Clover projects direct-contracting growth to outpace Medicare Advantage

Clover projects direct-contracting growth to outpace Medicare Advantage

Medicare Advantage startup Clover Health has doubled its managed lives with the advent of Medicare’s new direct-contracting model, and it has enlisted two home-based care providers to help it find success under the program.

The Nashville-based insurance company plans to pair certain high-risk patients under its direct contracting program with Spiras Health and Upward Health, who will provide in-home primary care. Clover is one of more than 50 companies participating in Medicare’s Global and Professional Direct Contracting Model in 2021. Others include insurers like Humana and providers like Oak Street Health and VillageMD.

“We want to preserve the flexibility to generate value for our members regardless if we have our own staff there,” said Dr. Kumar Dharmarajan, Clover’s associate chief medical officer and chief clinician of its direct-contracting entity.

Clover said it has about 66,300 members covered under Medicare Advantage and about 65,000 patients it calls “aligned beneficiaries” under Medicare’s direct-contracting program, bringing its total lives under management to more than 130,000.

The company projects higher growth in the direct-contracting program this year, expecting to grow beneficiaries by 8% to as much as 54% by the end of 2021. Clover estimates Medicare Advantage membership, by contrast, will grow by just under 3% to 5.5%.

If it doesn’t pan out, Clover, which went public through a special purpose acquisition company, could find itself even deeper in the hole. The company posted a $48.4 million net loss on $200.3 million in revenue in the quarter ended March 31, a 71% bigger loss than in the prior-year period. That’s partly because its claims expenses grew at more than double the rate its premium revenue did in that period: 47% compared with 22%, respectively.

Clover’s finance chief chalked up the loss to updated accounting guidance from the Securities and Exchange Commission. Clover’s share price plunged after a short-seller group outed the company in February for being under investigation by the Justice Department. Within the past week, stock traders have pushed its share price up.

Medicare’s new direct-contracting model is designed to add value-based care into the traditional Medicare program, which has historically been fee-for-service. Clover’s members have historically been covered under Medicare Advantage, so its direct-contracting program will consist of entirely new members. The insurer will be on the hook for those members’ total cost of care, just as it is with its Medicare Advantage members.

Dharmarajan said he thinks Clover will be successful in direct contracting because its proprietary technology uses claims data and other information to identify which of its members in the program would benefit from in-home primary care, a program it has offered for years. That ends up being between 5% to 10% of members, he said.

“It’s really important to get that right,” Dharmarajan said.

From there, Clover lets those members’ providers know, who will in turn refer them the home-based primary-care program. That care won’t be provided exclusively by Spiras and Upward. Later this year, Clover’s employed clinicians will provide in-home primary care, Dharmarajan said.

Commercial primary-care provider One Medical also hopes to capitalize on Medicare direct contracting through its pending purchase of Iora Health, a primary-care provider focused mostly on Medicare. Iora currently has about 2 million members enrolled in fee-for-service Medicare, or about 40% of its membership. If combined with One Medical, that could expand to 11 million members, or a potential $140 billion revenue opportunity, the companies shared in a slide presentation announcing their pending transaction.

The Biden administration recently poured cold water on Medicare direct contracting when it paused new applications for 2022, disrupting many providers’ plans for next year. Dharmarajan said that doesn’t affect Clover, which intends to keep moving forward with the program into 2022.

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Marie Maynes
Marie Maynes is a Sports enthusiast and writes for the Sports section of ANH.