Clover Health will scale back its participation in a federal payments program that allows companies new to Medicare to manage care for individuals enrolled in traditional, fee-for-service plans. .
The company did not say how many doctors it would remove from the Federally Responsible Care Organization REACH in 2023. But the change will result in a revenue decline of at least $1 billion next year, President Andrew Toy said during Clover Health’s Q3 earnings call Monday.
Clover Health does not disclose the number of patients it manages care for through ACO REACH. However, the company will cut two-thirds of the lives it manages through the program, Toy said.
“We are exploring alternative opportunities to support the shift of fee-for-service physicians to value-based care,” said Toy. “We are looking at the possibility of partnering with them on existing statutory programs, such as the Medicare General Savings Program.”
According to Toy, insurtech has received “a lot” of applications from doctors who want to cooperate in the ACO REACH model.
“We could have grown the show considerably,” says Toy.
Clover Health doesn’t disclose the revenue the program generates so far in 2022. But uncertainty about its future has prompted the startup to cut participation, Toy said. The Centers for Medicare and Medicaid Services redesigned the Professional and Global Direct Contract model into the ACO REACH program earlier this year following concerns by progressive Democrats in Congress about the influence of private capital in the program.
Going forward, the company will look to participate in the Medicare General Savings Program, which “is already required by law,” Toy said.
“It’s a more well-defined rule-making process like on the Medicare Advantage side,” says Toy. Clover Health doesn’t participate in the Medicare General Savings Program.
This decision represents a strategic shift of insurtech. At this time last year, Clover Health generated more than half of its total revenue through Direct Contracts, now ACO REACH. The company plans to generate more than two-thirds of its revenue through Direct Contracts by 2022. Clover Health is one of the largest. participants in the innovative payment scheme, as measured by the number of lives covered.
Rising medical costs have also prompted Clover Health to reduce its participation in the program. The insurer reported an uninsured medical loss rate of 104.2 for the quarter, meaning it lost money for every patient cared for through ACO REACH. Toy says it seeks to reach an uninsured MLR of 100 by 2023, which means the company wants to break even into the costs of its traditional Medicare enrollees.
The company’s net loss increased 118.2% year-over-year to $75.3 million in the quarter on revenue of $856.8 million, driven by an increase in members’ healthcare bills. Medicare Advantage and ACO REACH members. Medicare Advantage enrollment has increased by 30.9% to 88,136.
Insurtech has enough capital to stay in business through 2023, Chief Financial Officer Scott Leffler on the call. The company holds $782.7 million in total cash and investments.
A Cowen analysis in August estimated Clover Health needs to raise $400 million to achieve success by 2024.
“We are looking at our business as a whole to make sure we are operating at peak efficiency as part of an overall, broader effort towards profitability,” Leffler said. ‘ said Leffler.
