date, Aledade said its partner practices have received more than $47 million in shared savings revenue.

The Covid-19 pandemic has provided a significant challenge for ACOs, as shared savings payments make up a significant portion of their income. According to a survey by the National Association of ACOs, 77% of surveyed ACOs said they were very concerned about the impact of Covid-19 on their 2020 performance. Another 90% said the pandemic would have a significant or very significant effect on their ACO’s ability to earn shared savings.

Aledade seemed confident in the resilience of its practices. In the past year, Aledade saw its revenue grow 60% and its patient base grow by 50%. The six-year-old company currently works with 550 independent practices and 7,300 providers across 27 states. In total, its ACOs care for more than 840,000 patients.

“When we started Aledade nearly six years ago, we believed that value-based care was the only path forward for our health care system and a sustainable business model for independent primary care practices,” Mostashari said in a news release. “Our uniquely resilient business model — built on years of hard work, innovation, and partnership — means that we have the resources during this difficult time to be able to support practices, and help them not only to survive, but to thrive.”

Aledade said it shares in the risk and reward of value-based contracts with its participating independent practices. It also uses data analytics to get information on a population’s health and proactively manage at-risk patients. In 2018, the most recent year for Medicare data, the company’s ACOs reduced stays in skilled nursing facilities by an average of 17% and hospitalizations by an average of 6%.

Photo credit: smolaw11, Getty Images

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