Clover Health scales back on ACO REACH participation

Clover Health President Andrew Toy is transitioning to the role of CEO.

Photo: Courtesy of Clover Health

Insurtech company Clover Health is scaling back its participation in the federal government's Accountable Care Organization Realizing Equity, Access and Community Health program.

"We have decided to significantly decrease the total number of participating physicians," said President Andrew Toy during the company's third-quarter earnings call this week.

The move is being done in part to improve the company's medical cost ratio, which for the third quarter was 104.2% in the non-insurance segment. Also, there's still unpredictability in the new model, according to Toy. ACO REACH is not yet a statutory program, so its rules can change and its rates could get tweaked, he said. Clover still intends to be one of its larger participants.

"ACO Reach is an innovative program, and its rules and benchmark rates continue to be adjusted by CMMI (Center for Medicare and Medicaid Innovation), resulting in some amount of unpredictability," said Toy, who is transitioning to the role of CEO now held by Vivek Garipalli. "Given the program environment and the learnings with our participants, we have modified our ACO to target an MCR (medical cost ratio) lower than 100% next year and have made adjustments to the number of physicians participating in the ACO REACH program."

Clover is scaling back on ACO Reach despite having many new participants for 2023 that would have allowed for substantial program growth, he said. 

"We believe this will reduce total attributed lives and revenue managed by our ACO by up to two-thirds," Toy said. "We still expect this business line to have a scale of approximately $1 billion of annual revenue. And importantly, we very much believe these adjustments will result in a sustainable business line with an MCR below 100%," Toy said.

Physicians not admitted to the ACO in 2023 will be supported in their shift from fee-for-service to value-based care through existing programs, such as the Medicare Shared Savings Program, which is already statutory with more defined rules, according to Toy.

WHY THIS MATTERS

Earlier this year, the Centers for Medicare and Medicaid Services announced it had redesigned its Medicare Direct Contracting Model to an ACO model focused on health equity. ACO REACH replaces the Global and Professional Direct Contracting (GPDC) Model at the end of this year.

But both models have been controversial because opponents believed it would lead to the privatization of Medicare. In February, Physicians for a National Health Program (PNHP), an organization of 25,000 doctors who support Medicare for All and oppose Medicare privatization, rejected the ACO REACH model, as it did the GPDC.

"ACO REACH is Direct Contracting in disguise," PNHP President Dr. Susan Rogers said at the time.

However, more than 200 healthcare organizations, including Banner Health, felt differently, asking Health and Human Services Secretary Xavier Becerra to keep the Global and Professional Direct Contracting Model, calling it the premier accountable care model.

In August, CMMI released financial specifications around the new ACO REACH Model and chose 110 provisional members after a reported 18 members withdrew their applications. The ACO REACH model year begins January 1, 2023, and will run through 2026. 

Clover Health said while the decision to reduce the scale of participation in the ACO program is expected to result in a reduction of non-insurance revenue by up to two-thirds, it will still represent $1 billion in revenue. 

It is putting the emphasis on profitability through continued improvements in MCR and adjusted EBITDA performance. 

"While some uncertainty exists due to typical end-of-year seasonality in medical expenses, as well as the ongoing risk of COVID surges, we are revising our 2022 insurance MCR guidance to reflect our overall improved performance and positive momentum," Toy said. "We now expect a range of 93% to 94%, favorably updated from the previous range of 95% to 99%."

CFO Scott Leffler said that looking to 2023, Clover expects the insurance line to continue to grow at above market rates, although somewhat moderated from recent years. 

Clover Health has been growing its Medicare Advantage business. In July, it announced an expansion into 13 new counties across three states in 2023: Georgia, South Carolina and Tennessee.

Clover earned 3.5 stars in this year's Medicare Advantage star ratings, which means additional revenue for the company.

New MA members typically represent a headwind to MCR as it takes a year or two to comprehensively diagnose health conditions and bring them care management, according to the company. This transition period for new members impacts both MCR and star ratings.

THE LARGER TREND

The new ACO REACH Model requires all participating ACOs to have a robust plan describing how they will meet the needs of people with traditional Medicare in underserved communities and make measurable changes to address health disparities. This includes greater access to enhanced benefits, such as telehealth visits, home care after leaving the hospital, and help with copays, according to CMS.

REACH ACOs can include primary and specialty care physicians. 

Twitter: @SusanJMorse
Email the writer: SMorse@himss.org