Why We Became a Public Benefit Corporation
By Farzad Mostashari
I’m the CEO and co-founder of a health care company we started over eight years ago. Just last month, we made a change to our legal structure to become a Delaware “Public Benefit Corporation” (PBC). It’s a corporate structure that I think is well suited to mission-oriented companies where alignment with stakeholders is a key driver of the business model. I want to share why it was the right decision for Aledade, and perhaps encourage other leaders to consider whether this corporate structure might be right for their companies.
The simple but powerful idea behind Aledade is that we can create enormous value for society - for patients, for physician practices, for health plans, for the government - by focusing on prevention and taking a long view. We partner with independent primary care physicians to keep their patients healthy and out of the hospital. And when we succeed, the physicians’ practices, our payer partners, and Aledade share in the cost savings that we generate. To date, we have improved primary care for more than a million patients, saved more than a billion dollars in unnecessary cost and suffering, and sent more than $650 million to community primary care practices across the US.
Our business model compels us to maintain alignment with the interests of all these stakeholders - but more importantly, it requires them to BELIEVE that we will operate with their best interests in mind and at heart, over the long run. It calls for a fundamental shift in workflows, but also to share data and work together with traditional adversaries. Trust is at the very foundation of this model.
In health care, we are fighting an uphill battle against mistrust and skepticism rooted in decades of short-term, zero-sum behaviors across our industry.
- The usual relationship between payer and clinician is defined by nearly constant conflict; payment rates are determined by leverage, not by value
- Middlemen very often exploit complexity and opacity to extract rent from every transaction while adding little to no value
- Technology vendors overpromise and under-deliver, and make it hard for customers to switch by holding data captive
- Meanwhile, policymakers face a never-ending game of cat-and-mouse with organizations that seek to exploit every loophole until it is noticed and closed (often after private equity has stepped in and stepped up the abuse)
All of this dysfunction goes on while nearly everyone involved talks about “working for the patient,” and there’s a truth to this: Nearly every human being I have met working in health care finds meaning and purpose in trying to do their best for patients. But all too often the duty to maximize financial returns for their employer is in conflict with what is best for patients. The result? Moral injury and burnout.
But this moment is different. Now there is real hope.
There is an opening in American health care that escapes the seemingly intractable Gordian knot. By sharing risk and sharing data under value-based contracts, we can help move clinicians and payers to the same side of the table. By embracing transparency and removing complexity, we can redefine what it means to be an “aggregator." By engaging as partners rather than vendors, we can create an architecture for trust rather than suspicion. Our insights and advice from the front lines can help inform the future of health care regulations because we have built a business that is aligned with policymakers’ commitments to doing the right thing for our society.
But what do I say when a stakeholder says, “yes, Farzad, I know you mean well, but your ultimate, legal responsibility is to maximize shareholder profits. Period.”
How do we convey that our team and our Board always has - and always will - consider what’s best for patients, practices, and society in our decisions at Aledade… because we believe that this alignment is the key to our long-term business success?
It is therefore fitting that I first heard the term “public benefit corporation” from our earliest venture capital investor, Bryan Roberts. “Farzad,” he said, “Have you ever thought about making Aledade a public benefit corporation?”
I felt so grateful in that moment. Grateful to be reminded again that Aledade has mission-oriented investors who consistently take the long view. My second thought was that I had some research to do!
Months of reading, learning and talking with experts followed. I learned that Delaware - the state where Aledade is incorporated - passed a law in 2013 to allow companies to amend their certificate of incorporation to become a public benefit corporation; and in 2020, streamlined the process so that companies like Aledade could make the change with board approval and a majority vote from shareholders.
Public benefit corporations differ from typical corporations in one very important and exciting way: They must consider the interests of the stakeholders and their specific public benefit purpose. Our purpose? It took us less than 10 minutes to set down what will be an enduring charter:
Practically speaking, Aledade’s public benefit purpose means that we must weigh the interests of our primary care practice partners, their patients, our employees, and those who bear the burden of rising health care costs, alongside those of our shareholders, when we make decisions. Importantly, this duty extends to all significant board decisions, including decisions on whether to go public, to make acquisitions or to sell the company. It’s the kind of balance of interests that just makes sense for a company founded on alignment, and focused on its mission.
Today, I’m proud to announce that Aledade is officially a public benefit corporation.
We hope that by taking this step, Aledade can amplify the work we do everyday to rebuild some of the trust that our health care system has lost. Aledade became a PBC because I want primary care docs, the people at the foundation of our health care system, to know that we will serve you and work for your interests over the long run. To make it so, we have literally built you into the very charter that defines Aledade’s purpose.
This is also a message to every Aledade employee - present and future: Aledade is a place where our mission defines everything we do. Where you will never have to choose doing well over doing good. Where we hold ourselves accountable for the promises we make - to patients, practices and society. Where we make decisions that each of us, ten years in the future, would be proud of.
Let’s flip the script on the misalignment and mistrust in our health care system. Let’s get to work on this collective effort we call Aledade, a public benefit corporation.