Q4 2021 Clover Health Investments Corp Earnings Call
Thank you for your patience and please standby will begin shortly.
[music].
Good afternoon, everyone. Joining me on our call today is our CEO Vivek, Gary Kelly, our President and CTO, Andrew Choi and our interim CFO , Mark Herbers will discuss fourth quarter and full year results recent trends.
Ask your questions. This call is being recorded before we get started I would like to remind you that our fourth quarter and full year earnings materials, including the release are available on our website at Clover House Dotcom.
Also like to caution you that we may make forward looking statements. During today's call that are subject to risks and uncertainties, including expectations about future performance factors that may cause actual results to differ materially from our expectations are detailed in our SEC filings, including in the risk factors section of our latest annual report on Form 10-K .
And then our other periodic SEC filings the forward looking statements are made.
As of the date hereof, we assume no obligation.
And do not intend to update these forward looking statements as a result of future events or developments infill.
Information about non-GAAP financial measures referenced including definition and a reconciliation of those measures to GAAP measures can also be found in earnings materials are available on our website with that let me now turn over the call to pay back the back.
Thanks, Derek and thanks, everyone for joining US today, we are really excited about where clover sits today. The progress we expect to make in 2022 and our goals for the future.
Not just enabling physicians to provide great health care to all especially those in underserved communities, but to do this with a growing sustainable and ultimately profitable model.
Let me now with like quickly on the past year and some recent accomplishments and events 2021 was an eventful year for US we went public dealt with Kobe challenges and we accomplished a lot we.
We more than doubled our revenue to 1.47 billion lives under clever management increased by 124% to approximately 130000.
We launched our first non insurance line of business direct contracting underpinned by the Cobra assistant.
Assisting to need to be a differentiator with M. A M C. Our differential of over 1000 basis points core returning members, whose tcp's use the corporate system versus those who don't.
And we did this while operating on a wide network and driving a positive impact on health equity more minority and underserved beneficiaries than typical for Medicare advantage at scale.
We also had a strong AEP in Medicare advantage growing well above industry levels at 28% year over year.
In Georgia, we nearly tripled our lives I believe we're on a trajectory there so much new Jersey, where we are a market leader, we believe our increasing scale track the benefit plans and the corporate assistant will enable us to keep gaining share in core markets. While at the same time driving improved ncr's.
Indirect contracting we started 2022 with over 100000 more lives than we ended 2021.
And with providers in over 20 states largely due to this growth our lives in a club assistant management increased to approximately 200000 and our non insurance lives now represents about two thirds of our total lives.
We believe the more lives under Cobra system management, the more opportunities will have to drive clinical and financial improvements for clover and our participating providers.
Finally, I wanted to touch upon the recent CMS calendar year 2023 advanced notice forever.
Obviously, many in the industry are pleased with the rate increase we are as well, but we are even more excited about the increasing focus on health equity specifically cms's commitment to.
To continue to explore ways to revise the risk adjustment model in order to more appropriately paid for subgroups of Medicare beneficiaries.
Is this something that will get much more focus over the next year or so, but we believe cobra is well positioned given that almost half of our MAA beneficiaries are in underserved communities compared to 34% for the average on a plant. We encourage you to read our health equity White paper for more specifics with that let me hand over the call it Andrew.
Could talk about the corporate assistant and specifics around how it is driving a material impact.
Thanks, Steve.
<unk> 2021 was a great year for the Clipper assistance, along with unlocking an entire new business lines with our entrance into Medicare fee for service through direct contracting we continue to invest in its evolution as a pre eminent position enablement platform and increased our annualized medics under Kluver assistant management to over $1 billion.
The club assistant was built on open fire standards in an effort to break down data silos and improve interoperability across the health care system.
This enabled us to deliver our first major integration all Cooper assistant within Athena health market EHR with more integrations coming soon.
We also launched clinical program and data models, specifically targeting some of our most vulnerable members suffering from cancer and chronic kidney disease.
These successes are a validation of our differentiated software first approach the Cobra assistant allows us to iterate quickly and we can adapt it to fit the needs of different facets of Medicare as demonstrated by our rapid scaling up both our MAA and fee for service businesses.
To summarize our opportunity we believe we can fundamentally change health care by providing an easy to access on ramp to a value based care for every single provider in the country in 2021, the Kluver assistant platform surface, nearly 1 million clinical recommendations to commission and fly more than 200000 potential cure.
Caps for action.
Clinicians that use the <unk> assistant grew 43% year over year to approximately <unk> thousand in the fourth quarter and on average the platform acreage positions and managing more than 35000 per month.
By leveraging the clearer system platform. We believe we can raise the level of care given by every provider and rapidly I broadly scale in ways that traditional managed care plans and risk bearing provider groups cannot.
This engagement translates to improved MCR not only is there a difference in MCR between members, whose providers use the clip resistant and those who Jones, but there is also a benefit from the less October assistant use.
We measure this in terms of cohorts of when the physician went live on CA for.
<unk> in service to your 2021, our MA members with Pcp's, who went live on <unk> system in 2019 had a two 7% lower incurred MCR that members with P. C piece you went live on Clover system in 2020.
Similarly members with PDP two went live on Clover assistant in 2018 had a 4.9% lower incurred MCR than members, whose tcp's went live on clipper system in 2019.
Further the Clover system is a key to unlocking non insurance business lines.
For example in direct contracting we principally scale our model of care by deploying physician enablement software to providers versus acting as an insurer.
In these scenarios, we provide care coordination primarily through our software the clearer assistance.
This year, we expect to have approximately 250000 lives under management with about two thirds of these lives and two thirds of our revenue to come from these non insurance scenarios will.
We will be talking more about expanding this non insurance opportunity in the future.
Ultimately, we believe our success in fee for service is not indicative of anything program specific regarding direct contracting, but rather proof of our ability to provide software allows any physician to be successful in value based care.
This has been demonstrated by our leading growth in fee for service and we fully believe our software platform will be successful in other Medicare value based models as well.
We are highly supportive of innovation in the healthcare space, whether it'd be through a new program like direct contracting Medicare for all or Medicare advantage as it evolves.
In all these cases, the one constant one that we feel we are well poised to address is how do we quickly bring more physicians into these programs and make them successful. We believe the kluver assistant is proving to be this digital on wrap on to value based care and we feel very confident about our ability to be successful.
As new programs launch and old programs are changed.
With that I will now hand, it to mark for the financial update.
Thanks, Andrew I'm going to quickly cover the important items from the fourth quarter before handing it over to the back to wrap up the call.
We delivered $432 million in revenue in the fourth quarter up 160% year over year. This growth was driven by the launch of direct contracting and growth in our MA membership.
As of year end, we had approximately 129900 lives under corporate management and this was comprised of <unk> membership and direct contracting lives of 68120.
And 61876, respectively.
Moving to medical expenses, our net medical claims incurred for the quarter were $442 million.
Our cat M. A M. C. R was 102, 8% up only 30 basis points compared to the third quarter. Despite increased direct COVID-19 costs of approximately 200 basis points typical seasonal trends and higher outpatient utilization, which is carried over into January and it's something we'll be keeping an eye on.
Also our non-GAAP normalized M, a C or less 96, 7% compared to 98.0% in the year ago quarter.
We recognized a net premium deficiency reserve expense in the quarter equating to a noncash net expense of $62 million.
This was primarily driven by a $110 million reserve recorded for the 2022 financial year.
Joy collected an estimate at the sum of future medical cost claim adjustment expenses and administrative costs exceeding related future premiums in 2022 .
This was partially offset by the amortization of the remaining 2021 premium deficiency reserve of 48 million.
Direct contracting medical claims incurred on a GAAP basis for $235 4 million.
Our direct contracting margin was 103.0% up only slightly compared to the third quarter due to seasonality and increased COVID-19 costs relating to the omicron Spike in New Jersey, and New York, both of which ranked at the top in terms of hospitalizations by state in early January <unk>.
Excluding direct COVID-19 costs and prior period development non-GAAP adjusted direct contracted margin was 102, 1%.
Fourth quarter non-GAAP , adjusted operating expenses, which excludes noncash stock based compensation. She can cover therapeutics from salaries and benefits plus general and administrative expenses or <unk>.
$77 5 million.
Representing.
Okay.
Yeah.
Representing 18% of total revenues compared to $46 8 million and 28% of total revenues in the fourth quarter of 2020.
We expected adjusted operating expenses to grow at a more moderate rate and become a smaller portion of revenues as we scale and drive efficiencies, which is a key focus in our 2022 operating strategy.
Our GAAP net loss for the quarter was $187 2 million alright.
Alright, just to EBITDA loss for the fourth quarter was $154 8 million.
After excluding gross loss from direct contracting P. D. R. C Clover therapeutics at normalizing, our M&A business for the MTR impact of Covid, our normalized adjusted EBITDA loss for the quarter was $68 5 million.
Well, we had approximately 471 million total shares outstanding at the end of the fourth quarter, which includes the 52 million shares we issued in November as part of our capital raise.
Our cash cash equivalents and investments totaled 791 million as of December 31, 2021 and included $285 million in net proceeds from our capital raise.
Now, let me turn over to Vivek for some closing comments.
Thank you Mark just to wrap up we are excited about our expected improvements for 2022 MAA MCR. In addition, we believe we will see another stepwise improvement in EMEA MCR in 2023.
As it relates to operating expenses, we expect there will be only a moderate increase this year versus our Q4 2021 run rate driven by operating leverage and efficiency efforts. There is much more work being done this year to drive further cost efficiencies and because of that work.
If things fall into place. It is even possible may be profitable next year on a non-GAAP basis, excluding noncash expenses and nonrecurring expenses.
Okay.
<unk> is to improve every life as part of that I want to reiterate that we are very pleased with the CMS proposal that is now out for comment that lays out a path now to help equity gap.
Around risk adjustment and stars with that let's take questions.
At this time, if you would like to ask a question. Please press star one now on your telephone keypad to withdraw yourself from the queue. You May press the pound key once again that is star one on your telephone keypad.
We'll take a question from Richard close of Canaccord Genuity.
Yes. Thanks for the question Andrew I was wondering if you could go over that 250000 lives again.
And in more detail, you said something about non insurance and I just wanted to make sure I understand that.
Yeah, So basically the way that we're looking at this is that we have the insurance line of business, which is obviously Medicare advantage, where we act as the insurer.
That you understand that this is obviously in other areas, which started with direct contracting into fee for service space. We are we consider that to be non insurance because we are not acting in an insurance capacity, we're not an insurance company that's not how we're covered underneath like rent.
<unk>, we are actually signing business associated agreements with practices and physicians, providing them a clever assistant and then helping them go at risk.
Within fee for service.
With the government in a value based program, so where we are assisting physician groups and enabling them to go into value based arrangements, but are not acting as an insurance company. That's what we meant by that and the bulk of those are right now in the obviously in fee for service and direct contracting, but we tend to look at expanding that business too.
By enabling physicians to go at risk in other programs as well.
Okay and do you think youll have lives in other programs during <unk>.
2022 .
Yes, we were very looking at this very seriously it's something that we're looking at right. Now if you wanted to think about it it's quite straightforward for us to for a physician who's already using clover assistant to have started with either a fee for service to direct contracting or what RMA plan and then bring that into other areas.
That panel, we do want them to use clover assistant breath much of the panel coverage as possible. So while we don't have any guidance around that it is something we're looking at very seriously this year.
And Richard this is Derek.
Breakdown of that almost two safety is 160 to 165 direct contracting lives.
And 84 to 85 in my life.
Sorry, 84 to 80.
Okay. Thanks.
Andrew I was wondering if you could talk a little bit about.
Now that you have some scale wins expected 160 to 165000 lives on direct contracting how are you guys have been successful in getting M. A.
Physicians essentially.
Sure.
During the third quarter of this.
Yeah, absolutely. So what we're seeing here is that there are definitely synergies to more as I referenced just now the more lives that a physician can use to manage.
Their panel using <unk> assistant the better it results in more of that development of software muscle memory and engagement with the platform. So we definitely are seeing that we track you know physicians who are using it for both fee for service and MA and we were encouraged by what we see there. In addition, we definitely are going out.
Bringing in folks who are not.
Basically in that region are served by our MA plan I just want to also emphasize that that's something that we think is very successful as well is to be able to approach people on just the fee for service side and not necessarily on the on the MH side at all we actually do you believe that that non insurance segment could be a very fast growing segment for us as shown.
But by our initial success in fee for service and then there are certainly folks that once they start looking.
At our actual sort of successive quiver assistant that is easy to integrate to their practice.
We see that very quick to be scrapped them on that direct contract fee for service side.
And then we can talk to them about moving onto at risk with either our own them a plan or with others.
Okay, I will jump back in the queue. Thanks.
We'll take our next question from Kevin Fischbeck of Bank of America.
Hey, this is Adam on for Kevin Fischbeck.
Couple questions I think based on the math.
EMEA MLR disclosure and commentary youre kind of saying that U.
Baked in.
Uh huh.
A little less COVID-19 costs, and probably most of the risk adjustment.
Benefit. So are you basically saying that this 600 ish basis points of Covid that Youre building into MA MLR like if things are going to come in better than that that's all upside.
Thank you Steve.
Absolutely, especially around the guidance out of the 95% to 99%.
You guided to the gap in the MLR and you said you built in slightly less COVID-19 costs. So.
I'm just wondering if the rest would be upside if it came in better than the 600 basis points.
Yeah, but you are implying.
Yes.
I can't remember the exact.
And if we guided specifically to the amount of of Covid cost baked in but in our last earnings call. We did talk about baking in a few hundred basis points of Covid impact this year.
Again.
Not delineating specifically between kind of risk adjusted portion or.
Pent up demand.
Or just increased utilization driven by Covid impact.
But to your point it's.
Covid subsides and he was an impact over this year that technically would be.
I'm sorry.
Alright, Thanks, and then I guess I'm not sure how much you have to say about this but there's just been some controversy around direct contracting in the headlines, but I'm wondering if you have any thoughts and also you you guided to slight improvement in MLR year over year. So is it fair to say any adjustments are unlikely to actually be impactful to earnings given that.
It's largely breakeven.
In the near term.
Yeah. So great question and if you can maybe kind of our perspective on on Corvus has direct contract.
Yeah, absolutely. So so you know obviously direct contracting is if.
Something that is always being reviewed at sea.
I mean my program there the government it is entitled to review this.
But what we believe is there is definitely a focus on <unk>.
Bringing more physicians into value based care and this is something that's just as applicable on the traditional original Medicare side as well as in Medicare advantage, we definitely believe as a company that it's a consumer choice are legitimate consumer choice for someone to pick original Medicare.
Maybe with without med sup.
Or they might pick Medicare advantage and our goal is to provide kluver assistant in either of those scenarios right now we access the original Medicare market through the direct contracting program, but there have been other.
Forms of value based contracting between providers and the government before whether it be like <unk> or similar in Ethiopia.
Are there structures. So we believe that's going to stick around awhile value based care is around for a while what's really necessary is so many physicians are have been unsuccessful have not been able to move into value based construct which are better ways to create better outcomes at lower cost and clover assistant as a way for them to do that so.
We feel good about the success. We've had we believe that we're accessing a part of the market by helping physicians with our software platform, who need the help and who are not getting that help from others.
And we believe is a durable value that we are providing.
Just kind of add to that when we go back to kind of the original.
Founding vision of Clover.
It was always about how do we enable clinicians to make great decisions.
And with that scale and that's that's the core of our system software platform. We made a very intentional decision that we felt we could build the best software inside of a wholly owned insurance cases in any plan.
We don't think the debate around payment models is going to slow down I think it's only accelerate whether it's Medicare for all Medicare advantage direct contracting we're generally ignostic long term to payment models, mainly because the vast majority of our R&D efforts.
I think I'll leave it to the payment model side very much around clinical decision support and how do we help physicians make great clinical decisions on a day to day basis.
That demand I think we're at the very early part of that demand curve over the as we kind of look out over the next five to 10 years.
That's really where the base business opportunity clinical opportunity consumer opportunity is is really developing that platform I'm, making that much more powerful.
Yes, that's a fair point.
And then my last question.
Would be around the commentary around MLR improvement into 2023 was that mostly in reference to stars coming into your P&L benefit from pretty quick at Starz and then given some of the CMS.
CMS Gabe.
Plan right at year end 2023, I was wondering if you can remind us both the confidence level in maintaining at least three four star five Star then to 2024.
Yeah.
So.
From a guidance perspective.
We our original guidance was to have three stars for payment year 2020, we ended up at three five.
Our guidance for 2021.
Three five stars.
Nothing has caused us to change that guidance that would affect payment your 'twenty 'twenty four.
As it relates to looking out past this year and into 2023 I think one of the things that is unique to Clover is clover assistant is constantly improving so there is <unk>.
Actual feature iterations happening every for every three weeks or so.
That by definition, we feel good is going to cycle into impact throughout the course of this year and definitely into next year.
Beyond that in terms of actual clinical programs. One program that we stood up at the very beginning of this year as part of our annual primary care program is a palliative care program that this was the first time, we've launched at quite a ride home primary care program.
Couple that with what we started to execute on towards the back half of last year.
Our partnerships with timeshare cricket health and oncology in chronic kidney disease, respectively.
We expect to start having an impact.
Going into next year as well.
As most of you have other programs that may have more of a modest impact.
Beyond getting.
The stars improvement in back to next year.
Okay.
Alright, thank you.
We'll take our next question from Jonathan Young of Credit Suisse.
Hi, Thanks for taking the question I appreciate the commentary on M. A.
The advance notice I guess when you think about 2023, how you think about.
Benefit design kind of moving forward, you've got you're obviously has which benefits already so I guess given some of your larger peers are thinking about.
Back into the market a little bit more heavily.
How you think about that competitive landscape.
If you have to redesign your.
Benefits a little bit more in.
23.
Yes, I think.
I think if you just take a step back and if you look at where the growth has been in Medicare advantage over the last.
Five years, it's really been on the PPO side.
I don't have the numbers in front of it I think the growth rate for PPO versus HMO plan segments has probably been double maybe even more than double.
So when you look at kind of the incumbent plans that you're probably referring to.
Their HMO book of business is twice that of their PPA book of business, but it's growing at a much lower level when they think about driving gross margin its really on the HMO side.
They don't really have the capabilities.
To drive attractive gross margin at scale on their PPO plans for a multitude of reasons.
Their models are very much jet generally tied to having a strict control around the network.
And really using kind of that stick approach.
The vast majority of our of our business on the MA side, and 90% plus on the PPL at so irrespective of what competitors do in terms of coring dollars. Additionally.
Additionally, the benefits.
They still have to go up against the option of flexibility. So you can make an HMO plan more attractive but are you sure.
Competing against at least in the markets, we're in an attractive PPL model.
That's actually our core business.
Kind of fast forward.
Next year the year after and so forth.
Comments are getting into.
Business model that they are not actually well equipped to execute well on which is a world of choice in network flexibility and technology.
So we feel very good about continuing to invest in building a great.
<unk> planned model, but again powered by the Clover assistant.
Taking a step further I think youre absolutely right. There is definitely a in terms of your initial point a huge gap between our plan design attractiveness versus the competitors.
We're still in the very early stages in terms of thinking through the design.
How we want to.
Just that.
Which markets, we may adjust that and so I think a lot of work to do there between now and it's an issue in the May timeframe.
But in terms of thinking about balancing growth versus M&A NCR, it's very much top of mind and it's something we're super focused on.
And we made reference in our earlier comments.
If some things fall into place there is definitely that potential in a non-GAAP basis to get to profitability next year, an MAA in Crs.
It's definitely a huge laboratories that.
Okay, Great and then just going back to D. C again.
The concern around the program I guess I.
I guess.
Are there any steps youre, taking in case there are significant changes in our program I understand that you're obviously going to continue to build out the software and.
As needed, but I guess is there any contingencies in case there are major changes said D. C program are you looking to go into all the other ACO programs, perhaps anything of that nature.
Yeah. So.
You asked me the specifics because obviously, we're just wanted to see at what the <unk> decided to do here before we react too much and for obvious reasons, yes, we believe that we want to serve as large a portion of a patient.
Providers Medicare panel as possible that includes a fee for service and original Medicare that can be through direct marketing program, but there will be programs in this area.
We can move into as well as being able to serve across the Medicare advantage gamut, whether or not where the risk taking entity or not that's why we're thinking of it as our non insurance businesses, where we're not playing the role of the insurer. So.
I think when you look at our success in direct contracting and a rapid rapid growth. There. That's just a sign of the demand and the fact that we're not blue water market and have access to this very large Tam where everyone else is sort of competing for a very small number of sophisticated providers, who know how to go into value based programs.
That's fine that's sort of like you know.
People can compete over those providers were able to access the majority of providers.
You'd help going into these programs haven't been successful in the past, but with Clover assistant can be successful and that model. We are sure is going to continue to exist.
Need for that will remain in the fee for service world as well so.
We don't think we need like a direct backup plan here, but we intend to stay in the fee for service market.
Okay, Great and just last one.
You broke out the cohorts.
For you and a MLR so I guess.
If we think about that from the D. C side or should we expect kind of similar improvements in terms of cohorts, you're obviously, adding a lot. This year for 2022. So I guess you know should we expect you know 10 a.
100 that the improvement on the 2021 cohort how should we think about the 2022 cohort coming on just any color around that.
Yes, Barry.
Sure.
I'm sorry go ahead.
Yeah, I'm going to say I think it's a little too early for us to actually look at this right now very fair question to ask but we need more data did you, obviously do that cohort <unk> and DCM.
D C and they are obviously different program similar in almost identical in terms of clinical care as Vivek pointed out but one of the benchmark based program. One is a complicated program right. So we wouldn't expect identical.
The dollars flow through slightly differently. So we'll share more as we actually are able to track and create those cohorts.
Great. Thanks.
Yeah.
Thank you we'll take our next question from.
Gary Taylor of Cowen.
Hi, good evening.
Just a couple of questions if I could I wanted to go back to <unk> comment that.
Could actually be non-GAAP profitable in 'twenty, two I just want to make sure I'm understanding the point there if we take the midpoint of your MLR.
In revenue cadence in your G&A number I think it implies an EBITDA loss of roughly 200.
$40 million, so to flip that even to break even.
Outperform your MLR by <unk>.
750 basis points or so so am I kind of in the ballpark on those numbers and is that MLR piece, what you're describing is sort of the.
The key play that.
Profitability could be.
Plausible for and when you went next year as you meant 23 versus maybe maybe I'm off a year, that's 23 versus 22, but just to clarify that.
Yes.
'twenty three and just to your point.
So obviously there is two parts of the P&L there was the revenue line.
And then you have the expense line.
So I think as you've seen there's been a topline growth component.
This year versus last year.
Kind of look at next year, we expect growth again.
One of the things.
Given that you're spending kind of the vast majority of your career with managed care organizations in terms of researching that.
I think it pretty familiar with that kind of a typical.
Opex as a percentage of aggregate MA premiums is anywhere from kind of 8% to 12% depending upon the size of the plant.
You, obviously see where we're well above that.
So from and it's not rocket science past, a certain size organization to be able to right size.
Leveraging growth in terms of operating synergies to get there. So that's a big problem and Theres a ton of efficiencies. We have ahead of us to be able to achieve particularly on the technology side and the synergies across.
Different lines of the MAA and beyond as Andrew referenced.
And then on the MLR again kind of a few core parts of the equation. There is definitely the MCR site on M&A.
But I'm going to resist giving you any specific guidance around that given there's lots of different paths to that.
Again, which drug is go realm of possibility.
And we do think it is possible, but we're not necessarily guiding to that.
Got it.
And do you have a parent cash figure for us at the end of the calendar year.
I think I think total cash I want to say it was around $800 million.
Mark can correct me.
For the end of the year.
I I don't have a number I can share at the moment.
Gary well get back to you okay.
Or will look for it in the K then.
Last one for me can you just describe a little bit about how.
<unk> grown the direct contracting so you've raised guidance twice in terms of your enrollment there for 'twenty two could you just break out.
How much of that enrollment is coming in through claims alignment versus voluntary and then really is your strategy around it you know is there a per visit financial incentives for the physicians is there a profit split is it is it really the attractiveness of getting to use Clover assistant can you just.
One I'd like to see sort of the breakout of claims versus attribution, but just sort of how are you finding.
The success of of signing up these physicians as participants under your D C.
Yeah.
Alright, so basically I don't have the exact number but the heavy majority coming through claims alignment and that's part of our strategy here.
The reason is this that the success were coming from as we go to existing physician groups like I said, who want to move into largely they've been on fee for service, maybe they've tried to put their toe in there in the water with value based contracting.
Contracting and we say to them, we can help you move into a value based contract and.
And be successful in that.
And so we are actually having a <unk> business to business motion, there, where we contract with an existing physician and then their lives move into the D. C. E. As claims aligned lives. The normal methodology. This is as opposed to other models, which are heavily relying on voluntary alignment, which means that they're trying to switch folks oftentimes because by definition.
If they were claims align there would be claimed aligned if you did you use voluntary alignment that means that you actually didn't have the plurality of claims from last year and youre trying to switch them into your practice. There is no switching required for US. We just wish we just get the people who are already seeing Pcbs and that's how we're able to do.
Gross to rapidly basically and then yes, we have a similar model to MAA, where we have an economic structure, where they are able to predict and say you know this is how much we were earning before we give them extra compensation around my quiver assistant just like we do on the M&A for the time and the effort they are using to provide value based care.
And then we move onward from there.
Thank you.
We'll take our next question from Whit Mayo of SBB Leerink. Your line is open.
Hey, Thanks, good afternoon.
I wanted to go back to sort of an industry development that's occurred.
In the last year with CMS enhancing a lot of the compliance around.
Third marketing, our third party marketing organizations and there was a notice that that was issued I Wanna say October 8th that.
It created a little bit of.
I don't know some anxiety and some you know.
Some concern among certain carriers as to how they were supposed to comply with some of the the mandates that CMS had I guess, if I back I was hoping to get just your overall perspective and view on what happened and how Clover responded and and maybe I'll just I'll just stop there to get your response.
Yes, that's a great question.
We are very very supportive of.
Particularly the recent efforts by CMS.
To create a much higher bar in compliance requirements around third party marketing.
I think we've seen a lot of third party organizations sort of pop out of nowhere over the last many years really just trying to generate leads and selling leads to various organizations.
We do think it creates a lot of confusion in the marketplace.
Consumers don't generally know always what they are signing up for.
It's no secret that.
Churn is meaningfully higher with those strategies than kind of the normal.
Word of mouth or independent field agent type approach and.
And that churn is higher because there is confusion in the sales process.
No.
We're definitely Barry.
Bearish on kind of all of those models that are.
Taking a very sophisticated approach and really trying to explain plan options.
But I.
I think suffice to say.
I think we I think we would expect to see.
Continued rules and regulations on gearing to make sure. It's serving its kind of intended purpose. It following kind of the policy attack I think theres just as another example of that.
We referenced in our opening remarks.
Some of the meaningful proposals that CMS.
CMS is making around health equity that can impact risk adjustment and a way dramatically to help those that are most in need.
I think that's just another example of that.
I expect those types of changes and proposals will accelerate.
Andrew do you have any other.
They're coming from that.
Yeah real quick just a quick one Matt I think <unk> covered the main points a couple of different things as you know we talked about this in the past, but we've had less exposure to some of the online brokerages and then as well as Vic said to the field marketing organizations, where there's been a bit of a game, we think that it built up to use marketing dollars routed from a managed care plan.
Each of them.
Organizations to sort of bypass the caps.
Provided on broker commissions, which is obviously not in the spirit of the regulation. So very pleased to see that closing down.
And on the electronics side have definitely seen.
Again, as Mike alluded to high churn coming from those particular lead sources as well as a very rapid a race to the top in terms of cost per lead.
Again are we are sold by those electronic brokerage is too.
But we our exposure to them has been significantly more limited than other managed care plans I think that's probably why you saw our we're pleased with our success in this prior to AEP.
Got it.
One follow up question is just.
If you sort of reflect back on.
The 2022 open enrollment cycle and looking at some of the growth that you've had in some newer markets and I guess I should say not not newer but not your legacy core New Jersey markets, but what lessons were learned in terms of the receptivity the benefits what the plan design looks like and then when you.
Look at some of the success stories that you guys have internally what do you think was resonating out in the field with brokers with consumers just anything that would be helpful for us. Thanks.
Yeah.
Yeah, Great question.
Thank you.
Andrew has some thoughts on this as well after a few.
I think from our initial sort of readout from a lot of the conversations we've had is.
Clover from days Euro it has just been a very transparent organization.
Two individuals who are who are selling at a glance.
In terms of consistency around benefit design.
Easy to engage with.
And I think importantly, driving we think about the plan design feature.
<unk> true flexibility in network choice.
And we're a broken record on that point.
I think the kind of the Andrews point.
All of this AEP really showed us that we've been able to maintain an attractive growth rate.
Sticking with our core principles of making sure. It's a very pure sale process individuals' selling clover know what they are selling.
Making sure consumers are picking the right plan for them irrespective, whether its closure or another plan.
And leading with choice leading with PPL.
And I think.
It's going to be a bigger and bigger and bigger struggle.
With any organization set lead with Asia, where the majority of their margin or business that is driven by actual now they're going to struggle.
Nothing's going to change that trajectory on a go forward basis.
So that theme is just only accelerated interest we're seeing kind of we're now getting to that point, we're servicing them.
Some of the results and investors are seeking public market investors.
But kind of occupancy or Asia, or even sometimes that kind of a simple answer is basically what's happening, which is Asia, which is not what people want.
Yeah.
Really the corollary that I have had this question and I'll I'll stop is just any way to frame or size.
The coverage that you have within these newer markets with Clover assistant and I guess, the key is to deploy the technology in the hands of your physician partners, but where do you stand today in terms of the adoption levels and that that physician engagement. Thanks.
Yeah, absolutely so great.
Great point I think we can share some stats I don't think we publicly shared them yet. So we will think about doing that's a great feedback there qualitatively the way we think about this is obviously having access to Clover assistant physicians is core to our model. It's something that we think are every single one of our members whether it be on the fee for service side or the MH side his entire.
All of them deserves great data driven.
Our primary care.
So we always make sure that folks have CA doctors. They can go to it takes a little bit of time, sometimes for us to see where our new members is going and where we're growing very rapidly like in our newer markets.
We obviously have a majority of your members and so it takes a little bit more of a time for us to find out where those doctors are and go and talk to them about working on clover or getting on CA et cetera. So we tend to have see a coverage some upfront when we build our networks for adequacy and then we build out the networks throughout the year as we see the doctors that are our members are seeing.
Sorry, as we see it in our data where our members are going so more to share on that in the newer markets, but that's certainly the trend we've seen in.
The core markets of New Jersey, and what we're replicating in places like Georgia as well.
Okay. Thanks, Andrew.
We'll take our next question from Jason Cazorla of Citi.
Great. Thanks.
Hey, guys, great. Thanks for taking my questions.
Just really quickly Rami incremental 10 states that you're entering in for D. C program, a 22, well those new states help inform you in terms of how you think about I may state and county expansion for 'twenty, three and beyond or is there any way you can kind of like help frame that at all.
Thanks.
Alright.
The D C D C states framing M&A expansion is that what the question just make sure I heard it.
Yeah, you had an extra 10 states or youre going to the 10 states that you're in 10 states in 'twenty, one you're going to transact in 'twenty two just thinking about if those new states will help frame the way youre thinking yeah, Okay. Yes.
Yeah. The way I would think about this which is which I think is a useful framing here is that previously but when we just had MAA in order for us to sort of like a test out a new market or new state we had to build a network adequacy due to bid which was we were fine doing that and we've been showing and we're very good at that actually buy our.
Right, but if it's material overhead in terms of resources operational costs like <unk> set to do that with something like a direct contracting we're able to much more easily work with physicians directly in any given state and we don't have to necessarily have all the overhead of building network et cetera, So that does give us meaningful <unk>.
Earlier, so I think I'm, not saying that we won't also sort of textile markets with MA. It just allows us to have higher conviction before we do that.
Testing the waters with some of our physician partners.
Cypress.
Got it okay. Thanks, that's really helpful. Maybe just go on shifting over to I may I mean, youre at Youre talking 26% to 27% growth year over year on average is.
Is there any way to help delineate the attribution of that growth between existing counties in a.
Call. It 101, new accounting for 22, just any way consideration on that would be helpful. Thanks.
Yeah, So I can't remember what we publicly shared here. So we can make sure that we're consistent and get you more information, but what I'll say is that we're definitely very pleased with our growth in the core counties as we've always been.
In New Jersey, and then we've also talked about how we've been quite happy and we have some slides on this that we shared at conferences and things like that that Georgia is absolutely pacing along the historical growth path that we've seen new Jersey grow along so we have markets sort of like where we're landing still establishing our foothold we definitely think that you know our core markets and new <unk>.
<unk> you are I wouldn't say they are mature yet, but we've always done well there and then somewhere like Georgia, where we've shown that in New Jersey playbook is working well and is on obviously.
Obviously, a couple of years back, but growing in a way that we saw with the Jersey markets. So we're pretty happy about that.
And I think I was just really quickly a follow up on that comment around George I mean, that's definitely helping I think latest number how much shows around 12000 members in the states I know you've talked about replicating what you did in new Jersey in Georgia, but maybe just real quickly the thought process around jumping into charges, specifically and then whats kind of helping to drive that outsized growth relative to your.
Your expectations from before that's it for me thanks.
Yeah, absolutely and so we're very data oriented so I think someone else alluded we've been in.
We tend to have a land and expand strategy with MAA with D. C. We have more opportunities to do to land as well a little bit more effectively and cost efficiently, but as we look at signal on the market. We look at networks. We can there's not any one thing certainly other plans, but I do think that it's a combination of the provider landscape locally that met the benefits, we can offer but very centric on.
Do we think we can offer very very strong PPO in this market and provide that network choice that you back what have you.
Moving to it really is all about that I think that we tried to emphasize that because so few other MA plans will emphasize the wired network because narrow network is a priority, but certainly you know.
Most people coming out of commercial.
Understand that you pick the HMO when you want a compromise and have a narrow network in exchange for some cost savings, but in general if you could have it you want the PPO I think that thinking carries over into Medicare as well people are just been trained get these narrow network HMO MAA plan, but the P. P. O is the more desirable product so as long as we have.
Thinking about that that's really the core of what we've always believed desktop choices. Good and then what we're also seeing to add to that is that physician that resonates with physicians as well right being able to work about clover provide some deleveraging from the sort of working to large incumbents.
It helps them with their network negotiations a little bit. So I think that also helps on the physician side.
We'll move next to Calvin startup of J P. Morgan.
Okay. Thanks.
I had a question going back to the cohort analysis.
So I know, it's not apples to apples exactly it's the non-GAAP versus that 95% to 99% GAAP MCR range, you gave but if I just think about the year over year improvement across the cohorts.
I mean, presumably a big chunk that comes from you earlier or I guess your more recent cohorts from risk scores improving but.
As we think about the year over year improvement how much how does that get allocated really across the different cohorts are more skewed towards more recent cohorts are as they come really through some of the more mature vintages.
Let me answer. This way then you can ask a follow on of it doesn't make sense. So I definitely.
When people start using clever assistant because we have the ml the agenda. The rules engine because we look at total comprehensive body truth. There certainly are additional diagnosis and the deferred in the first year, where we say hey have you thought about this have you thought about key disease have you thought about this you know the risk factors that result in risk adjustment.
Credit through diagnosis. However, what we also see is that the Cosby, we push for and it's just on care planning for all those which is appropriate from a park acquisition.
That doesn't really actually increased that much into later cohort position stays on Cobra assistant in later years, what we're seeing is that it's really the care planning over a longer duration of time, because obviously, if you catch CTD earlier and you weren't thinking about that and you were able to catch up a lab test and plan for it earlier that does move the overall medics.
It might actually increase medic, the short term, but it will smooth the medics curve over a number of years and so the increase from cohort to cohort within the same physician tends to be the effects we believe of.
The better care planning on medics and not from something like a readjustment.
Okay, and then just one quick one on modeling a.
A couple of other companies have.
Called out something some stuff around.
MCR seasonality from Covid I'm, just wondering if theres anything that you guys have seen your population so far.
That would be notable as we were thinking about modeling out 'twenty two.
Thanks.
Yes, I think one thing that.
I think the data is publicly available now but.
It's a look.
Set up a little bit different in the center, but we look on the M&A side.
Still a significant percentage of our members are in New Jersey, and so when you look at publicly available data. So you look at 2021 and even into January of this year and you go back to 2020 as well.
New Jersey State of New Jersey.
Ranked number two in the country just behind New York.
Highest.
Per capita COVID-19 Medicare costs divided by total per capita Medicare costs.
I think it was a few hundred basis points above the median.
I know, we've gotten a lot of questions over prior kind of earnings calls around.
So how does new Jersey different well the data is now kind of pretty low that the day that it is pretty different in terms of experience.
Exactly that kind of the entire degradation of that so I think it's a little bit harder for us to sort of map to COVID-19 seasonality.
Yes.
Given that and we don't know what this year is going to hold versus last one we assume it's going be a little bit of a lesson.
Impac.
Yeah.
Got it thanks.
At this time I would be happy to return the call to Derrick Neuman for the Red portion.
Great we have time for a couple of questions.
The first question is.
When will Clover announced a permanent CFO vivek.
So we've got.
Meeting some great candidates.
I think.
Couple of things as we're thinking about is we're.
Obviously looking for someone.
To be with us for a long time, we're being pretty patient with their choice and we are creating a pretty high bar at the same time.
Mark has done a great job as interim and I think has given us the luxury of time of being able to be.
Pretty patient choice.
Choice and at the same time, we've been able to bring on some great talent.
Into the organization.
Over the last few months outside of the CFO role as well.
We've.
Create a really strong.
Finance team over the last kind of six months or year underneath.
Mark.
Great next question, what other possible business pivots.
Our fee for service licensing software expanding to new healthcare markets are you looking at.
Andrew.
Yeah. So.
I wouldn't I wouldn't call them, a pivot I think that Medicare is yes.
We're very comfortable in the Medicare space right now, but there's a lot of room within that to get to the trillion dollar Tam that we've always talked about right. Our goal is to be the preeminent physician enablement platform within Medicare for value based care. We started in MMA, we brought back a fee for service, where we've been very successful I think it used.
Our software platform to be able to enable physicians to to come to value based care in fee for service and then there are other places where it would make a lot of sense for us to enable them to do similar things perhaps in there are there any plans, perhaps like you know with the air medical.
Medicaid for example, which are very adjacent to Medicare.
Plenty of room for us to be able to explore new models, while staying very consistent and building on top of our current success.
The final question from Red It given our time constraints is what new enhancements are being added to clever assistant in the near future and then we'll turn it over to get back for closing remarks.
Yeah. So there are there are big features that are small features but what we're always doing is like.
Top of mind for me is constantly iterating and doing tests to see like everything down to the smallest things for example, I know, we're looking at stuff right now where.
We're making it easier for physicians to see.
Data point that didn't come from their own practice, maybe it was a lab reports or maybe those are from other physician practices.
And they want to use that information to be able to aid in their own decision making.
Making more of a theater available we're comfortable putting more integrations to pull that up in and then making sure that's very easy to access.
Yeah.
That's core to what we do but even just saying something as simple as that there's dozens.
Different sub features underneath that that we could build it.
To serve that particular need but really excited about that that we're constantly iterating trying new things and then we'll launch a major new features probably like two or three times a year.
Great feedback.
Thanks Scott.
Just close.
Everyone's time today.
In summary, we feel really really good about where we are today.
In particular, our team our growth improvements MCR and in particular lowering lowering our opex as a percentage of revenue is expected in 2022, and just reiterating what I said earlier.
Great work being done this year to drive further margin improvements because of that.
If a number of things fall into place. It is even possible may be profitable next year on a non-GAAP basis.
When excluding noncash expenses and nonrecurring expenses.
Enabling this is Culver assistant and that's providing a true and growing technology moat, while we're making a meaningful and positive impact on health equity along our mission of improving every life.
Thank you again everyone.
This does conclude today's program.
You may now disconnect your lines and everyone have a great day.
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