Aledade clinches $260M to fuel M&A, expand value-based care solutions for practices

The health tech industry may be in the middle of a market downturn, but Aledade has picked up more than $380 million in venture capital dollars in the past 12 months.

The company, a public benefit corporation, picked up $260 million in series F funding to fuel its continued growth and expand its network. Last June, Aledade banked $123 million in a series E round and raised $100 million in January 2021.

The latest funding deal values the company at $3.5 billion, Bloomberg reported, citing people familiar with the situation.

Aledade, which has raised $660 million to date, uses data analytics software to help independent doctors’ offices transition to value-based models. The company's technology helps practices identify and better manage their most at-risk patients.

The Bethesda, Maryland-based company aims to use some of that cash to bulk up its tech capabilities and services, specifically with an eye on acquisitions.

The financing enables Aledade to be "opportunistic" in identifying and acquiring additional capabilities into its platform, Farzad Mostashari, M.D., CEO and co-founder of Aledade, said in an interview.

As investment in value-based primary care heats up, Aledade has made strategic acquisitions in the past year to build out its capabilities. It picked up value-based care analytics company Curia earlier this year, marking its second M&A deal after its tuck-in acquisition of Iris Healthcare a year ago.

Mostashari noted that Curia was a "capability" acquisition, while Iris Healthcare added a patient care solution. "Those are the kinds of things that we are going to be open to considering; companies that are doing great work either in value-based patient care, but could benefit from our distribution, our data, our engagement in our total cost of care model, or fundamental technology that could help increase the value we offer to practices."

But, he added, "We're not in a mad rush to spend the money." 

In a press release, Aledade said it will focus on accelerating the growth of its primary care network and strategic alliances with national and regional health plans.

"The most important value to us is service. The more important metric is not revenue or financing, it’s how many much money are we putting back into community primary care. If we focus on that, then everything else follows," he said.

The round was led by new investor Lightspeed Venture Partners, with participation from Venrock, Avidity Partners, Omers Growth Equity and Fidelity Management & Research Company. 

The company set out to raise $100 million in a challenging funding environment. "I think it was tough for us, despite having amazing results year over year, at a time where it would be impossible for a lot of people. It was hard with new investors. Many potential new investors we spoke with were just risk off. It seems like the focus was much more on the downside protections than it was on opportunities on the upside. Until we got to Lightspeed. They were delightful, smart and did incredible diligence," Mostashari said.

The company ended up upsizing the round.

Launched in 2014, Aledade now works with more than 1,500 independent primary care practices spread across 45 states and the District of Columbia. The company added more than 450 primary care practices, including nearly 60 health centers, to its nationwide network just this year.

Aledade's more than 150 value-based care contracts collectively cover more than 2 million patients and more than $20 billion in total healthcare spending, according to the company.

It now serves more than 1 million patients under the Medicare Shared Savings Program and nearly 250,000 patients under Medicare Advantage (MA) contracts with national and regional health plan partners.

The company has charted strong financial results, reporting that revenue grew more than 50% in 2022. The value-based care player says it brought in $475 million in revenue last year.

That growth translates directly to increased payments to the practices in Aledade's network, the company said.

The company says that by helping transition independent primary care practices to value-based care models, those organizations have saved the U.S. healthcare system more than $1.7 billion.

To succeed in the value-based care space, companies have to provide the best solutions to practices as well as health plans and government payers and deliver on the promise of better care and lower costs, Mostashari noted.

"I think we are pretty differentiated in terms of all three. Our rate of growth is differentiated as well as our ability to do value-based contracts across government, Medicare Advantage and commercial. And, our tech-driven, reproducible savings in cohort after cohort is now proven."

The company also has been building out its payer partnerships. It inked a 10-year collaboration with Humana to provide value-based care services to its MA members. It also signed a partnership with CareFirst BlueCross BlueShield to support the payer's in-network primary care practices adapt to value-based care models.

Also this year, Aledade expanded its reach in MA in partnership with Cigna. The insurer's MA members who live in Delaware, Maryland and the District of Columbia now have access to its network. 

Earlier this year, Aledade announced that it made the strategic decision to become a public benefit corporation. PBCs are a type of for-profit corporate entity that has also adopted a public benefit purpose. A PBC must consider the nonfinancial interests of its shareholders and other stakeholders when making decisions. 

Potential IPO plans?

Along with the funding news, the company announced a new hire. Efrem Castillo, M.D., jumped on board as senior vice president for MA. Previously, Castillo was a senior vice president of clinical transformation at Optum and also served as chief medical officer at United Healthcare Medicare Solutions. 

The company also announced two new members of its board of directors—David Blumenthal, M.D., and Paul Hennessy, CEO of Shutterstock.

Blumenthal served as the president of the Commonwealth Fund and the U.S.’ national coordinator for health information technology from 2009 to 2011. He also was a professor of medicine at Harvard Medical School and chief health information and innovation officer at Partners Healthcare System in Boston (now Mass General Brigham).

Of note, in the press release, Mostashari also highlighted Hennessy's experience leading "fast-growing, publicly-held, technology-based businesses" to help support the "next phase of Aledade’s growth."

"IPO is not a destination. It may be the means to supporting our mission as a public benefit corporation. That's what we're always required to be thinking about is our long-term mission and our stakeholders, especially our practice partners," Mostashari said in the interview. "If we're ready and the public markets are ready and it's the best way to continue our growth, then that's what we'll do."