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Venture capitalists connect with local doctors

Dan Gorenstein Sep 4, 2014

Venture capitalists connect with local doctors

Dan Gorenstein Sep 4, 2014

Venture capitalists are getting into the new health care game — a game in which the more money you save, the more money you make.

Enter Aledade, one of the first companies with VC backing. It’s teaming up with small, independent primary care docs.

Why do investors think they can strike gold in these health care outposts?

It’s because of physicians like Dr. Rebecca Jaffe, who has spent the last 30 years running a family medicine practice in Wilmington, Delaware.

“We serve newborns and their parents, and their parents, and their parents, up to four generations of a family. We call it womb to tomb,” says Jaffe.

To Jaffe, “womb to tomb” is a pledge she makes to her patients. That type of attention often leads to meaningful patient-doctor relationships. To Aledade CEO Dr. Farzad Mostashari, those relationships represent a business opportunity.

“When a health plan sends a video out, a video about nutrition for people with diabetes, 4 percent of people open that link. When their primary care doctor sends it, 95 percent of the time we know that they click and open that video,” he says.

Today, the health care industry spends billions trying to buy the kind of persuasive power a physician like Jaffe wields.

If you can control — or at least influence — patient decisions, you can limit health care spending, which has become a high-stakes business. Mostashari says to imagine the case of a 30-something recreational runner who comes in complaining of knee pain and wants an MRI. The patient would think, “If they are not recommending an MRI for me, it’s because I don’t need one. And I trust my primary care physician,” says Mostashari.

Aledade is betting the relationships you find in these independent mom-and-pop practices will help control health care costs more than almost anything else. Already, the company is working with 100 doctors to form what are called Accountable Care Organizations, or ACOs.

That’s a jargon-y way of saying that the less spending overall, the more money doctors can earn while ensuring quality care.

To date, Aledade has helped the doctors create three ACOs under the federal government’s Medicare Shared Savings program. Mostashari says Aledade will be a savvy partner with cash.

“I’m going to give them what they need,” he says. “Whether that’s data, whether it’s capital, whether it’s tools, whether it’s technology.”

In exchange, Aledade keeps 40 percent of any savings.

The company is being backed by the venture capital firm Venrock, which hit health care grand slams with Athenahealth and Castlight Health, both multibillion-dollar businesses today.

Venrock’s Bryan Roberts sees that kind of possibility for Aledade, too.

Even though the practices are small independents, 100 doctors like Jaffe call the shots on nearly $1 billion of referrals, tests and hospitalizations every year. The trouble, says Roberts, is many don’t realize it.

“Today those primary care physicians have no control over and no incentive for control over those downstream dollars. And so to me that’s the place where magic can happen,” he says.

That magic will often mean offering same-day appointments, checking on patients just discharged from the hospital or extending hours to help avoid trips to the ER.

Similar programs in Massachusetts and Florida suggest this is a winning formula. 

Under its Alternative Quality Contract, Dr. Dana Safran of Blue Cross Blue Shield of Massachusetts says not only do doctors make more money, but patients experience a new level of attention.

“Like never before, they have their doctor’s office calling them, just to check back in. So, they are finding, they are a patient the practice is thinking about all the time.” 

The Urban Institute’s Dr. Robert Berenson says he’s preached this kind of approach for more than two decades.

But as hospitals have gobbled up physician practices, there are a shrinking number of doctor partners. Berenson sees no reason to think that trend will change anytime soon.

“Independent, small practices are likely going to die out simply because recent graduates of medical school don’t want to live that kind of life,” he says.

Venrock’s Roberts concedes the current crop of docs are more interested in shift work than paying bills and managing staff — the kind of responsibility that comes with running your own business. But he likes to think Aledade could reverse the trend.

“We show these primary care docs can have a real effect on their microcosm in the system. Having that effect will make them more money. That may in fact change the desires of doctors to be independent,” he says.

Dr. Jaffe certainly hopes signing on with Aledade makes life better for her and her patients.

She says she’s sick of hitting health care walls, like a recent case in which no repair company would fix a 101-year-old patient’s wheelchair.

“I have known this woman for more than 35 years. And I want what’s best for her — and what was best for her was for us to do our utmost at getting that seat fixed. I went so far as to ask my husband if he would consider doing it,” she says.

Jaffe worried the woman would get hurt trying to learn some new doodad of a device, but ultimately, that was the only choice.

“In less than two days, she fell, broke her leg and is now sitting in a nursing home,” she says.

It all goes back to Jaffe’s womb-to-tomb pledge. Even if Aledade makes bundles, but she does most of the work, Jaffe wants these sorts of health care pileups to go away. Something she knows she can’t do on her own.

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