The Edge of Healthcare: The Billion-Dollar Problem In Healthcare

Martin Cody: Welcome to the Edge of Healthcare, where the pulse of innovation meets the heartbeat of leadership. I’m Martin Cody, your guide through riveting conversations with the trailblazers of healthcare. Tune in to gain exclusive access to strategies, experiences, and groundbreaking solutions from influential payer and health system leaders. This isn’t just a podcast, it’s your VIP ticket to the minds shaping the future of healthcare right now. Buckle up, subscribe, and get ready to ride to the Edge of Healthcare, where lessons from leaders are ready for you to use today.

Martin Cody: All right, everybody, welcome to another episode of The Edge of Healthcare: Lessons from Leaders to Use Today. My name is Martin Cody, SVP of Sales and Marketing for Madaket Health, and I am absolutely thrilled beyond description to have with us today the CEO, co-founder of Aledade Health, Dr. Farzad. Mostashari. Farzad, nice to see you, and thanks for being on the program.

Dr. Farzad Mostashar: Happy to be here.

Martin Cody: I’m impressed with everything I read about Aledade, yourself included. There’s so many attributes of the organization. We’ll get into the public benefit side of things, but I want to take a step back and learn a little bit more about how you, you know, your path into healthcare, because I’m fascinated by how folks get into this industry.

Dr. Farzad Mostashar: I actually feel like I’ve been on the boundary between medicine and population or public health my whole career. I started off actually doing a public health degree after college, and then my dad got sick and had a pericardial effusion, and he was quite sick in the hospital. And I was so struck by the contrast between the laying on of hands of the healthcare, the medicine that was relieving his suffering and then the broad reach of what I was learning in the School of Public Health, and I carry that dichotomy with me to this day, thinking both about the emotional and the relationship-based care, right, the healing tradition, and how do we not just be reactive and how do we think about not just, not only the person sitting in front of us, but also where that person comes from? Why from their zip code? Why this person? Why now? Which is epidemiology. And so I ended up getting a degree in medicine. I did internal medicine residency at Mass General, but then I did an epidemiology medical epidemiology fellowship with the CDC, the Epidemic Intelligence Service. And so I’ve been bouncing back and forth between those two really ways of thinking in healthcare.

Martin Cody: Interesting. The epidemiology side of things is very rich, very needed, extremely deep. And it’s funny that you juxtapose kind of the clinical book side of things with the human element of experience that you had, very personal experience that you had with your father. It reminds me, I’ve been in health care for 37 years, always on the provider facing side until Madaket Health. And now we’re upstream on the administrative side. But I remember in the 80s, early 90s, a great movie called I think the doctor was William Hurt, where he’s a high falutin cardiothoracic surgeon who gets sick. So he gets to see it then from the patient side, and it completely changes that dichotomy of, you know, this world class surgeon who now has to go through it from the patient side. It sounds like you’ve had a similar experience and you carry that with you to this day.

Dr. Farzad Mostashar: Yes.

Martin Cody: Interesting. So that’s the transition into healthcare and kind of the path, which I think is inspiring in and of itself. Talk to us about Aledade.

Dr. Farzad Mostashar: So I spent ten years at the New York City Health Department as the chief health data guy and one of the projects that took over not just my work, but also my view of my role in life, was when Mike Bloomberg asked my boss, Tom Frieden, who asked me, how do we save the most lives? I was like, Wow! Like, what a great question. And working backwards from that question, it was from a public health agency point of view, it was smoking cessation, and doing everything we could to change the environment, whether the environment is whether people around you are smoking in a bar or your environment is how much does it cost to buy a pack of cigarettes, or your environment is am I hearing an ad? Right? Thinking about how do we change the environment within which individuals make individual decisions? And that really worked. And in a five-year time period, we drove down rates of teen smoking from 14 to 7%; adult smoking from 28 to 18%. But then we said, Well, how can medicine save the most lives? And you’ve been in health care for 37 years, you said? How can medicine save the most lives.

Martin Cody: Would you like an answer?

Dr. Farzad Mostashar: Well, yeah. Isn’t the most important question?

Martin Cody: Without question is, and I would say getting the most accurate information to the caregivers hands in the least amount of time possible would be a step in the right direction.

Dr. Farzad Mostashar: Yeah. And that’s actually the answer I came up with. At the time, we said, look, there are hundreds of guidelines and evidence-based medicine and quality measures; which one would save the most lives if we did that more consistently? And it was blood pressure control. We only controlled blood pressure about 65% of the time in American healthcare. And if we got that to 85-90% then we would save the most lives. But why don’t we? And my first answer to that question was what you just said. Right? It’s an information problem everyone should have, should be able to know; every practice should know what percent of their patients are controlled. And we should have decision support and registry functions and quality measurement at the point of care, which meant we need to move off of paper and pen. And I spent the next ten years doing that: getting America initially New York City and eventually being in charge of programs and policy for the Obama administration during the steep part of the curve of implementation of the Hitech act, and being in charge of rolling out electronic health records. And we went, in a five-year time period, from 9% of hospitals to 90% of hospitals on electronic health records, and blood pressure control didn’t improve.

Martin Cody: Aha. Interesting.

Dr. Farzad Mostashar: So then what’s my updated? Priors, as an epidemiologist would say is, It’s not fundamentally an information problem. It’s fundamentally an incentive problem that we pay more when someone has a stroke than when someone doesn’t have a stroke. And so we pay for strokes and we’re getting strokes and heart attacks and kidney failures. It’s an incentive problem. And Aledade was my attempt to create and crank open a little window in American healthcare, where the incentives are for us to prevent strokes, to do what we know we can do, to do better primary care, better prevention, better chronic disease management so that fewer people have strokes and heart attacks and end up in the hospital. And that should pay for itself. It turns out ten years in, I can tell you, it does work. It’s not easy, but it works.

Martin Cody: Well, and it’s interesting because within that is your approach to value based care. Yes. And you talk a little bit about the results. And one of the first results that I came across that was extremely impressive was saving Medicare more than $800 million in 2023. So and I’m going to get into a little bit more deeper into the weeds on that, but give us a high level overview of fundamentally how ACOs work in relation to value-based care.

Dr. Farzad Mostashar: Yeah. So ACOs are, I think, a terrific example of value-based care and all, to me, there’s lots of different people appropriating the word value-based care for whatever it is that they’re doing. But fundamentally, are you paid more if you prevent a stroke or if you treat a stroke, right? That to me is the acid test. And fundamentally value-based care or accountable care or ACOs or risk-taking providers, it all comes down to two components. One, you have to get the opportunity to make a difference and to be accountable. So you got to get lives under management, which translates to total medical spend a year under management. So you got to do that part. And then you got to actually reduce trends. You got to actually make a difference compared to what things would have been, but for you. And so on that first part, I remember walking around Brookings; I did a stint there before starting Aledade and scribbling on every surface I could find this pyramid, and I was like, wait a minute. You get one ACO and you get 100 primary care docs, and each doc has 2000 patients on their panel, and each patient costs $5,000 a year in medical expense. Draw a line. 100 times 2000 patients times $5,000; that’s $1 billion a year. That’s a 100 primary care docs patients medical cost is $1 billion a year business. That’s crazy. It’s just a sign of how much we pay for primary care. But that’s the model that we have, is we sign up primary care practices, not individual patients one by one. And then we sign contracts or get contracts for the primary care practices that actually reward them if they can keep people healthy and out of the of the hospital. And then the second part of that equation is keeping people healthy and out of the hospital. How do you do that? Well, it turns out there’s where the technology actually makes a big difference. So once you have the incentives in place, then the technology becomes indispensable.

Martin Cody: That’s the clearest and most succinct overview of this very, very complex process I’ve heard, especially from a mathematical perspective, which makes perfect sense, but also from a technological investment into automation, into tools, into analytics, and that sort of things. Because you’re right, if you’re going to monitor the trends, you’re going to need some sophisticated tools to look at the trends, because you’re monitoring a series of health standards. You know, the most common seems to be A1C or reduced emergency department visits after discharge, all of the different pop health items. But there’s also, as you know now, running a business for ten plus years, the cost of doing all that is really from an administrative side of things. And I’m fascinated by the 800 million number, because I know that that is across how many primary care offices would be my first guess in totality. But also those were 2023 numbers. And most recently, you departed the JPM conference in San Francisco, where I believe you teased 2024 numbers. So I’d love some insight into those items.

Dr. Farzad Mostashar: Yeah. So in 2023, $800 million of savings for Medicare. And we’re really happy. We’re a public benefit corporations, I’m sure we’ll get into. And our motto is: Good for patients, good for practice, good for society. So that good for society part really matters to us. And we’re super happy that we’re saving Medicare money, and Medicare keeps some of those savings; passes on the rest to us to split with the practices we work with. So that in 2023, we were about 10% of the lives in the Medicare Shared savings program; about a million lives out of 10 million. And we were 16% of the savings in that program, about twice as much savings as other participants in the models. So we went from $538 million of savings received and shared with primary care practices from 538 million to 750 million, we think, in ’24. And that’s a function of two things, right? More lives under management, more practices under management. We’re up to 2000 practices in ’24 of all kinds. These can range from a solo doc in California Valley to a federally qualified health centers in Mississippi, to multi-specialty clinics outside of Philadelphia and everything in between. And the other thing, the other reason why we saw that big increase in the savings earned is because our ACOs continue to get better year after year after year. This is a long-term business, this is a cohort business, right? You start off and you get maybe 2% savings, then 4%, then 6%, then 8%, then 10%. You got to stick with it. You got to trust the process, as they say. And so as all of our ACOs mature and they move up and to the right, that is kind of part of the magic here of get lives under management, better primary care, and then the technology-enabled workflow and process redesign takes effect.

Martin Cody: Well, I like the incremental gains philosophy. That’s not all at once. But if you do this over time, over five years, over ten years, you’re going to have some extremely significant impact. And I think and I hope it’s not a naive conclusion, but in my layperson’s eyes, as it relates to the results in 2023 and 2024, when you think about the fact that we were coming out of the pandemic and many people had put off care during that period of time, you were ostensibly serving a larger market basket of members each subsequent year, which then puts considerable strain on all of the solutions. But yet, you’re still achieving very enviable results and having it as good or greater impact than the year prior with more members.

Dr. Farzad Mostashar: Yeah. Two thoughts to pull out of a very important point you just made. One thought is that the longer you have a patient working in this model, the better it is. And one of the things that makes value-based care difficult is if you have a lot of patient churn, meaning you’re losing 20, 30, 40% of the population every year and bringing in new people all the time, creating those bonds and strengthening those bonds between practices and their patients is key and is, you know, the first part of what we call our core four. The second point is Covid was a once-in-a-generation, I hope, rock that got thrown in the pond and it depressed utilization severely in 2020. And we thought that that, we and the actuaries and everybody else thought that that depression would spill over in 2021 and 2022, would take care of all the unmet needs and the unmet care. Well, that didn’t happen in ’22. ’22 was actually a pretty low utilization year, not because we had met all the need, but because hospitals couldn’t hire people. People were still afraid of wave after wave of Covid; they were staying home. There were supply chain issues. You couldn’t build the necessary testing and operating suites, staffing shortages. So we didn’t actually capture all of the unmet need and all the utilization until ’23 and ’24. We’re still in it. So how does that affect value-based providers, and getting a little weedy on this, it depends on your contract architecture, contract structure. And we have over 160 value-based contracts. We’ve seen it all. All right. But fundamentally the question is: Do you get adjusted for trend or don’t you get adjusted for trend? And what’s the time frame for that? So in the Medicare shared savings program, one of the things we really like about that program is that it adjusts for trend. So if healthcare costs go up, your budget goes up in year, for that year. If healthcare costs go down, your budget goes down, right? But it really isolates what in finance terms is alpha versus beta, right? It really isolates how much are you better than everyone else in your neighborhood, in your region, in the nation, on those trends? But it creates a lot of lot of stability in the results. On the other hand, we have other contracts, and Medicare Advantage is a really great example of this where there were, you know, boom years in 2020, 2021, ’22, and ’23 and ’24 have been decidedly bust years. Because increased utilization with relative underfunding has meant that health plans and risk-taking providers have taken it in the neck. Those trends adjust, but two years hence. So the rate notice that we just saw for 2026 rates and what we’ll see next January for 2027 rates are going to reflect the disjunct between what inflation actually was and what we thought it was going to be and people are going to be made whole, Medicare Advantage health plans and providers are going to be made whole, but it takes a couple of years to catch up. Whereas in the Medicare shared savings program, it’s immediate. So all this to say, folks, you know, don’t try this at home. You really need to have the regulatory understanding, the policy, understanding the contractual chops, and the ability to have a risk pool, and to have downside risk. Downside risk is a thing. And for small practices who want to do value-based care, who want to take risk in Medicare Advantage, like it could be a bankrupting risk if you don’t have a partner like an Aledade who can shield you from the downside.

Martin Cody: Let’s pull on the risk for a moment, because that seems to get discussed quite often, and with good reason. So when a partner is looking to take on more risk, so to speak, give us a layperson’s term on what does that exactly mean to either a provider, a patient, or a physician organization?

Dr. Farzad Mostashar: It shouldn’t mean much to a patient. They should just feel like they’re getting better care, more access to primary care, where they get called if they don’t call their practice. If they do call the practice, they get seen. The practice wants to see them. Doesn’t say, Go to the emergency room for everything. When they show up, the doctor seems to be more informed about their care. They may know the specialists I’ve seen. They may know whether I have or haven’t had my flu shot. They may know if I’ve been to the emergency room. They may know if I haven’t filled my prescription. So just more engaged, more informed, more accessible primary care is what the patient should feel. From a practice point of view and from a ACO point of view, typically, the more risk you take on the downside, the more share you get on the upside. And that’s just math, right? Like if I’m a health plan, if I’m just doing an upside only deal, then it could be just luck of the draw, right? If I roll the dice and if you get lucky, then I pay you. If I get unlucky, then I don’t pay you. There’s a limit to that structure. What health plans and the government want more is if the risk-taking providers share downside risk as well. And that guards against the abuses of fee for service. It lets you relax your guard. This group is not running up the bill unnecessarily. I can gold card them for prior authorization. There’s all these good, more aligned win-win relationship with payers that become possible when you’re taking downside risk. The problem is: it’s downside risk. So if there’s something that happens like this increased utilization we talked about or government policy changes, the providers could end up owing the government or owing the health plan millions of dollars. And so we don’t think that that is the kind of risk that a small practice should be exposed to. And so at Aledade, we have a very clear financial relationship with practices. They get to keep all of their fee-for-service billing. We don’t touch that. They keep nearly all of the quality payments. We share in the upside 50-50 with them and we take 100% of the downside risk.

Martin Cody: I like the attributes and elements of that relationship. And I’d be curious. We live, sadly, in an immediate gratification world. And you talked about that this is a, you have to be in this long term to kind of see the permutations of compounding and success. So how do you, as CEO, kind of instill that knowledge and wisdom as you’re bringing on new provider groups to say, This is not a one-hit wonder. You’re going to have to stay the course on this.

Dr. Farzad Mostashar: Yeah. I think you really put your finger on the key thing here. We get asked all the time, like what makes a good practice for Aledade, almost as if like you got to really like. And when we started the company, we literally had a slide that showed like a carton of eggs and one golden one, and we were like, You’re the one out of 12 practices who we really think can succeed in this. If we’re doing it today, all the eggs would be gold, because all you need, all you need to succeed in a partnership with us is that willingness to change and the patience to see it through.

Martin Cody: That shouldn’t be too challenging. And speaking of partnerships, I would love to compliment you on your partnership with Sylvan Health from a nutrition perspective. And I’d be shocked, by the way, if when you went through med school, if there was a nutrition course. We seem to have a medical curriculum being taught that doesn’t teach nutrition, and we certainly have a food industry that doesn’t care about health based upon what we perceive to be USDA recommended allowances of certain foods. But how does one determine at Aledade partnerships that you’re going to embark upon from a high level, and then from an execution level?

Dr. Farzad Mostashar: We actually have a very high bar for quality of evidence, and we engage in a lot of pilots, including the one you mentioned. But as part of the pilot, we do rigorous evaluation. And I’m an epidemiologist, and I know all about reversion to the mean and it’s really easy in this world to get a sense that things should work, but once you subject them to a randomized trial, they don’t actually work. So we’re very selective about what we do pilots with, how we do pilots with them, and then really selective in terms of what goes into general release. And there have been very few actually, that have made it all the way. One was end-of-life counseling. We did a randomized trial. We found that it really had a huge impact on patient engagement, patient satisfaction, but it also reduced days in the hospital at the end of life where people didn’t want to be in the hospital and they didn’t want to die in the hospital. And we bought that company. And we are now providing that service, which has a Net Promoter score of plus 92. But we’re providing that to all of our practices, all the patients who qualify for free. We did a randomized trial of kidney care management. This one was with an outside vendor that worked. And now we’re, again, rolling it out to all the people who we are worried might crash into dialysis. So we’re very deliberate about creating evidence and then acting on evidence.

Martin Cody: I like it. Let the data and let the intelligence kind of speak, so to speak. And I’m curious, as you move along that path of partnership review and trends and trend management as it relates to some of the programs, what do you see some of the trends happening in the next two, three, 4 or 5 years that you’re kind of road mapping out right now?

Dr. Farzad Mostashar: The big one for me is going to be Medicare Advantage. We talked about some of the advantages of the Medicare shared savings program and the stability and less volatility than Medicare Advantage. But more and more seniors are in Medicare Advantage. And to serve them and to serve our practices, we have to be there; we have to be just as good on the Medicare Advantage side as we are on the traditional Medicare side. So that is, I think, our kind of main strategic objective for the next 2 or 3 years is going to be to really build out that second leg of the business.

Martin Cody: And is that what kind of keeps you still getting up every morning, fully charged, and wanting to address this issue? That seems to be very thorny, multi-pronged challenge that doesn’t go away very quickly.

Dr. Farzad Mostashar: I love it. I mean, I love learning. I love data analysis. I love culture. So I’ve really enjoyed the past ten years, and I’m looking forward to the next ten.

Martin Cody: Well, and you talked about culture and there’s all sorts of books written on culture, especially in the business environment. But one of the things that we mentioned earlier was the public benefit corporation. And those don’t, in my opinion, get enough publicity as they should because of what they are able to do, culture related and from an impact standpoint, both within the organization and the community. So why was it important for you to pursue that? And please share with the audience what that means as an organization.

Dr. Farzad Mostashar: Yeah, it’s a relatively rare form of corporate organization. Only about 1 in 1000 companies have gotten that designation of a public benefit corporation. Mark Cuban’s Cost Plus drugs is actually one of them. I think on the LLM side, gen AI side; Anthropic is a public benefit corporation. What it basically says really, it only has one real meaning. And that meaning is that from a governance point of view, from the decisions that management and the board make, all decisions, they have an obligation, a legal obligation to consider the mission alongside profit. And that is, on the one hand, was no change for us at all. Like we’d always acted in a way that was aligned with our mission: better health, better care, lower cost, creating a healthcare system that’s good for patients, good for practices, and good for society. That’s our mission. That’s what we’ve always been doing. And we’ve never taken short-term profit as the goal. But what it does is it signals externally to policymakers, to practices, to plans, to patients that we’re not in this for short-term profit. We’re in this for the long haul. We are going to be trustworthy partners for you. Because even if someone comes to us and says, Hey, you know, I’ll give you this much money to do the wrong thing. We are not fiduciary obligated to do that. In fact, we’re obligated to do the opposite.

Martin Cody: I have to do the opposite.

Dr. Farzad Mostashar: Yeah. So I think more mission, and it’s fantastic for culture. It’s fantastic for recruiting and retaining. So I think more mission-oriented, mission-driven companies should be considering that public benefit corporation designation. But if you’re not really, if you’re putting on kind of face paint, then it will, I think it will backfire.

Martin Cody: Yeah, it will probably cause more harm than good and sooner rather than later.

Dr. Farzad Mostashar: Yeah, I think people see through hypocrisy pretty quickly.

Martin Cody: One would hope, because they would only have themselves to blame if they do not. And it can be harmful. I’m glad you touched upon the internal aspects of what that brings to the table. Because externally, you’re right. People and businesses and future partners get to know soon, this is the organization that we are; this is what our DNA is all about. But that does lend itself quite well from a recruiting perspective internally. From a cultural organization, everyone is rowing the boat in the same direction. I think that does tremendous opportunity and positivity as an outcome standpoint.

Dr. Farzad Mostashar: I was doing a part of a product technology review, and I’m the CEO, and I was encouraging the team to take one technical approach. And a junior engineer who’d been with, I’m the founder, I’ve been here ten years. Right? A Junior engineer who’d been with us less than a year, challenged me and said, Is this, you know, what you’re saying, like, but is this good for the patient and good for the practice and good for society? I was like, yes. Thank you. Yes, it is. Let me explain to you why it is. But giving everyone in the company permission to say, We need to be our best selves is, I think, wonderful.

Martin Cody: I completely agree, and I think you probably would be more concerned if the frequency of the times that you posed those questions internally was not met with opposition, because then that also tells you something.

Dr. Farzad Mostashar: Yes.

Martin Cody: In closing, I’d love to learn your thoughts on how does someone get Ahold of Aledade or become more involved, either as a partner, either as a payer? You know, what is the best way for someone to interact?

Dr. Farzad Mostashar: Yeah. The website is meant to, is designed to, particularly for practices who are considering it. There’s a lot of information there. And we would love to hear from you. We have our careers page. Aledade.com/careers for people who may want to consider. We got 400,000 applications last year.

Martin Cody: Wow.

Dr. Farzad Mostashar: So we do have high standards. But you want to be with people who are a performers, who are mission aligned and culturally aligned with you. And you can always reach out to us on, I think LinkedIn from the social sites is the one that we’re emphasizing the most these days.

Martin Cody: Fantastic. And I think 400,000 applicants is insanely high from that standpoint. And I co-chair the provider information subwork group at the … organization, and I work with providers, many of them family practitioners often. And there is a large degree of truth to provider burnout. And you know this better than anybody: more often than not, they just want to provide care. So with you being able to handle the contracting and all of the rigmarole behind the scenes and just let them focus on patient care, especially at the general practitioner family physician standpoint, which crudely is analogous to the emergency department of family practitioners because they don’t know what’s coming through the door. The orthopedic doctor does; the ENT doctor does. The family practitioner has to be well versed in just about everything. So giving them a hand certainly is amazing for society, amazing for the provider, and I think it’s a testament to you and the Aledade organization for what you’re accomplishing.

Dr. Farzad Mostashar: They’re the heroes. We seek to serve the heroes.

Martin Cody: Farzad, thank you so much for sharing some of the wisdom and some of the success, and we’re excited about the 2024 numbers that you’re talking about. And if incremental growth is something to behold, then certainly Aledade is stepping in all the right directions. Great job.

Dr. Farzad Mostashar: Thank you so much.

Martin Cody: Everyone, thanks so much for joining to another episode of The Edge of Healthcare.

Martin Cody: Thanks for diving into the Edge of Healthcare with us today. I hope these insights will fuel your journey in healthcare leadership. For more details, show notes, and ways to stay plugged in to the conversation, head over to MadaketHealth.com. Until next time, stay ahead of the curve with the Edge of Healthcare, where lessons from leaders are always within reach. Take care of yourselves and keep pushing the boundaries of healthcare innovation.