This is Alex West, co-host of the Pulse podcast by Wharton Digital Health. Today’s guest is Dr. Farzad Mostashari. Farzad is the co-founder and CEO of Allidade, a primary care enablement company that partners with independent PCPs to transition to value-based care and, as a result, maintain their independence. Founded in 2014, Allidade works with 11,000 physicians across 40 states and the District of Columbia, accounting for 1.7 million patients under management in Medicare, Medicare Advantage, commercial and Medicaid contracts. Farzad previously served as the National Coordinator for Health IT in the Department of Health and Human Services, and he completed medical school at the Yale School of Medicine and a Master’s in Population Health from Harvard’s T.H. Chan School of Public Health. Earlier this year, Allidade raised a $123 million Series E round of funding led by Omer’s Growth Equity. In this episode, I spoke with Farzad about his journey to starting Allidade, why he and the company are betting on independent physicians as the drivers of change in value-based care, and how Allidade became the rare, profitable digital health company. I hope you enjoy the conversation. Farzad, thank you for joining me on The Kohl’s Podcast. How are you? I’m doing great. Nice to see you again. Yeah, it’s good to see you. We have a tradition of asking our guests this icebreaker. What did you want to be when you grew up? I grew up in Iran, where engineers were the highest form of intelligence, and I wanted to be a nuclear physicist, at least until I entered college, actually, and then I met people who were really good at math and physics, and then I realized I wasn’t smart enough to do that. Farzad, tell me about your path to starting Allidade. I’ve been banging my head against this particular wall around the question of how do we save the most lives through health care, and I started in New York City when I was with the health department, and Matt Kendall, my co-founder, and I did something called the Primary Care Information Project, which was all about information and computers and electronic health records, and then I spent a bunch of years at Health and Human Services in the Office of the National Coordinator, eventually as the U.S. National Coordinator for Health IT, trying to solve public health problems through technology and regulations, and it wasn’t working. I kind of reluctantly came to the realization that we had to, I had to, think about the financial incentives in the system, that technology wasn’t enough, and there was this window of opportunity I saw in the ACO program, in the accountable care movement, that if you got a group of primary care docs together, and Alex, I think you were one of the early people who saw me scribbling this formula on whiteboards all over napkins and talking about it, which was, if you get 100 primary care docs together, he’s chuckling, and each primary care doc has 2,000 patients on their panel, and each patient has $5,000 a year of total medical expense, what is that? How much spending do 100 primary care docs control, potentially? And people usually get the math wrong, and it’s not $10 million, it’s not $100 million, it’s a billion-dollar industry. And so that was the idea that spawned Allidade, was why don’t we help get those 100 primary care docs together, create a risk-taking, a risk-bearing entity, and help actually keep patients healthier and out of the hospital, and then we and the docs can share in those savings. That math is, people get it wrong, because it seems impossible to believe that 100 primary care docs, and what the system typically thinks of when you think of 100 primary care docs, and the limits of the scope, they can’t possibly have a billion dollars of medical spend flowing through those walls, but it’s really foundational. Once you put those pieces together, you do start to see, wow, well, of course, this population that everyone is discounting, of course, this is the group to be supporting in this shift to value-based care. That’s right. With that in mind, could you tell us more about how that thesis yielded Allidade and what the provider and patient population looks like today, and the services you’re delivering? So the question then is, okay, you got your 100 primary care docs together, how do you actually do it? How do you actually reduce cost of care? And for us, it was aligning the financial incentives, yes, but also creating a technology platform that can help guide their actions and then providing them with the coaching in the field to help change the workflows of the practice so that when a patient needs care, they can get access to primary, urgent primary care, which is not a thing in most of the world. When they go to the emergency room or go to the distressed hospital that the primary care practice knows about it and reaches out to them and connects with them, that when they haven’t seen primary care in a while, someone reaches out and pulls them back into primary care. So those are all the building blocks that you have to build, and which we built both in terms of the playbook, but also in terms of the technology and data that makes, and coaching that makes that feasible. So we are now well on our journey. We’re in 40 states, Alex, over a thousand primary care practices around the country, over a million patients now, over a million seniors, in fact, and then another many hundreds of thousands of commercial and Medicaid lives. And that adds up to about $17 billion under management and is working. We’re getting savings, 2% the first year, then 4%, then 6%, then 8%, then 10% savings as these cohorts mature over time. And this year we’re going to pay primary care practices, a quarter of a billion dollars in additional revenue that comes from things not happening with their patients, their patients not getting sick, their patients not having complications. And for listeners who have heard of value-based care and risk-bearing primary care and advanced primary care and all of these different things, and maybe group Allidade in the bucket of the Oak Streets and the Agilons and the Chenmeds, can you talk a little bit about how the Allidade model operationally, as well as the business model differs from some of these other groups working in a similar space? Yeah. So we’re all fellow travelers in the sense that we’re all dedicated to the mission of reducing total cost of care with a focus on enhancing primary care and business models focused on risk. Some of the ways in which we have each carved our own paths on this, Allidade doesn’t build practices or buy practices. And so there’s Oak Street builds practices, hires doctors and nurses and bricks and mortar and parking lots and all the rest of it. We don’t do that. We partner with existing practices. In that sense, more like Agilon. We do not rely on health systems. I think one of the first groups to embark on this was Evelyn. And I remember thinking, gosh, it’s a really hard road to hoe if you’re going to a hospital or health system and trying to convince them to reduce hospitalizations, which is a big part of how you get savings. So we work with the whole spectrum of primary care, everything from small practices to big practices and community health centers, but not health systems. And so that I think is a little bit different. Evelyn, as I mentioned, and Bright focus on the hospitals and health systems. I think Agilon focuses more on the larger size practices as their hubs. We work across the spectrum, all the way down to solo primary care practices. I think we invest a lot more in building our own technology. We don’t use other people’s tech and we’ve built from scratch the whole population health platform. And we now have more people working in our product and technology organization than we have working in the field coaching practices. So it’s a major, major investment on using home built and purpose built technology. And I think another difference was we didn’t start with Medicare Advantage, which is where a lot of the risk-taking groups started was MA. We started with the Medicare Shared Savings Program. And I think there are a lot of the same things work, but one thing that doesn’t get you anything in the Medicare Shared Savings Program is focusing on risk adjustment. And I’m grateful for that. In a way, it’s harder when you don’t have the ability to increase your revenue through diagnosis documentation, but it makes you really focus on the hard things first, actually getting reductions in hospitalizations and PR use. And just to double click on the health systems and hospitals piece, alligators have a very clear image of the waterfall slide and the story that goes with that of why primary care and why independent primary care can drive this change. Could you dig a little deeper in the role that you see independent primary care playing in this shift to value-based care and why specifically the health systems and the hospitals are not at the core of this model? Yeah, I think it was somewhat counter narrative. When I was national coordinator, when I went to visit, I don’t know, Cleveland or something, they would want to take me to the center of healthcare, which is the hospital. And then in the hospital, I remember they took me to the ICU to see all the machines. And that was one of my favorite places as a resident to rotate through was the ICU. I loved all that high-tech stuff, but that’s not the heart of healthcare. Certainly not the heart of value-based care. The heart of value-based care is that quiet conversation that happens in the doctor’s office. And some of these are quite humble primary care practices, but that’s the heart of healthcare. That’s where blood pressure control happens, right? Which is what’s going to prevent that stroke that ends the patient up in that neural ICU. So if you think about value-based care separately on its own merits, not as like, well, who’s the most powerful person in healthcare today? Well, that’s the most powerful person in fee-for-service healthcare today. And in fee-for-service healthcare, the success is a function of your negotiating leverage over payers. And so you get bigger and bigger and bigger and more and more and more expensive. And it’s almost the anti-value proposition, right? These aren’t unrelated to each other. They’re actually antithetical to each other. The more successful you are in the fee-for-service world, the less successful you’ll be in value-based care. And independent primary care is where you have the most to gain, the least to lose from this switch from fee-for-service to value. The other factor that makes primary care so key is that they’re the ones who actually, if anybody in this darn healthcare system has the job of prevention and coordination of care, it’s primary care. So they’re in the right position, but they don’t have necessarily the right tools to be able to be effective. And so rather than try to create a new entity or work with people who are the wrong people, we decided what we could do was, at scale, give those primary care practices the contracts they need, the data they need, the software they need, the policy help they need, the regulatory help they need, the capital they need, all the stuff that scales. What’s indispensable is them. And with that in mind, the services you’re providing to those independent practices, the narrative certainly is that the independent provider is a dying breed and the independent primary care practice is going away. And certainly, Allidate’s experience is that that’s a vast overstatement. But it is hard to be an independent primary care provider. And how do you think through whether it’s directly driving Allidate’s business model or just in support of the most important partner in the story? How do you see Allidate’s role in supporting these practices and addressing the administrative burden, addressing the policy burden, even in the situations where it’s not directly driving Allidate’s business? I think the most acute example of that was during COVID, where practices all over were faced really with an existential threat to their existence. Even as the need for healthcare had never been greater during a pandemic, people stopped coming into the office. We told, we sent out 150,000 postcards that said, stay home. But what that means is under a fee for service system, those practices aren’t getting paid. So they had to, they were really an existential threat for them. But also they had so many other needs. So we found our true identity, I think, during COVID of we are servants to these practices and we serve them and whatever they need. If they needed PPE, if they couldn’t get masks and gloves and shields, we went and we figured out how to get that imported and in their hands and donated to them. If they needed telehealth to be able to continue to see their patients and stay in business, over a weekend, we stood up 150 practices on telehealth because that’s what we had to do. If they needed help navigating the loan programs, the grant programs or the PPP, if they needed someone to advocate for them, I think there were over 50 news articles and interviews and whatever, where we were advocating for independent community primary care. So, you know, whatever it takes. And I think that there is more and more an appreciation of the need to keep competition, to keep choice in markets. Because if you continue to treat independent practices poorly and underpay them, and they join the health systems and the hospitals and consolidate, then costs just go up and quality clearly does not improve. Alex, I think you helped us convene a very important body of work around competition policy and healthcare. And I think that sensibility has only appreciation for that has only grown in policy circles in the past eight years. So I think for us, the key question is one on the macro scale, what’s happening with independent practice. And it’s actually stabilized Alex, the number of solo practices in the past three years has not declined at all, which is really surprising to many. And what tends to be happening is practices joining together to form larger groups, IPAs or multi-specialty groups, rather than selling to hospitals that has really, really slowed down almost, almost to a halt. And then from a micro level, Allidate itself, we’re bringing more physicians out of hospital employment, and including joining existing practices are starting their own practices, then we’ve lost to hospitals and health systems. So when you actually get primary care to embrace value-based care, and they thrive under that model, then they can maintain their independence and they can maintain their autonomy and reduce burnout without having to go join the health system. And that’s our mission. The ability to remain independent, and as a result, have more competitive healthcare markets is I think a really underrated piece of the promise of value-based care in that sense. At the big, big level, back during that summit with the Brookings Institution, it was Anthem and Cigna and Aetna and Humana. And that sort of consolidation shifted more to the CVS Aetna and the Cigna Express Scripts. But there’s always been this push of the health system continuing to buy independent practices and that horizontal consolidation that value-based care and Allidate’s work are really maybe one of the few driving forces against that trend, along with these new opportunities in value-based care and in risk-bearing primary care broadly. That does touch on an interesting part of Allidate’s founding history and much of the leadership team. You, as well as Allidate’s president, Matt Kendall and co-founder, came from the Office of the National Coordinator, along with a number of other folks. The leadership team now includes former Center for Medicare Director Sean Kavanaugh and another CMMI alum and North Carolina Health and Human Services Secretary Mandy Cohen. There’s so much policy background at Allidate and in the Allidate leadership team. In your own experience and at Allidate, how do you feel that public sector background is driving Allidate’s success? And what role is that playing at Allidate that other firms with similar goals may be missing? Well, one thing is, it’s a little bit of a hack because folks who’ve had a lot of public sector experience and leadership are underappreciated in the private and the startup market. So, their loss, my gain. People don’t realize. I think when Matt and I started Allidate, some might have said, what, these two govies? What, you’re going to give money to two govies to start a private company? But I think we had had a lot of startup experience in government. And one of the great things about hiring govies is that they get the mission. They get also doing things on a large scale. And they’re people who aren’t motivated just by short-term financial returns. And so, I think that’s a hack, right, is identifying people who are undervalued by the market. The second is healthcare. It’s a complicated industry and regulations are an essential part of understanding how the system works and where it’s going. And I think having people who’ve been policymakers helps us inform and anticipate policy and build a company such that it’s not that, you know, the regulators do things that are good for Allidate, right, because we wield influence. It’s because we can anticipate if we were policymakers, what would we do that’s good for America? And then we built a company that was aligned with the goals of the policymakers. So, if you do that, then what you have is not regulatory risk. What you have is regulatory opportunity. The program as it was in 2012 was not a great program to start a business on, but I was confident that some of the biggest flaws with that program were going to be addressed because if I were a smart policymaker, I would have addressed them because that’s what’s good for America. And I think that’s the second advantage of having people who are highly experienced in government joining a healthcare startup. It has become quite fun to watch on Twitter a new CMS regulation, an interim or a final roll drops, and everyone just sort of sits tight. And then you or Sean or Travis Broom or the Allidate policy team starts tweeting. And you can slowly see everyone starts to come to understand what was in the rule. Once Travis starts tweeting, it’s a pretty exciting dynamic to be able to see even from afar at this point. Allidate raised a massive round of funding this year, $123 million Series E round. What’s the plan for this capital? Yeah. We never do things the easy way. So, we raised money at the end of 2020. We took off the entire crazy valuation year of 2021. And then almost at the peak of the market, uncertainty, fear, uncertainty, dread in May of 22 is when we raised that Series E. And I think what’s great about that is you know this is long-term thinking investors. And so, having OMERS, the municipal workers of Ontario’s retirement fund, right? They’re thinking long-term fidelity the same. It was great to have those in addition to folks who’d already been in Allidate bring that round together. And the story for that round was really funding our growth, but also talking about the opportunity to take this core engine we’ve built and literally treat it like a platform. So, what we’ve created is the flywheel spinning of getting more practices signed up, which helped us get more health plan contracts. And then the more health plan contracts we have, the easier it is to sign up practices. And the more practices we then sign up, the easier it is to get more health plan contracts. And so, that flywheel is spinning and then we’re getting more and more cohorts maturing through the 2%, 4%, 6%, 8%, 10% savings. So, that engine is working great and it’s creating a lot of platform contribution, which is returns that can be put back into, plowed back into growth. It can be plowed back into technology and product and research and development. But what we realized was we can also plow it back into new businesses in a sense. And we can capture value from external innovation. We did a tuck-in acquisition of Iris Healthcare, which provides just long conversations with people facing end of life or really complex healthcare about their situation and what they want, what their wishes are. It has a plus 92 net promoter score with patients and their families, plus 92. And before, we actually did a randomized clinical trial with them. They were charging like 800 bucks. And there were a lot of health plans and others who didn’t want to pay 800 bucks for our conversations, right? Like, why am I paying $800 for conversations, right? What we found was that those conversations actually reduced unnecessary hospitalizations at the end of life, something to the tune of $4,000 to $10,000. So, what we can do now, and we purchased Iris and we scaled them up massively, is we can now identify the patients through machine learning algorithms who would be most likely to benefit from this. We can give warm handoffs from primary care practices to Iris Healthcare. And then if they achieve savings, we don’t need to charge anybody. They’re just adding to the savings rate and we’re capturing all the savings that they create. So, that’s the repeatable model that is at the heart of Allidate Care Solutions, which as you alluded to, Dr. Mandy Cohen is leading for us. And to speak more to Allidate Care Solutions, a company at Allidate stage has nailed down the core business model. You can finally consider all of these new opportunities within Allidate Care Solutions or elsewhere. How do you think through what to go after, what Allidate can do uniquely well in the market that others can’t, and whether it’s something like Iris, a new intervention, whether it’s a new public program like ACO Reach or some other CMS or CMMI model, how are you thinking through the next horizon beyond the today’s Allidate core business? Yeah. I think where it starts is, can we identify things that are good for patients that save money? And there certainly are a bunch of those opportunities, but not as many as exist in a fee-for-service world, where you can just get paid for doing something. So, we’re really, really looking for the Venn diagram of they’re good for the patients, they’re good for society, and they can be good for the doctors. If it doesn’t meet any of those tests, we just don’t do it. So, there’ve been lots of people come to us and said, hey, whatever, you can monetize X or Y. And I’m like, well, is it good for the patients? No, we’re not interested. So, that’s one way to cut through and parse the world. But there’s still lots of potential opportunities. And here’s the thing, Alex, we don’t really know in the value-based care, these are complex relationships, and there is a crisis of replicability. You don’t really know if something that sounds good on paper will actually save money. And if you think back to the Camden Coalition’s randomized clinical trial of the intense hotspotting care management program they had, it just made sense to everybody. And the initial results were super strong. You’d find really high cost people, and you give them a lot of these care management supports, and then their costs go down. Well, yeah, but it turned out that was reversion to the mean. And the people who in the randomized trial didn’t get the care management’s costs also came down who were super high cost to begin with. And there was literally no benefit in that program. So, one of the things that we have learned is to be humble and skeptical and evidence-based, which means we test things all the time. And so, I mentioned that with IRIS, we did a randomized clinical trial. I don’t know of any other startups in our space, in the value-based care space, that do RCTs of interventions before they scale them. But that’s who we are. That Camden Coalition paper is such a good example. A lot of pros and cons in taking such a rigorous approach for things that, oh, of course this works. Why wouldn’t this work? Yeah. And for interventions where you already feel that way. And then that paper came out, and the next day at Allidade was, well, there was a bit of a vigil, so to speak, because there was so much respect for the Camden Coalition work. There was so much respect that they had put themselves to the test in that way. Yeah. And then to find out that it wasn’t all, that the whole industry, the whole community in healthcare and value-based care and public health thought it was, it was also a good reminder, the stuff that seems like it would work, we still need to test it. It’s still worth knowing what is the number, how do we get there, and how confident can we feel in that outcome? What I tell folks, Alex, is, you know, they’re like, well, but we want to do this thing, and we think it’s a good thing, right? And I say, well, maybe we should be doing five times that amount, right? Like, maybe the answer will be, it’s so good, we should do a lot more of it. Or we’ll find out that actually it doesn’t meet the test. So I think that if you really want to figure out how to allocate resources, you have to have, in this field, you have to be really kind of evidence-based and rigorous in terms of what you can do. But you can build, particularly once you’ve built the data infrastructure, you can build an experimentation platform that can provide some of these answers faster than the three years it took us with IRIS. And back to the fundraising, we recently released an episode with Sean Duffy from Omada, who I think they’re in a similar position where the IPO talk has been around that company for a while now, similar to Allidade, this big fundraising round. Their ads? The IPO talk around Allidade? What are you talking about? No one talks to me about that, Alex West. How much of this capital raise is about that optionality, the ability to wait until the moment is right for Allidade to be a public company, to wait longer if that’s necessary? And how does knowing that that’s on the horizon, whether that’s 6, 12, 24, 36 months out, knowing that that is likely coming at some point, does that impact Allidade’s operations at all? Is the prospect of being a profitable public health tech company something that maybe not day-to-day, but in general, comes to mind? Look, being public is not a goal. If it’s the right thing for our mission, then we do it. And I think the key here is that it’s easiest to raise money when you don’t need to raise money. So the fact that we’re so capital efficient, the fact that we’ve been profitable since 2020, the fact that we don’t buy or build practices, right? The fact that we’re so scalable in our growth model, all that means is that we do get to choose. And we don’t have a need for raising more money or for cash or for going public. So I think the key here is that we have, yes, we have optionality and we’ll do what’s best for the mission and for the company. And thinking of the long arc of Allidade’s history, people look at Allidade’s success today and assume a straight line from day one to where the company is now. And think of Allidade as an eight-year overnight success story. And of course, it’s never that simple. But what are the key decisions that got Allidade to this point? And what were, in hindsight, the key challenges or problems to overcome that made the difference for Allidade to be where it is today? I think we made a bunch of correct assumptions about the world in the early days that focus on the independent practice, the focus on partnership, the focus on technology, the focus on traditional Medicare, many of which were counter convention. And those turned out correct, largely. But it’s always about then you pick a strategy, but then can you execute against that? And can you overcome the inevitable obstacles and changing how the world works and fighting through those? So we had the right idea, but our first year, our first ACOs didn’t make savings. That was crushing, but we kept at it and we learned and we improved both our playbook and our technology and gave it time. And that’s, I think, the key thing for any entrepreneur is to appreciate that you have to be committed to the long-term. I mean, if you have the wrong idea, then by all means pivot, but oftentimes you have the right idea. You just need to prove it out. You’ve been the CEO of Aladade now when it was a three-person company, a 100, a 500, now a 1000 plus person company. And the CEO of all of those firms must require a different skill set or at least have different priorities. How have you had to adapt to be the right person to lead Aladade at all of those different stages with such a wide range of job descriptions over the years? So I’ve loved that aspect of leading a private company. I mentioned to you earlier that my experience in public company, Matt and I started, I think, two new bureaus in the New York City health department, big new projects. It was part of a big transformation as part of US National Coordinator for Health IT. So all of those things translated, but I must say the hardest phase of being National Coordinator for Health IT was like the first six months. And then you kind of get into the job and get used to the job and then the learning curve falls off a bit. But in a startup, the more successful you are, the game gets harder. You just go to the next level, the next level, the next level. And maybe it’s not necessarily just harder or easier, but just different. And so I’ve loved learning. I’ve loved being faced with the different challenges that you have at 100, at 500, at 1000. And I’m also very committed to, if at any point I feel like I’m not keeping up with Allidate, then I need to step away and bring in someone who can serve as the best leader for this company, because what matters here is the mission. Has that skillset though changed over time as the company has grown, as the company has become more successful? I mean, in many ways, it’s the same. It is still being the chief strategist and laying out the course and inspiring people and setting the culture. I think later on in a company’s life, there comes a time, and I’m so pleased to see it at Allidate, when the team takes on the culture from you. And it’s not kind of endothermic where you have to keep putting in, putting in, putting in to keep the thing running. Now I’m getting energy, cultural energy out of the team. We have a climate policy group. I didn’t, I didn’t think we needed a climate change policy, but we did. And it was, you know, Will Palmisano and a bunch of other folks who said, Hey, you know, what’s Allidate-y? Caring about the environment is Allidate-y. I was like, okay, I guess you’re right. And, and, you know, if we’re going to do climate, we know how we’re going to do it. We’re going to do it with evidence and we’re not going to buy bullshit carbon offsets. We’re going to invest in putting carbon in the ground and doing carbon removal and pay more for those guys, right? Letting others lead is I think one of the biggest changes that comes in as the size of the organization grows, but like you still got to be able to go down to bare metal sometimes. And I strongly believe that as, as the leader of any organization, you have to be able to go deep, deep, deep, deep. You can’t just hire managers and let them do their job kind of thing. Otherwise you don’t really understand your business. Since we are an MBA run podcast, what advice do you have for MBAs interested in the space? My advice to MBAs is the same as my advice to, to anybody, but in particular, I see a lot of MBAs graduating and you say to them, what do you want to do? Do you want, you know, like a, do you want to do strategy? Do you want to do, you want to own PNL? Do you want to do whatever? And everyone’s, a lot of people are like, yeah, I want to do strategy. I’m like, that’s the wrong answer. Kind of right. Like what you should want to do is own PNL. That’s what you should, that’s what I, my advice to you would be. You don’t want like strategies that is like the easy transition from doing what you’ve been doing as an MBA, but to really build your depth, go make contact, go make contact with the world, go get punched in the face. It’s just, you don’t get punched in the face enough when you have a strategy job, you can always blame execution. But when, when you own the PNL, you get punched in the face and that’s kind of what you need a little bit is go see what is really happening and challenge yourself to deal with those realities and then say like, okay, well, maybe we had the wrong strategy here. So that’s what I would advise is focus on jobs that are more on the ground, hands-on, operational with whatever problem it is you’re trying to solve. Farzad, thank you so much for joining me on the Pulse podcast today. I really appreciate your time. Thank you, Alex. This has been fun. And for those who don’t know, Alex did Yeoman’s work at Allidade for many years. And we were really, really happy to see him in the alumni group. Maybe one day he’ll come back to Allidade. Thanks, Farzad.

Dr. Mostashari’s journey illustrates the importance of being flexible in your career path. Initially aspiring to be a nuclear physicist, he pivoted to healthcare when he recognized his strengths lay elsewhere.

The decision to focus on independent primary care practices rather than large health systems highlights the importance of thinking independently and recognizing the potential of often-overlooked sectors.

Understanding the financial dynamics within healthcare was crucial for Dr. Mostashari. He learned that aligning financial incentives can lead to better patient care and healthier practices.

His experience underscores that while technology is essential, it must be paired with effective strategies and supportive frameworks to truly impact healthcare outcomes.

Building a successful organization like Allidade requires patience and a long-term vision. Dr. Mostashari emphasizes that commitment to a strategy, even when facing initial failures, is key to eventual success.

The importance of rigorous testing and validation of new ideas is a recurring theme. Dr. Mostashari advocates for a humble approach to innovation, emphasizing the need for evidence before scaling new interventions.

His work during the COVID-19 pandemic showcased the significance of community support and collaboration. Being responsive to the needs of independent practices solidified Allidade’s role as a trusted partner.

As a company grows, so must its leadership. Dr. Mostashari highlights the necessity of adapting leadership styles and empowering teams to foster a strong organizational culture.

The shift from fee-for-service to value-based care highlights the importance of prioritizing patient outcomes rather than merely increasing the volume of services provided.

Continuous learning and being open to feedback are vital for personal and organizational growth. Dr. Mostashari’s journey reflects the need for leaders to evolve and adapt as they encounter new challenges.

Growing up in Iran, Farzad Mostashari aspired to be a nuclear physicist, influenced by the cultural perception of engineers as the pinnacle of intelligence, until he realized his strengths lay elsewhere.

He began his career in New York City with the health department, focusing on public health and the integration of technology in healthcare through the Primary Care Information Project.

Farzad served as the U.S. National Coordinator for Health IT at the Department of Health and Human Services, where he aimed to address public health challenges, but faced limitations in effecting change through technology alone.

Recognizing that financial incentives were critical to transforming healthcare, he pivoted his focus from purely technological solutions to understanding and leveraging the economic structures of the healthcare system.

Farzad conceptualized Allidade by realizing the potential of uniting independent primary care physicians to create a risk-bearing entity, thereby enabling them to share in the savings generated by improved patient care.

He famously illustrated the potential financial impact of 100 primary care doctors managing a billion-dollar healthcare expenditure, which highlighted the often-overlooked power of primary care in the healthcare system.

Allidade was established to provide a comprehensive platform that aligns financial incentives, offers technological support, and coaches practices to enhance patient care and reduce costs.

Since its founding in 2014, Allidade has grown to partner with over 1,000 primary care practices across 40 states, managing care for 1.7 million patients, including a significant number of seniors.

The company has achieved progressive savings for its practices, reporting reductions in costs of care, which culminated in a projected $250 million in additional revenue for primary care practices due to improved patient outcomes.

Unlike competitors, Allidade does not acquire or build practices but instead empowers existing independent practices, fostering a collaborative environment focused on value-based care and operational efficiency.

The speaker recognized that traditional health systems often resist reducing hospitalizations, which is crucial for achieving savings in healthcare. This realization led to the decision to partner with independent primary care practices instead.

They chose to work with a diverse range of primary care practices, from small to large, including community health centers, but explicitly avoided health systems. This strategic decision was rooted in the belief that independent primary care is vital for driving change in value-based care.

A significant investment was made in developing their own population health platform, emphasizing the importance of home-built technology over using third-party solutions. This reflects a belief in the power of tailored tools to enhance primary care effectiveness.

Instead of starting with Medicare Advantage, which is common among risk-taking groups, they began with the Medicare Shared Savings Program. This choice reinforced their commitment to focusing on genuine care improvements rather than financial maneuvers.

The speaker articulated a clear distinction between the traditional fee-for-service model and value-based care, emphasizing that the heart of healthcare lies in primary care interactions rather than hospital-centric approaches.

They highlighted the essential role of independent primary care in prevention and care coordination, advocating for these practices to receive the necessary contracts, data, and support to thrive in a value-based care environment.

During the pandemic, independent practices faced existential threats as patient visits plummeted. The organization quickly mobilized to support these practices, showcasing their commitment to serving the healthcare community.

They provided essential resources such as PPE, telehealth setups, and assistance with navigating financial aid programs, reinforcing their belief in being a servant to the primary care community.

The organization took an active role in advocating for independent primary care during the pandemic, highlighting the importance of competition and choice in healthcare markets to prevent consolidation with health systems.

The overarching belief is that maintaining and supporting independent primary care practices is crucial for improving healthcare quality and controlling costs, ensuring that these providers remain a viable option for patients.

The podcast highlights a growing appreciation in policy circles for the stability of independent practices, with solo practices maintaining their numbers despite external pressures.

Instead of selling to hospitals, independent practices are increasingly joining together to form larger groups or integrated practice associations (IPAs), indicating a desire for collaboration over consolidation.

Allidate’s mission is focused on empowering primary care providers to embrace value-based care, allowing them to maintain their independence and autonomy, thus reducing burnout and avoiding the need to join larger health systems.

The discussion touches on the historical context of health systems buying independent practices and the role of value-based care as a counterforce to this trend.

The leadership team at Allidate, including co-founders with backgrounds in government, is seen as a unique asset that informs the company’s strategy and aligns it with policy goals.

The podcast emphasizes the importance of understanding healthcare regulations and how the team’s public sector experience allows them to anticipate policy changes rather than react to them, creating regulatory opportunities.

Allidate successfully raised a significant Series E funding round, attracting long-term investors who share a vision for sustainable growth and innovation in healthcare.

The company has developed a self-reinforcing model where signing up more practices leads to more health plan contracts, which in turn attracts even more practices, creating a robust growth cycle.

The new funding is aimed at enhancing technology, product development, and research, as well as exploring new business opportunities, exemplified by the acquisition of Iris Healthcare.

Allidate’s acquisition of Iris Healthcare highlights a commitment to improving patient experiences, particularly for those facing complex health challenges, showcasing a dedication to high-quality care with impressive patient satisfaction metrics.

Faced resistance from health plans unwilling to pay $800 for conversations, questioning the value of such expenditures in healthcare.

Found that these conversations significantly reduced unnecessary hospitalizations at the end of life, saving between $4,000 to $10,000 per patient.

Acquired Iris Healthcare to enhance their capabilities in identifying patients who could benefit from these conversations through machine learning algorithms.

Implemented a system for warm handoffs from primary care practices to Iris Healthcare, creating a seamless transition for patients needing support.

Developed a model where they capture savings generated from their interventions, allowing them to offer services without charging upfront fees.

Established a guiding principle to pursue opportunities that are beneficial for patients, society, and doctors, filtering out initiatives that do not meet these criteria.

Adopted a rigorous, evidence-based approach by conducting randomized clinical trials (RCTs) before scaling interventions, learning from the Camden Coalition’s experiences.

Fostered a culture that values humility and skepticism, recognizing that not all intuitively appealing solutions yield positive results.

Built a data infrastructure to facilitate rapid testing and experimentation, aiming to derive insights faster than traditional timelines.

Maintained focus on their mission rather than pursuing an IPO for its own sake, emphasizing capital efficiency and profitability to enable strategic decision-making regarding future growth.

Early on, the leadership at Allidade made key assumptions about the healthcare landscape, focusing on independent practices, partnerships, and technology, which were initially counterintuitive but ultimately proved correct.

Despite initial setbacks, such as their first ACOs not generating savings, the team remained committed to their vision, understanding that proving their ideas would take time and persistence.

The CEO recognized that leading a company through different stages (from 3 to 1000+ employees) required adapting leadership styles and priorities, embracing the challenges that come with growth.

The CEO found joy in learning and adapting to new challenges at each stage of the company, emphasizing the importance of evolving skill sets as the organization grew.

As Allidade matured, the culture began to take on a life of its own, with team members contributing actively to the company’s values, such as the establishment of a climate policy group advocating for environmental responsibility.

The CEO highlighted the importance of letting team members lead initiatives, indicating that as the organization grows, leaders must empower others while maintaining a deep understanding of the business.

The CEO advised MBA graduates to focus on owning P&L rather than just strategy roles, emphasizing the importance

Encouraging MBAs to engage in challenging roles, the CEO noted that real-world experiences, including setbacks, are crucial for developing a robust understanding of strategy and execution.

The leadership philosophy at Allidade emphasizes the need for constant learning and adaptation, reinforcing that success is a journey of overcoming challenges and refining strategies.

Ultimately, the CEO’s commitment to the mission of Allidade remains paramount, with a focus on finding the right leadership to align with the company’s evolving needs as it grows.

The joy expressed about seeing a member in the alumni group underscores the belief that community connections are important for personal and professional growth.

The mention of hoping someone returns to Allidade highlights a sense of nostalgia and the importance of belonging to a group that shares common experiences and values.

The expression of gratitude towards Farzad suggests a belief in the power of encouragement and recognition in fostering participation and connection among alumni.

The alumni group serves as a reminder that relationships formed during one’s career can provide ongoing support and opportunities for collaboration.

The sentiment of hoping for a return indicates a belief in keeping doors open for past members, promoting inclusivity and the idea that everyone’s journey is valued.

The reference to Allidade implies that shared experiences within the group create a lasting impact on individuals, reinforcing their professional identities.

The alumni group serves as a testament to the belief that networking doesn’t end with employment; it evolves and continues to provide value throughout one’s career.

The gratitude expressed hints at a belief in the importance of reciprocity—supporting one another within the community can lead to mutual benefits.

The hope that Farzad might return signifies a belief that past members can inspire current members and contribute to the group’s ongoing journey.

The underlying theme suggests that the values and principles established at Allidade continue to resonate and guide alumni in their personal and professional lives.

In this episode of the Pulse podcast by Wharton Digital Health, co-host Alex West welcomes Dr. Farzad Mostashari, the co-founder and CEO of Allidade, a trailblazing company dedicated to empowering independent primary care practices. With a rich background in health IT as the former National Coordinator for Health IT at the Department of Health and Human Services, Dr. Mostashari brings a wealth of expertise to the conversation. Listeners will gain insight into Allidade’s innovative approach to transitioning primary care to a value-based care model, which supports physicians in maintaining their independence while improving patient outcomes.

Dr. Mostashari shares his journey from public health to founding Allidade, detailing the critical role independent physicians play in healthcare transformation. He discusses the company’s impressive growth, serving over a million patients and achieving significant cost savings, all while advocating for the necessity of independent practices in a system often dominated by large health systems. This episode is not just about healthcare; it’s about the future of patient care and the importance of maintaining competition in the market. Tune in to discover how Allidade is reshaping the landscape of primary care and learn valuable lessons about resilience, innovation, and the power of community in healthcare.

Farzad Mostashari grew up in Iran, where he aspired to be a nuclear physicist, influenced by the high regard for engineers in his culture.

He realized his limitations in math and physics after entering college, which led him to shift his career aspirations.

Farzad has a strong interest in public health and has been dedicated to solving healthcare challenges through technology and regulation.

He has a personal connection to the concept of saving lives through healthcare, which has driven his professional journey.

Farzad emphasizes the importance of aligning financial incentives in healthcare to improve patient outcomes.

He has a unique approach to healthcare, focusing on the potential of independent primary care physicians to drive change in the system.

Farzad’s work with Allidade involves developing a technology platform to support primary care practices in managing patient care effectively.

He is passionate about coaching and guiding primary care practices to improve their workflows and patient interactions.

Farzad has a vision for creating a healthcare environment where patients have better access to primary care and are proactively engaged in their health.

He has a collaborative mindset, seeing other organizations in the healthcare space as fellow travelers in the mission to enhance primary care and reduce costs.

The guest emphasizes the importance of independent primary care practices in driving value-based care, contrasting it with the traditional hospital-centric model.

They have a strong belief that the essence of healthcare lies in the quiet conversations that happen in doctors’ offices rather than in high-tech hospital settings.

The guest expresses a passion for technology, highlighting an investment in building their own population health platform from scratch, which showcases a hands-on approach to innovation.

They played a significant role during the COVID-19 pandemic by providing essential support to independent practices, such as sourcing PPE and rapidly implementing telehealth solutions.

The guest believes that independent primary care providers face existential threats but can thrive with the right support and resources.

They advocate for the importance of competition and choice in healthcare markets, warning against the consolidation of independent practices into larger health systems.

The guest has a history of working in various capacities, including a role as a national coordinator, which gives them a broad perspective on healthcare dynamics.

They view the shift from fee-for-service to value-based care as a critical evolution in healthcare, emphasizing the need for primary care practices to adapt and thrive in this new model.

The guest has a proactive approach to addressing the administrative and policy burdens faced by independent practices, aiming to empower them rather than create new entities.

They have a strong commitment to advocacy for independent community primary care, as evidenced by their efforts to raise awareness and support for these practices during challenging times.

The guest emphasizes the importance of independent practices in healthcare and their stabilization over recent years, which contrasts with the trend of consolidation into larger health systems.

They highlight a mission to empower primary care providers to embrace value-based care, which helps maintain their independence and reduce burnout.

The guest’s leadership team at Allidate includes individuals with significant public sector experience, which they believe is an undervalued asset in the private sector.

They describe hiring individuals with government backgrounds as a “hack” for success, as these individuals are often motivated by mission rather than short-term financial returns.

The guest enjoys the dynamic of interpreting new healthcare regulations on social media, particularly how their team helps others understand the implications of these rules.

Allidate’s recent funding round of $123 million is aimed at supporting long-term growth and expanding their platform capabilities.

The guest mentions a successful tuck-in acquisition of Iris Healthcare, which focuses on providing support to patients facing end-of-life decisions, highlighting its high patient satisfaction score.

They believe that understanding healthcare regulations is crucial for navigating the complex industry and that their policy experience allows them to anticipate changes beneficial to their company.

The guest expresses confidence in the evolution of healthcare programs, believing that smart policymakers will address existing flaws, which influences their business strategy.

They view the cyclical nature of signing up practices and securing health plan contracts as a “flywheel” effect that drives the growth of Allidate’s business model.

The guest emphasizes the importance of evidence-based practices and rigorous testing in healthcare interventions, highlighting their commitment to conducting randomized clinical trials before scaling solutions.

They advocate for a patient-centered approach, ensuring that any new initiative is beneficial for patients, society, and doctors, rejecting opportunities that do not meet these criteria.

The guest mentions a “humble and skeptical” mindset when evaluating healthcare solutions, acknowledging that not all interventions that seem beneficial on paper will yield positive results in practice.

They reference a notable experience with the Camden Coalition’s care management program, which initially appeared successful but ultimately revealed no significant benefits, showcasing the need for skepticism in the healthcare industry.

The guest’s organization, Allidade, focuses on creating a data infrastructure that allows for rapid experimentation and testing of healthcare solutions, aiming to provide answers more efficiently than traditional methods.

They express a belief in the potential for scaling successful interventions, suggesting that if something works well, it should be expanded rather than limited.

The guest highlights the capital efficiency and profitability of Allidade since 2020, indicating that they are in a position to choose when and if to pursue public offerings based on their mission rather than necessity.

They share insights on the complexities of value-based care, acknowledging the challenges in replicating successful models across different contexts.

The guest emphasizes the importance of identifying opportunities that align with their core mission, focusing on patient outcomes rather than solely on monetization.

They reflect on the significance of community respect and collaboration in the healthcare sector, particularly in relation to the Camden Coalition’s work and its impact on industry standards.

The guest, Farzad Mostashari, appreciates the long-term commitment required for entrepreneurship, emphasizing the importance of perseverance even when initial results are disappointing.

He has a strong belief in the necessity of adapting leadership styles as a company grows, recognizing that different stages of growth present unique challenges.

Farzad values learning and personal growth, stating that he enjoys facing new challenges at various stages of the company’s development.

He acknowledges the importance of team culture, noting that as a company matures, the culture can evolve to be self-sustaining rather than dependent on the leader.

Farzad supports evidence-based approaches to climate policy, advocating for substantial investments in carbon removal rather than superficial carbon offsets.

He encourages MBAs to pursue hands-on, operational roles rather than solely focusing on strategy, believing that real-world experience is crucial for effective leadership.

Farzad expresses a willingness to step aside if he feels he can no longer keep pace with the company’s growth, prioritizing the mission above personal ambition.

He has transitioned from working in public health to leading a private company, which has shaped his perspective on leadership and organizational growth.

Farzad emphasizes the importance of understanding the core operations of a business, advocating for leaders to have deep knowledge of their organizations rather than relying solely on managers.

He highlights the significance of being challenged and facing reality in business, suggesting that such experiences are essential for developing a robust strategy.

The guest is involved in an alumni group, indicating a sense of community and connection with past colleagues.

The guest has a history with Allidade, suggesting a significant relationship with the organization.

The mention of “one day he’ll come back” implies that the guest is currently not active in Allidade, hinting at a transition or change in their professional journey.

The guest’s presence in the alumni group is appreciated, suggesting they have made a positive impact on their peers.

The use of the word “really” emphasizes the enthusiasm and happiness of the group regarding the guest’s involvement.

The guest’s name is Farzad, indicating a personal connection and recognition within the conversation.

Farzad Mostashari grew up in Iran, aspiring to be a nuclear physicist, influenced by a culture that revered engineering as the pinnacle of intelligence.

He attended Yale School of Medicine for medical school and later earned a Master’s in Population Health from Harvard’s T.H. Chan School of Public Health, shaping his understanding of healthcare.

Farzad began his career in New York City with the health department, where he worked on the Primary Care Information Project, focusing on integrating information technology into healthcare.

He transitioned to the Department of Health and Human Services, eventually becoming the U.S. National Coordinator for Health IT, where he sought to address public health issues through technology and regulatory frameworks.

After years of attempting to improve healthcare solely through technology, Farzad recognized the need to address financial incentives within the healthcare system to effect real change.

Identifying a gap in the accountable care movement, he conceptualized Allidade, envisioning a platform that would bring together primary care physicians to manage a collective patient population and share in savings from improved care.

In 2014, Farzad co-founded Allidade, focusing on enabling independent primary care practices to transition to value-based care while maintaining their autonomy.

Allidade expanded rapidly, now partnering with over 11,000 physicians across 40 states, managing care for 1.7 million patients, and generating significant savings for practices.

Unlike competitors, Allidade does not acquire or build practices; instead, it supports existing independent practices through technology, coaching, and alignment of financial incentives.

In 2023, Allidade raised $123 million in Series E funding and is projected to distribute a quarter of a billion dollars to primary care practices based on improved patient outcomes, demonstrating its successful model in the healthcare landscape.

The organization decided to partner with existing primary care practices rather than relying on health systems, aiming for a diverse range of partnerships from solo practices to community health centers.

The journey began with insights from early adopters like Evelyn, who faced challenges in convincing hospitals to reduce hospitalizations, highlighting the need for a different approach in primary care.

A major investment was made in building an in-house population health platform, prioritizing proprietary technology over third-party solutions, which led to a larger technology team than field coaching staff.

Unlike many risk-taking groups that began with Medicare Advantage, the organization chose to start with the Medicare Shared Savings Program, focusing on genuine reductions in hospitalizations rather than revenue increases through risk adjustment.

The organization recognized that the heart of value-based care lies in primary care practices, not hospitals, emphasizing the importance of preventive care and coordination that happens in doctors’ offices.

Acknowledging the anti-value proposition of the fee-for-service system, the organization positioned independent primary care as having the most to gain from a shift to value-based care.

The organization aimed to empower independent practices by providing necessary contracts, data, software, and regulatory assistance, thus reinforcing their critical role in the healthcare system.

During the pandemic, the organization solidified its identity as a servant to independent practices, providing essential resources like PPE, telehealth setup, and assistance with financial aid programs to help them survive.

The organization actively advocated for independent primary care during the pandemic, engaging in over 50 media engagements to highlight their struggles and the importance of maintaining competition in healthcare.

The narrative surrounding independent primary care shifted, with increasing appreciation for their role in maintaining market competition and quality care, countering the belief that they were a dying breed.

Over the past eight years, there has been a growing appreciation for independent practices within policy circles, highlighting a shift in the healthcare landscape.

Contrary to expectations, the number of solo medical practices has remained stable in the last three years, indicating resilience in independent healthcare.

Instead of selling to hospitals, independent practices have been consolidating into larger groups, such as Independent Practice Associations (IPAs) and multi-specialty groups.

Allidate has focused on transitioning physicians out of hospital employment and into independent practices, promoting autonomy and reducing burnout among healthcare providers.

The success of primary care practices embracing value-based care has been pivotal, allowing them to thrive independently and compete effectively in the healthcare market.

Allidate was founded by individuals with significant public sector experience, including past roles in the Office of the National Coordinator and the Center for Medicare, emphasizing a mission-driven approach.

The leadership team at Allidate utilizes their policy background to anticipate regulatory changes, turning potential risks into opportunities for growth.

Allidate raised a $123 million Series E funding round during a turbulent market period, attracting long-term investors focused on sustainable growth.

The company has developed a self-reinforcing growth model, where signing up more practices leads to more health plan contracts and vice versa, enhancing operational efficiency.

Allidate has begun to diversify its offerings, including a tuck-in acquisition of Iris Healthcare, which focuses on end-of-life conversations, demonstrating a commitment to holistic patient care.

The organization faced resistance from health plans unwilling to pay $800 for their conversations, questioning the value of such costs.

Research revealed that these conversations significantly reduced unnecessary end-of-life hospitalizations, saving between $4,000 to $10,000 per patient.

To enhance their services, they purchased Iris Healthcare, which allowed them to scale operations and identify patients who would benefit most from their programs using machine learning algorithms.

They developed a model where they only charge if they achieve savings for patients, aligning their financial incentives with patient outcomes.

The leadership emphasized the importance of identifying opportunities that are beneficial for patients, society, and healthcare providers, rejecting any that did not meet these criteria.

They adopted a humble and evidence-based approach, recognizing that not all interventions that seem effective actually yield savings, as illustrated by the Camden Coalition’s trial results.

Unlike many startups, they conducted randomized clinical trials (RCTs) of their interventions before scaling, ensuring that they only implement proven solutions.

They established a robust data infrastructure that allows for rapid experimentation and testing of new ideas, aiming to shorten the time needed to validate interventions.

Since becoming profitable in 2020, they have maintained a capital-efficient model, allowing them to choose the right time for potential public offerings without pressure.

While the prospect of going public is acknowledged, the focus remains on mission-driven growth rather than the pursuit of public company status as an end goal.

The journey began with the establishment of Allidade, driven by a vision to improve healthcare through independent practices and innovative partnerships.

The first year was marked by setbacks, as the initial Accountable Care Organizations (ACOs) did not achieve savings, creating a significant obstacle for the company.

Despite early failures, the team focused on learning from their experiences, refining their strategies and technology to better align with their mission.

The leadership emphasized the importance of long-term commitment, recognizing that perseverance is crucial when the foundational idea is strong.

As Allidade expanded from a three-person team to over 1,000 employees, the leadership had to adapt their skills and priorities to meet the evolving challenges at each stage of growth.

Over time, the company’s culture began to evolve organically, with employees taking initiative in shaping the workplace environment, including the establishment of a climate policy group.

The leadership recognized the need to let others lead and innovate, allowing team members to take ownership of initiatives that aligned with the company’s values.

The CEO maintained a belief in the importance of deep understanding of the business, advocating for leaders to engage with all levels of operations rather than solely managing from a distance.

The CEO advised aspiring MBAs to seek hands-on, operational roles rather than purely strategic positions, emphasizing the value of real-world experience and accountability.

The conversation concluded with a recognition of the journey from the company’s inception to its current success, highlighting the importance of resilience, adaptability, and a strong mission.

The speaker reflects on a past experience with a notable figure, indicating a sense of nostalgia and connection to their shared history.

The mention of an “alumni group” suggests a community or network that has maintained ties over time, emphasizing the importance of relationships formed during their time together.

The speaker expresses happiness at the individual’s presence in the group, highlighting the positive impact of reconnecting with former colleagues or mentors.

The hope that “one day he’ll come back to Allidade” implies a desire for the individual to re-engage with the organization, showcasing the lasting influence of their contributions.

The gratitude expressed towards “Farzad” suggests that this person played a significant role in the speaker’s journey or the community, reinforcing the theme of mentorship and support.

Overall, the conversation captures the essence of professional relationships, the significance of alumni networks, and the ongoing impact of past connections on current endeavors.