Q1 2021 Clover Health Investments Corp Earnings Call

Good day, and thank you for standby and welcome to the Clover Health first quarter 2021 earnings call. At this time, all participants are in a listen only mode.

After the Speakers' prepared remarks, there'll be a question answer session to ask a question. During this session you will need to press star one of your telephone. Please be advised that today's conference is being recorded.

If you require any further assistance please press star zero.

I'd now like to hand, the conference over to your speech today.

Rick Newman head of Investor Relations and corporate strategy. Please go ahead.

Good morning, everyone.

I want to introduce myself as this is the.

First earnings call as the head of Investor Relations and corporate strategy on Clover.

And I wanted to express how excited I am about the opportunity here as well I've clovers opportunity to make health care better.

With that out of the way and thank you for joining our call today, where I see I'll go back GAAP, Holly, our President Andrew Hawaii, and our CFO, Joe Wagner will discuss first quarter results and answer your questions. Note. This call is being recorded.

I'd also like to caution you that we may make forward looking statements during today's call that are subject to risks and uncertainties.

Actors that may cause actual results to differ materially from expectations are detailed in our SEC filings, including the form 8-K filed today containing our earnings release.

Permission about any non-GAAP financial measures referenced including a reconciliation of those measures to GAAP measures can also be found in our SEC filings and the earnings materials available on our website.

With that I will now turn over the call to be back.

Okay.

Thank you Derek welcome aboard and thank you everyone for joining US today, we founded Clover to improve every life and everyday that passes brings us one step closer to that goal. We enter 2021 with strong momentum and continued to execute today Clover is partnering with physicians to care for more than a 130000 individuals that is.

Nearly double the number of lives we had under management on January 1st from.

From the outside we look like a typical health insurance company from the inside Clover is building and employing technology to refocus health insurance on improving patient outcomes.

Our unconventional approach aligns interests and incentives so that health care puts people first and that's why we developed the Clover assistant disruptive technology designed to drive systemic change on a nationwide scale.

In particular, the Clover assistant, let's just break equitable care to a broad and diverse community. We were recently interviewed by the National Committee for quality assurance, which is conducting a study with the brand on behalf of CMS is office on minority health on strategies to drive the deliberate equitable quality care they contacted us because it's preliminary.

Evidence showing our planned strong performance on a prototype of the Medicare advantage health equity summary score or <unk> for short.

This is a newly developed measurement tool for identifying plans that do well at providing high quality equitable care to their members, including groups or disproportionately affected by social risk factors.

As a reminder, at the end of 2019 CMS data showed that approximately 50% of our members identify themselves as being a minority dissect, which is substantially higher than the percentage of individuals who identify as minority in Medicare advantage overall.

CMS has stopped collecting and co leading data on race and ethnicity, but we have no reason to believe that those figures have meaningfully changed.

Thankfully this new health score, we believe acknowledges the unique challenges and serving members at higher social risks and rightfully prioritizes health equity.

We have consistently advocated that CMS reform at star rating system to better account for social risk factors and are hopeful that CMS will incorporate health scores or something akin to it into the star ratings soon.

Doing so would recognize and reward rather than punish plans like clover that takes seriously the intractable problem with health care disparities in our nation and are committed to providing high quality care to underserved populations. Importantly, this test score would hold plans accountable. They do not ensure that solving this important problem is core to that.

Their model.

Our high performance on this health equity score is significant validation of both our core mission to improve every life and our approach in doing so in an effort to highlight strategies to drive equitable care that we shared with NCQA. We also intend to release a whitepaper soon summarizing our efforts around health equity we are focused on delivering equitable.

<unk> care and are hopeful that this becomes a significant topic of discussion across the entire industry. We urge you to read the document and joined the conversation.

We believe.

Our approach enables us to deliver what patients want better care for less money with more choice and what physicians want information they need to make the best decisions every time.

At quarter end, we had over 66300 Medicare advantage members and during the quarter, we generated over $200 million in revenue a record for Clover on April 1st we launched our direct contracting entity or D. C E need Clover health partners and with it added approximately 65000, new lives across each day.

Through claims alignment alone and.

We do not intend to stop there as we will be adding more lives to our management through the voluntary alignment process throughout the year.

Moving beyond Medicare advantage into the largest segment of Medicare original Medicare not only as a strategic milestone for Clover, but also demonstrates the scalability of the Clover assistance, while other companies may be constrained by antiquated technologies geographic limitations or asset heavy approaches we believed our tech centric strategy.

<unk> enables us to quickly and cost effectively deploy software two positions nationwide.

Strategically growing lives under management through D. C feeds our virtuous cycle, because we believe that as more physicians use the clover assistant the software will get smarter and outcomes will improve which will then reduce the cost of care and perhaps just as importantly, it allows us to more effectively scale to new geographies in Medicare advantage.

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As we follow into D. C geographies with M&A plans will already have an installed base of physicians actively engaging with the CA platform. Additionally, we believe our direct contracting entity will have a material impact on lowering costs and improving outcomes for all patients across the clover ecosystem.

Clover is perfectly positioned to be a pioneer of the D. C program for a few important reasons.

First our market, leading technology platform. The Clover assistant is designed specifically to align priorities I E to lower overall medical expenses, while enhancing the quality of care and 100% of our D. C. E primary care providers are expected to use the clover system, which perpetuates our flywheel, we believe that having our value.

Propositions centered around software will allow us to scale more rapidly than others, who are dependent on brick and mortar or other asset heavy approaches.

Second we already specialize in managing care on a wide and open network, which is critical expertise when seeking to manage a large population within the original Medicare.

At launch we had contracted with approximately 1800 individual providers across eight states and had over 65000 claims line beneficiaries.

We believe we have access to up to 200000, Medicare beneficiaries through our contracts with participating providers and are focused on growing our beneficiary base through voluntary alignment throughout the year.

Our provider partners have already begun voluntary alignment activities, including making available both online digital Rome and forms and paper based enrollment kits. There are still a lot of unknowns. As this is a brand new program, but we see substantial opportunities to grow lives attributed to our direct contracting entity.

The traction we have seen to date gives us conviction in our ability to grow through direct contracting and as we do we'll also be scaling our innovative home based care operation.

Today, the vast majority of Clover as members receive care through primary care physicians and get the benefits of Clover assistance through this channel, but what most don't realize is that Clover system also powers, our home based care operation.

The Clover assistant is vital here underpinning to clinical models. The first clinical model covers the majority of our lives under management, those who received care be irregular visits with their P. C. P. In this sense. We believe we can truly scale like software are influencing scaled true any PCP and the provider ecosystem through the deployment of the Clover assist.

Yeah.

The second clinical model is our approach to home based care called Clover homecare. It caters to our sickest most medically complex members often with advanced Comorbidities.

Okay.

Home based care program is an innovative model and a further opportunity for the clover assistant to reduce costs and raise the standard of care.

We believe that unlike healthier members, who could visit their PCP the best place to care for our Sickest members is in the home and that's exactly what clover or home care guidance, we considered the clover homecare model to be progressive and note that there is a significant opportunity to control that ex is this small minority of members accounts for a <unk>.

Proportionate portion of our overall med ex.

Powered by the Clover assistant we are enabling primary care providers to help patients whether they are homebound or able to attend visits which helps deliver more efficient and better outcomes. We're encouraged by data showing clover homecare has ability to reduce hospitalizations and emergency room visits and skilled nursing facility stays on the impact that has.

Had on patients' quality of life.

Finally, we continue to strengthen our organization to support our growth as a public company.

This quarter, we announced two new board members Bill Robinson, formerly the president of Broadgate human capital and an HR executive of General electric and.

Demetrius Kazuko <unk>, who served as general counsel of United Health Care is Medicare and retirement Division and as a director of the center for Medicare and principal Deputy administrator of CMS.

We believe both will add a lot of value. We also hired Derrick Neuman, who you met earlier, who will run our investor relations and corporate strategy.

I'm proud of what we've accomplished and I'm energized by the opportunities ahead of us despite the pandemic near term uncertainty.

Our software based infrastructure enabled us to quickly stand up a direct contracting entity and rapidly double our lives under management, we believe the sports Shadows, our ability to enter adjacent markets and a highly scalable way.

On Clover, how to lower costs increase choice and improved care for hundreds of thousands of people. We have a lot of hard work to do and we're hard at work doing it with that I will turn the call over to Andrew who will talk about our tech and our work to expand the number of places where members can get care Andrew.

Thank you Beth.

Everyone knows we believe that our technology, specifically the Clover assistant is what differentiate clover from anyone else in the market.

Continuous iteration off the Clover assistant is not only critical to our mission to improve every life, but also directly ties back to our financials supporting the positive alignment between our business on the health of our members.

In recent months, we have been focused on ensuring that the clover assistant is built out with specific functionality to support our direct contracting efforts I am pleased to say that these features have now launched with the first direct contracting users, but getting to use the system now.

An example of this is the integration of additional rich real time clinical data sources to power, but whoever assistance. These include historic Personalised claim filed data and EHR extracts from our partners.

This day to further enables the clover assistance to personalize its recommendations for everything from powering specialist referrals to calculate and care gaps true, making recommendations for enrollment into our home based care program.

I'd like to also emphasize the real time aspect of this data as we believe this differentiates us from other managed care companies.

For example, we are now able to ingest admission and discharge event data from a wide network of hospitals and surface. Numerous actionable events include the assistant in less than a second as a reminder, the power of the Clover assistant life not only in the total size of the dataset, but also in making get action.

<unk> by a physician and moving towards real time processing is just another step towards that.

For all these features what is also interesting is the synergistic relationship between the impact we expect to see in direct contracting on the impact we expect to see in Medicare advantage that is we believe we have identified opportunities for significant cost management in the direct contracting program that have the potential.

To positively impact our Medicare advantage business as well.

I also want to touch on our efforts to reduce access to care barriers that are member states by ensuring that clover assistant managing their care outside of affordable health care environment.

In our first example, we have improved the technology that drives member identification and enrollment includes homecare.

We believe our approach of using a sophisticated software algorithm for risks targeting combined with PCP led enrollment in the program is industry, leading and differentiating.

This approach to home based care combines all aspects of what I think makes clover clover fares.

First we use technology and data to identify those most in need.

We partner with our existing wide network of P. C piece to enroll members in the supportive services on <unk>.

Third we continue to support the member across the care continuum using the Clover assistant.

And a second example on broadening the reach of the Clover assistant we intend to soon launch a beta of you all the assistance that is designed specifically for Hospitalists operating in an inpatient setting.

Powered by the real time admit discharge speeds Guy spoke about earlier, we believe this feature will enable us to get Clover system usage into one of the most critical location.

Member's health journey.

In our third example of driving care more broadly with the Clover assistant I want to touch on our pilot partnership with Walgreens aimed at increasing access to basic health care services in our communities starting in New Jersey.

We have been working with Walgreens to integrate data from the Clover assistant into Walgreens health quarters, which are custom built health destinations within select Walgreens stores Clover members have been visiting health corners in Walgreens for blood pressure testing BMI measurements comprehensive medication review flu shots on more.

Yeah.

Currently over 30 health corners are open to Clover members and approximately 26000 or almost 50% of Orange New Jersey membership now live within one mile of a clearer powered walgreen's health corner.

Since we began the program over 1100 care gaps have been closed.

As you can see the Clover system continues to scale and grow within our core Medicare advantage business into new lines of business like direct contracting we're focused on cost of iteration deployment to new practices and sites of care as well as integrating into new data sources.

Before I hand, it off to Joe and on a personal note I want to express how proud I am on every member of Clivers team I recently put up a post on Linkedin, calling out a reporter from Bloomberg on what I saw as a dismissive comment on the quality of our engineers based solely on his skepticism regarding the quality of talent outside the U S.

S.

I want to make it clear to everyone all of our engineers and all Clover right are crucial to our success growth and strong long term potential to everyone from our clover members to our employees to our physician partners, our regulators and our investors. My commitment is that we I Clover, we'll fight for all of us as human beings.

Our mission is to improve every life and we beat it.

Thank you now over to Jeff.

Thanks, Andrew we are thrilled to have delivered a first quarter of more than 200 million in revenue. Our total revenue increased 21% compared to the year ago quarter, primarily due to an increase in membership.

As of quarter end, we are now serving approximately 66300 Medicare advantage members, which represents an increase of approximately 18% over the first quarter of 2020.

We expect to continue to expand both inside and outside of New Jersey as well as through direct contracting as we view market expansion as a key to driving growth and proliferation of the Clover assistant.

Moving to MCR, our total estimated medical costs for the quarter were $214 4 million, resulting in a GAAP MCR of 107, 6%.

Similar to the fourth quarter of last year, we incurred significant costs carrying from members that were diagnosed with COVID-19, and these costs are the primary driver of our elevated MCR.

To put some specificity around the impact that the pandemic is having on our medical costs remember that we focus solely on Medicare, which inherently means an older population.

90% of our members resided in New Jersey, and we have a significant percentage of minority members.

This data shows that the COVID-19 hospitalization rate Medicare beneficiaries in New Jersey is roughly one five times the national average and that minorities had been disproportionately affected by the pandemic.

The combination of these factors has resulted in short term disruption to our MCR.

Fortunately, we are seeing lower COVID-19 costs from month to month in 2021, thus far as more and more of our members become vaccinated.

Our non-GAAP normalized MCR for the quarter, which excludes the net impact of the COVID-19 pandemic and any changes to our estimate of prior period revenue and medical costs was 95, 4%.

This is an increase compared to the 95% normalized MCR that we reported for full year 2020.

We believe our relative performance here is related to a few factors.

First we are seeing some return of previously deferred care and certain non COVID-19 utilization patterns.

We have the continued impacts of the physician fee schedule increase that was implemented in late December as well as some limited COVID-19 related headwinds relating to lower risk score capture for 2020 dates of service.

Third we identified several areas where enhancements to our internal processes and cost reduction initiatives, while making progress are taking longer to be realized and.

In an effort to address the COVID-19 pandemic, we made rapid and substantive changes to help our members get the care they need it and now with the increase in vaccination rates. We're just starting to re prioritize our ongoing processes to promote cost efficiency.

We would like to highlight a few key points from our M. C. Ours that we believe are relevant to our investors.

First our first quarter normalized MCR for returning members, who see a primary care physician that uses the clover assistant continues to be lower than the normalized MCR for those who don't in this differential was over 1000 basis points as compared to an approximate 700 basis point differential for full year 2020 normalize for COVID-19.

We believe that this illustrates the clover assistant continues to power improved financial outcomes.

The second point is that our first quarter MCR from markets outside of New Jersey remained lower than our MCR and our new Jersey market, which supports our thesis and strategy for geographic diversification.

Lastly, when considering Mcr's remember the Clover today has higher than industry average growth rates obvious plan designs that have Richard benefits and lower out of pocket costs than many of our competitors plans and our current three-star planned rating from.

For now we estimate that these differences add as much as 1500 basis points to our M. C ours when lined up next to those of our competitors.

These factors play out over time continued scale and geographic diversification higher star ratings and continued iteration and coverage of our Clover assistant technology. We maintained full conviction on these items provide a tailwind for future margin expansion. Since we are just in the early innings of our story.

First quarter non-GAAP, adjusted operating expenses, which exclude noncash stock based compensation were $61 9 million compared to 48 million in the first quarter of 2020.

This was in line with our expectations and increased by $13 9 million from the first quarter of 2020, primarily due to investments made in infrastructure to support our direct contracting initiatives as well as higher professional legal and consulting expenses to support Clover status as a public company.

Our non-GAAP adjusted EBITDA loss for the first quarter was $76 2 million compared to last year's first quarter adjusted EBITDA loss of $21 7 million driven by the higher MCR and operational investments.

After normalizing for the MTR impact of COVID-19, our non-GAAP normalized adjusted EBITDA loss for the quarter was $52 1 million.

We reported GAAP net loss for the quarter of $48 4 million compared to a net loss of $28 2 million for the first quarter of 2020.

Like many dis back companies. Our current period results were impacted by SEC guidance related to our accounting for public and private placement warrants.

Applying the updated accounting treatment, we recognized a gain of $85 5 million in the first quarter of this year for the change in fair value of the warrant liability.

Clover had approximately $408 1 million shares outstanding at the end of the first quarter.

And our cash cash equivalents and investments totaled $720 1 billion as of March 31 2021.

Our merger with social capital, which closed in the first quarter of this year delivered approximately $670 million net of deal related expenses to support growth in working capital.

Despite near term impacts and volatility, especially around expenses due to COVID-19. We expect it to continue delivering solid revenue growth as we continue to expand our market share and begin the new direct contracting opportunity.

We are reaffirming our guidance that Medicare advantage membership is expected to be in the range of 60000 to 70000 by December 31 2021.

On direct contracting as Vivek noted we started the D. C E program year on April one with more than 65000 align beneficiaries virtually all of which were claims alike.

Similar to many of our fellow decent your participants we began the program with fewer claims on line beneficiaries than initially expected.

This was driven by a few factors first some beneficiaries belonging to select participating providers did not successfully exit their preexisting Medicare shared savings program relationships.

Second some beneficiaries last Medicare eligibility passed away or enrolled in Medicare advantage.

We believe that we still have access to up to 200000, Medicare beneficiaries through our D C contracts with participating providers.

We expect to see increases in the number of our aligned beneficiaries as voluntary alignment continues throughout the year, but the specific timing for such increases its difficult to predict.

We are taking a conservative approach, leaving us to forecast that we will end 2021 with between 70000 and 100000 total airline beneficiaries.

Voluntary alignment will occur quarterly and we expect the majority of the incremental voluntary alignment to become effective in the fourth quarter, given cms's submission calendar and programmatic ramp up time with.

Look forward to bringing on many new lives for the claims limit process for 2022.

Based on these updates to direct contracting lives we are updating our guidance on total combined revenue for the year, which is now expected to be in the range of $810 million to $830 million inclusive of a preliminary estimate of approximately $20 million to $30 million of revenue generated from direct contracting.

We are reiterating our revenue guidance for Medicare advantage since the first quarter was in line with our expectations.

Consistent with our discussion a couple of months ago GAAP estimates for direct contracting revenue are dependent on the finalization of accounting treatment, which we expect will be complete by the end of the second quarter.

Our initial direct contracting per member benchmark is higher than originally predicted.

Medicare benchmark expenditures under management for direct contracting are now expected to be in the range of $700 million to $800 million, reflecting the revised forecast on 2021 align lives and this higher per member benchmark.

The Medicare benchmark represents the level of estimated medical expenses for the beneficiary population being managed by the direct contracting entity.

Given the nuances of revenue recognition under this program. We continue to believe the estimated CNS benchmark expenditures are a more appropriate measure of the size of the opportunity and its impact on the company's financial outcomes.

Total Medicare spend under management, which includes revenue from the Medicare advantage program plus the estimated CMS benchmark for direct contracting is therefore expected to be in the range of one five to $1 6 billion more than double 2000 twenty's level.

Normalized non-GAAP MCR for Medicare advantage is now expected to be in the range of 94% to 97% for full year 2021.

We anticipate that certain factors that are driving our first quarter results will continue somewhat into future quarters as well and we believe this range captures the impact of seasonality, but also allows for improvement in core processes that will occur throughout the year.

We estimate full year non-GAAP adjusted operating expenses, which excludes stock based compensation will remain within the range of $250 million to $270 million, reflecting the use of a portion of the proceeds from the January merger to make investments in marketing network expansion and technology to support future growth.

As always we remain focused on growth and continue to make appropriate investments to fuel that future growth.

Normalized adjusted EBITDA loss is expected to be in the range of $240 million to $190 million.

Note that we are not providing net loss guidance due to the potential for significant variability of several components of net income, including Mark to market accounting of the fair value of the warrant liability that we discussed earlier.

As a reminder, the liability was reduced by $85 5 million in the first quarter with could materially increase in future quarters due to stock appreciation, which would in turn negatively impact net income.

We are seeing encouraging traction across our business, but we are only in the early innings. We continue to build clover for the long term and have several levers to drive growth and initiatives underway to improve our cost profile, we are committed to delivering shareholder value over the long term.

Now I'll hand, it over to Vivek for closing remarks.

Thank you Joe.

We built Clover house to improve every life.

And in the face of the challenging environment, Joe outlined we're executing against that mission every day.

Our two key clinical differentiators, the Clover assistant and Clover homecare have already helped us to lower costs increase choice and <unk>.

Food care for tens of thousands of people and we believe it will help us do so for many more as we continue our expansion.

The launch of our direct contracting entity illustrates the scalability of our software based model and foreshadows the potential breadth and depth of our future reach.

Before we take questions I want to leave you with three things Firstly, we're extremely excited about the launch of direct contracting and very bullish on the opportunity ahead.

Lee.

Assistant technology is a market leading differentiator for Clover and finally, we are focused on creating a healthier society, which means delivering high quality equitable care to everyone.

We look forward to demonstrating our progress in the quarters and years to come.

Before we start on questions today, and a first for Clover, we were also including some questions from the strong community of Clover investors on read it.

As a quick aside we are a big believer in the retail investor community.

On a personal basis I started off as a retail investor over 20 years ago, probably trading too frequently I made money then lost money so that experience, but that experience really maybe want to become a great investor and importantly wanted to understand the business and industries in much more detail.

I am very much a buy and hold retail investor today focused on companies with a long term orientation going after an important mission with technology at the core and the spirit of that we believe it is vital we play a role in engaging our entire investor base and answering important questions with that operator, let's please take the first question.

Thank you as a reminder to ask a question you will need to press star one of your telephone to withdraw your question press the pound key please stand by while we compile the Q&A roster.

Our first question comes from Kevin Fischbeck with America. Your line is open.

Alright, great. Thanks.

I guess a few questions here.

So.

When you you guys.

First did the transaction.

I just had a pretty aggressive ramp.

Number of members.

Getting to half a million members on a couple of years, how do you think about that outlook today for direct contracting is that is that still right, where we should be thinking about that as members that you would have access to it doesn't necessarily members that would be signed up or is there. Some reason to think differently about that direct contact angle.

Yeah. Thanks for the question Joe do you want to take that I can jump in.

Sure Hey, Kevin Good morning, Thanks for the question, Yeah, I think you know Kevin.

We're not going to give guidance for future years at this point, but I can say that a couple of things I think as we think about the opportunity you know first you know.

We're excited that we still have access to the 200000 members 200000. That's on lives. This year. So that has not changed and that's been consistent with.

With kind of what we've said all along I think you know as we know more and more about claims alignment and voluntary alignment we'll certainly.

Refine some of those numbers for future years, I think one certainly encouraging thing I mean, I guess a couple of countries things is one we've got a great start relative to others in the program. So we're super excited about that and secondly, as we think about you know tailwind.

Looking ahead.

Obviously, we're in the programme now which is great. You know there are others that are in the program at this point so.

We're revisiting a lot of conversations that we've had earlier in the year with some ACO partners.

We're looking to do other things and now.

Are looking to potentially partner with US again, so so I think we're really excited about where we are I think it's too early just to say for future years kind of exactly where we're going to end up but I think.

We have great traction, so far and voluntary alignment and we're excited about the.

The rest of this year.

Okay.

I guess I'm, just trying to understand the MLR bridge.

You know when we think about.

Maybe a normalized number for this year.

Versus last year versus maybe 2019, which is the last year, where it was not impacted by COVID-19 I mean I.

I guess on its face it looks like MLR was only down 200 to 500 basis points that you're kind of saying that these adjustments that you mentioned.

Bridging from last quarter to this quarter.

Still point to kind of a true core improvement of closer to.

800 basis points or 90 basis points. So how should we think about the progress over the last 10 years you know within this guidance.

Yeah, Kevin that's a great question I think certainly you know from a normalized perspective I think when we go back to 2019, obviously your business was very different different benefits different membership mix etcetera, and so we ran kind of 90 899 back then and so certainly seeing progress no question about that.

And I think you know for us as we look at kind of the mix of a tailwind than headwind Theres a lot what happened in this first quarter, obviously, we got hit pretty hard with COVID-19.

We've seen some return of deferred care, we also have.

Some headwinds as every other MA plan does in terms of.

From depressed per square coding, although again not as much of an issue for us.

The physician fee schedule increase so I think you are your statement is absolutely true and that we are absolutely seeing momentum as we look kind of over a longer term in terms of normalized MCR.

I think the guidance that we're giving for the remainder of this year is appropriately conservative just given kind of what we're seeing in the first quarter and I think we'll certainly see progress as we continue throughout the year, but I think that's the way to look at it right. If you look at it over the course of two years, we're seeing.

Certainly progress from I'd say, the high ninety's into the low and mid nineties, and then I think as we think about kind of longer term.

Our view is you know what what is our earnings power.

Going forward, obviously, some headwinds for this year not only as it relates to COVID-19, but also as it relates to risk, scoring physician fee schedule et cetera, you know.

As we think about the long term earnings power of the business.

We really think about per MCR is kind of the two points that I mentioned, just a little bit ago. You know one is how do we how do we think about the differential of clover system versus non Clover assistant that's really the most important metric for us and will continue to focus on that metric and then secondly, as we think about that MCR just compared to others. When you think about growth rates in <unk>.

More importantly star scores, we line up very well so I think we're certainly happy with the progress that we're making as we look long term from the business.

Okay, then maybe just one question.

Is there a way to size what you guys think the coating headwind was this year maybe.

Maybe on the.

Basis points MLR.

Yeah, I think it's a range for us Kevin I think for US, it's probably around 150 to 200 basis points, probably a little bit higher than we had originally anticipated.

I think last quarter, I said 100 to 150, its probably a little bit higher than that.

Again.

I'd say roughly that $1 50 to 200 is just kind of where we are and where we came out just when we looked at you know at the end.

Putting impact.

Okay, great. Thanks.

Okay.

Okay.

Okay great.

So we will take our first question from from from Red. It now. The first question is a compound question, but it came to us at one piece, what if clover health doing to make sure. The Clover assistance remains the leading AI for health care are you work of data analytic companies are data scientist to expand dataset will you licensed the technology to other insurance agency.

How does clover system health positions offer individualized care so.

So I will take the first question.

And so thanks for that a couple or a few different actors number one.

We see <unk> isn't that big unique because while there's you know a few technology powered insurance companies out there. We're really focused on clinical care right. There are physicians on a wide network using clover assistance and what that lets US do is focused on providing the ability of route any data model. So to the question about how do we remain.

The leading AI for health care that closed loop on.

Clinical models, where our data is being a sort of reacted to it not by real position.

Do we take those actions and their conversation on if I can figure out you know what happened on that.

This trade models further advice them further either rate faster than we feel anybody else, whether it be big tech companies or other insurance companies or even clinical companies. We feel we have all of those components include breast is that and we can integrate faster and that's how we stay ahead.

On the point about licensing out that's a really interesting one our mission is to improve every life. So it's something that we might consider in the future.

That's something that I find interesting here is a few years ago, we did do some testing with the Clippers data.

Data engine.

Bell engine in international markets, where we verified that our data platform on trading actually does work very well it Don do you have that EBIT non English datasets. So we were pleased by how well that works I think that sets us up technically for some pretty good advancement in the future if we ever want to expand.

On the question in terms of is the visualization Altair.

So clover systems sessions are personalized to the individual to be individual in the care accounts are and that's rerun every single time, a senior comes back and have another PCP visits. So we are already deeply personal on the content data on suggestion that we show through Clover assistant.

And we think that that's a very powerful part of the overall product. So that can range from adjusted clinical program enrollment index liver homecare too just something simple like a diagnosis recalled from Asia to care GAAP a.

Closure all of these things are absolutely personalized on.

Any carrier accounts or that is based upon the clover assistant platform. So that we're always developing new bottles, new rules things to drive those actions, we'll talk about those are absolutely rolled those out.

Going into the future I think that's a good way to think about this overall is that clover assist the number one AD kluver as the average Medicare payer our technology is uniquely focused on the clinical side of the business. We are focused on helping clinicians that is where our R&D is focused all of our day to bowls that we.

Build habit action ability component to them. So it's not just about predictions predictions and action and then we're always speeding those actions back into our core bottled trading, which we think gives us a systemic technical advantage in terms of improving the overall product at improving the outcomes on benefits for our.

Seniors.

So thank you for that question whoever asked it and operator, we can go ahead and take the next question.

Thank you. Our next question comes from Jill investing with credit Suisse. Your line is open.

Yeah. Thanks, So I almost called I didn't make that guidance, but thanks for taking the questions.

On direct contracting thanks, I'll, let per load on your updated expectations. There I was wondering if you could flush out a little bit more on your confidence in voluntary us on alignment mostly coming in for Q have you seen any indicators of data points that gave us he was on visibility there and how much revenue is assumed in your outlook from beef voluntary.

Fisheries.

Initial Andrew I'll pass on to you.

Sure. Thanks.

Thanks, Sheila Thanks for the question. Thanks for calling on this morning appreciate it yeah. So on voluntary alignment I mean again, it's early in the process.

You know one of the things that we wanted to make sure. We did this time is just kind of reset expectations based a little bit upon the unknown I can say initial.

Initial.

Kind of results from our voluntary I'm, an outreach has been positive we've been you know we've been seeing.

<unk> seen some good traction there.

Just one of the things we have to keep in mind is just kind of a CNS timing for voluntary alignment for this year and so in order to get a member effective for July one.

Need to be voluntary aligned by the end of this month and then similarly for fourth quarter, they need to be voluntary aligned from a form you know from a documentation perspective by August 31st and so for US that's why we kind of.

Came out with a more conservative range, just given some of the timing there as we learn more about the program, but again.

We've got a few different methods for voluntary alignment that we are using and we're seeing really good traction early on and so just in terms of revenue there and benchmark.

Obviously, the the range that we're giving the 70 to 100000, a full year, that's based on a base right now of.

Roughly $65 66, which is where we started and so I think for us both the revenue and benchmark.

For voluntary alignment there, there's I'd say a relatively small piece for voluntary alignment, we've not assumed in our guidance for either revenue or a benchmark and again just to keep in mind. You know right. Now we are only assuming from a revenue recognition standpoint that we have roughly 45 per cent of benchmark.

As a as technical revenue recorded so if you're comparing us to others that have.

<unk> come out with different accounting treatment, the benchmark coming back kind of at 700 800 million a range that we're giving is probably more appropriate from a comparison standpoint.

Yeah.

Okay that makes sense and then a follow up on Kevins question early on about and expectations for next year I know youre not.

Willing to give any guidance therefore.

Our lives coming from better contracting program for 'twenty 'twenty, two but just wondering if you can share some thoughts around T. Mobile just isn't to close that direct contracting program for new applicants just wondering how that affects the opportunity for you guys. I mean as you guys have been already approved for the program.

Yeah, I'll take that Joe.

So.

Hi.

I think it's hard to tell.

Exactly.

We're seeing them on the land on kind of opening up.

Applicants in the program, but.

I think they are.

There most likely reviewing the program to make sure that.

Rules and regulations are set up appropriately to not have on excess number of applicants coming in it makes the program difficult difficult to manage.

At least that's our current view.

But at the same time.

We don't think it's going to be.

I don't really view it affecting too much on our thinking.

At the end of the day, you know any practice.

Practice, joining the program.

And it was going to make that decision based on whether value can be driven out of it.

Irrespective, whether it's 52 applicants now or or hundreds clover is really the only direct contracting participant we're aware of that's actually software enabled.

It enables practices to succeed in direct contracting, whereas a significant amount of the amount of the applicants are actually provider centric.

Okay. Just one last one on your partnership with Walgreens can you remind us how economics work there and the one thing I'm trying to understand like ardent Ya.

Members better off seen by a P. C B, who was using global assistant bad form.

That's what's essentially you need much better outcomes and get improvement trying to understand like how you has that between dry eye, telling them to some other channels on what's it like going through your P. C. P who was using <unk> system platform.

Yeah, absolutely. So also so we're not sharing any of the details on the actual deal or the partnership.

So that part of the question, but I cannot elaborate more on the care journey here. So the idea of what the Walgreens health quarters is that they are providing supplemental services to support the PTP.

Oh as an alternative to a model where they are sort of becoming the P. C. P. So you've seen that in other models that are out there that day.

You actually put the PCP at the store that isn't on what's happening with the health corner. The health corner is not replacing the PCP, but instead of the same care gaps or things that the PCB you might be looking to order for the patient for example, fit kits et cetera are actually fulfilled after health corner to make it easier for our seniors items.

The patient of the PCP to get their supplemental care, so like a flu shots on additional sort of beta readings like BMI like I said like Kip can be deployed there.

So think of it as it's all part of one care journey with Clover assistant backing up the coordination of sharing data. The PCP is still sort of in the quarterback position I've done the health corner is supplementing that by making it easier for them to access this extra care.

Okay. Thank you.

Alright. Thank.

Thank you for that sort of on factory those questions I appreciate it.

For our next question that came to read it.

Hum.

What is the latest with the SEC.

I would also particularly like to know your strategy around the stock price vs.

Do you want to go ahead and take this one.

Yes, Thanks, Andrew.

It's our policy generally not to comment on pending in Greece, but we'll of course always make any disclosures required by law.

I'd note that we always welcome the opportunity to introduce your company and disruptive model to government agencies and regulators.

Just in terms of as we think about about stock price.

We take a very long term orientation around.

Around stock price. So one of the advantages we think we have versus other incumbent insurers.

You know myself and myself on Andrew obviously heavily invested in clover for for the long term on a on a personal basis, but even from a mission orientation.

Our clinical organization, it's definitely a different approach then when we think about our competition and so.

What we think will happen over the next.

A couple of years is it will become more well understood how clover assistant is driving value at scale with software really enabling that if we think about kind of our model really enabling a wide network of physicians to be successful versus the traditional narrow network.

That's going to become more and more well understood as well and we also think it'll become more and more willing to share over time.

That our plan designs are meaningfully more attractive and value to consumers vs versus the competition and stock.

Stock price as a way of taking care of itself.

Over the long term as long as we're able to execute them.

Over the one from towards our goals.

Okay.

Alright, Thanks, a lot.

Operator, we can take the next question.

Our next question comes from Lisa Gill with J P. Morgan Your line is open.

Good morning, and thank you for taking my question I just wanted to go back to your comments around Walgreens and I understand you're not talking about the economic impact, but I just really want to understand a couple of things one is that the pharmacist that's actually providing these services Q do they have access to clover assessing that they can feed that information back.

And to that P. C. P and three are you doing anything to then encourage the member to have their prescription filled at Walgreens in any way. So that you can kind of close that gap in care potentially.

Yeah.

Oh yeah.

Yeah.

Uh huh.

Great question. So you had a couple of their so.

So first of all it's in a walgreen the health quarters are actually built out separate dedicated part of the of the Walgreens and you can see this on our Walgreens website as well and so sometimes their staff there suddenly stopped with the capability to be able to act as a pharmacist, but it's not the actual pharmacy cow.

Or if that's your question like what are you going to get your fills it's a different part of the store so, but obviously pharmacy is something that they can help with the.

Remember has questions.

Next thing is on Clover assistant yes. So part of this is all is that we have a certain view all of the clover assistant data, but they're not using the PCP view as per their conversation.

<unk> has that view, but they have at axis.

Same platform it has stayed care gaps.

That are available to the P. C P.

On the open things that need to be filled so that when the member shows up it's part of a more seamless characters you're right. So they can pay off yes, I can help you with this et cetera.

In that particular sites of care. So we are providing that data from the clover system platform to be used in those health corners and that last question are we this is not unified with any part of the part D pharmacy benefit right now obviously, just thinking to the future we could look out there, but we separated.

You know, having Caribbean given at a health COVID-19 Walgreens from whether or not a given individual wants to use walgreens as their pharmacy, we believe in choice that clover. So our members can continue to choose whatever pharmacy you'd be like but they also have based on whether they want to get care at a health quarter ability.

Could go into that and get additional supplemental care as well so hopefully that helps with your question.

That definitely helps and then secondly, I just want to understand the silver home care is that actually a provider coming into the home is our virtual care component to that and and you know how do I think about that on a go forward basis are there other services, you're going to add I mean, just broadly speaking.

Think about it on the home.

Thanks Lisa.

It's a great question.

So the way to think about our Clover home care program is we.

We built an in house to simplify it in house spoke street or in house churn met four years ago.

But the home based model. So the reason we did that.

And wanted to own that internally as.

As we felt we would end up with a much higher engagement rates from those were eligible because we could also won collaborate with existing primary care practices in the market place.

In terms of helping the role there most at risk lives, but also end up being able to service the homebound individuals as well. So as an example last year, we ended up with a little bit over 70%.

The most at risk members that are eligible actually enrolled and home based primary care.

And when we think collaboration with primary care physicians. Its clover is actual employed primary care physicians delivering care is physically in the home obviously last year. We included virtual care as part of that but it is a physically homebase model on them.

When we talk about in conjunction with existing primary care physicians, we routinely will share data back to the existing primary care provider to make sure. They are included in that process.

And we obviously get to own.

The savings that we generate.

And because it's internal home based primary care physicians employed by Clover.

We're not in a arm's-length vendor relationship where sometimes it can be dispute over kind of who's on the eligible pools.

We have also quoted this model over to direct contracting.

So we think that there are contracting we're actually bringing this service to our primary care practice partners. So we think about a lot of these brick and mortar models that have proliferated.

What sometimes gets lost is these models are actually taking patients.

From existing primary care practices that.

That creates a lot of friction in the marketplace and ends up with much lower enrollment rates of the eligible versus Clover is home care program.

Columbus home care program is popular because we're actually working with existing primary care physicians on a collaborative weighted particularly direct contracting where practices are actually benefiting from the savings that we can generate so it creates kind of the opposite reaction.

In the local marketplace and it's all powered off of the Clover assisted as we mentioned.

The OE parts.

Okay, Great. That's very helpful. Thank you.

Like the rest of Asia, we'll do one more we'll do one more clover.

Read it question, which happens to be on Clover assistant and then we'll wrap up so we had a combination of questions asking about will ever replaces the dishes book basic elements and also about our vision on telemedicine.

So this is a future looking statements you're meeting I'm, not making any commitments here, but looking at our at our technology for where we can go with something like telemedicine looking at something like working with vs that could go with the physician Clover is if it's not about replacing the physician right. It's about helping the physician would be the best version of themselves are being.

Them with information at their fingertips personalized information personal I suggestions always using their clinical judgment as.

As part of that you can sort of see where we think we might go with telemedicine is it's more than just simply a face to face visit over a video call I do think and this is putting on my future is task that we're in striking distance in the next few years, all being able to convey a combined clover assistant with something like VR on AUR technology.

<unk> to provide really detailed with virtual visits where the where.

Where the patient and the physician might not be co located in the same.

Save room, but provide the physician with more ability to be able to do it examination in order to have a more impactful and counter now I think that other CMS guidelines that will be under the existing tele medicine, a regulation for awhile, but from a technology perspective. This will help us move into things like rural Health care health.

Our guard against future Pandemics from an equipment perspective, we already did something called the video on wheels. During the pandemic, where we delivered equipment in a very safe way sterilized equipment to underserved.

Seniors, who did not have video capabilities. So we do know that it's possible to sort of set up an environment within their home in a safe way. So they can have these kinds of encounters and it makes a lot of sense that we would build much more upon that going forward. So once again the assistant is colby assisted because its they are not to replace the position, but you make them.

The best version of themselves and I think that you will see more and more capability in doing that with technology Uber remote distances.

So thanks, so much for the questions from the analysts. Thank you from all the questions on read it as well.

I will now hand off to be back to close up.

Thanks, Andrew I, just wanted to thank everyone for their time today.

We're incredibly excited about our future.

In the beginning of a direct contracting.

Really appreciate it.

This concludes today's conference call. Thank you from participating you may now disconnect.

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