Clover Health eyes home health push: Day 3 at J.P. Morgan 2023 healthcare conference

8:45 p.m. CT: Oscar Health shopping for a new PBM

Oscar Health is in the market for a new pharmacy benefit manager, CEO Mario Schlosser said.

CVS Health’s Caremark manages pharmacy services for the insurtech but Oscar Health is soliciting bids for a new PBM this year, and expects that with its increased size, it will be able to lower its costs for pharmacy services.

The change is one of many Oscar Health is banking on to help its insurance arm turn a profit this year and the company to break even in 2024, Schlosser said.

“It is easy to miss that, in health insurance, a lot of the cake gets baked before the year even starts,” Schlosser said. “We’ve already taken steps for margin expansion in ‘23.”

The company limited sign-ups in Florida, priced for above-market premium increases nationwide and expects to start the year with about 1.1 million exchange members, Schlosser said. Open enrollment for exchange plans ends Jan. 15.

The company operates virtual primary care plans in five states and half of its members have access to these more affordable sites of care, he said. The plans reduce member medical expenses by 5% compared with traditional insurance products, Schlosser said.

Oscar Health also is working with providers to reduce the number of one-day inpatient stays, and better manage its out-of-network care costs, Schlosser said.

Oscar Health laid off 80 employees, or 3% of its staff, last month, according to a company spokesperson.

It renegotiated one of its agreements with a reinsurance provider for 2023. Reinsurers essentially act as insurance for insurers, and are a popular financing mechanism for startup insurers looking to grow quickly. Health plans can pass on a portion of member premiums to reinsurance companies in exchange for the reinsurer covering medical costs. But reinsurers can charge high fees for accepting patients’ risk.

During the first three quarters of the year ended Sept. 30, Oscar Health passed along $1 billion in member premiums, or about a quarter of all premiums it earned, to reinsurers. The company will have about the same level of reinsurance this year, Schlosser said.

“Right now, I think reinsurance is a cost-effective source of capital for us, certainly better than raising equity against future growth,” Schlosser said. “But it is costly.”

—Nona Tepper

7 p.m. CT: Bright Health banks on ex-customers for future growth

Bright Health Group’s former health insurance customers will drive growth this year, CEO Mike Mikan said.

The company grew too fast and its expenses mounted, he said. To keep the insurtech afloat, Bright Health eliminated its exchanges business last year and to focus on selling Medicare Advantage plans in California and operating primary care clinics in Florida and Texas.

Bright Health plans to incur a pre-tax charge of up to $90 million to wind down its exchanges operation and spend approximately $72 million to restructure, according to a filing submitted to the Securities and Exchange Commission Tuesday. The company plans to complete these operational changes by the end of the year. Mikan reiterated his goal of profitability on an adjusted earnings before interest, taxes and depreciation basis in 2023.

“We’re mindful of the challenges we’ve had in our business,” Mikan said.

Bright Health operates 75 primary care clinics under its NeueHealth brand, and last year treated 500,000 patients, including Bright Health policyholders, those with other insurance, and Medicare and Medicaid enrollees. This year, NeueHealth expects to serve 235,000 patients, 70% of whom will be former Bright Health insurance members, Mikan said.

All of these clinics operate under delegated risk arrangements with other payers, so the company’s familiarity with managing patient care will help drive profitability, Mikan said. “We have become a leader in value-driven care in the commercial market,” he said.

In its insurance business, Bright Health priced for profitability and expected the number of signs up during open enrollment this year to be “flat-to-net-slightly-down as we terminated some relationships,” Mikan said. “To our pleasant surprise, we ended up in the positive side of that, so we’re favorable net new adds,” he said.

Because Bright Health specializes in covering those who are dually eligible for Medicare and Medicaid, it does not rely as heavily as other Medicare Advantage carriers on its performance during open enrollment, Mikan said. People who are Medicaid-eligible can enroll in Medicare special needs plans at any time.

The insurer aims to sign up 125,000 Medicare Advantage members by the end of the year, which would translate into a 12% revenue increase. The company also aims to end the year with 65,000 members enrolled in its Medicare Accountable Care Organization REACH program.

—Nona Tepper

6 p.m. CT: Alignment Medicare Advantage enrollment rises 11%

Alignment Health increased its Medicare Advantage membership by 11% during the fourth quarter, CEO John Kao said.

The health insurer, which covers more than 108,000 Medicare beneficiaries in six states, expanded into the competitive, fast-growing Florida and Texas markets last year.

Alignment Health didn’t gain the traction it sought from providers in the two new states, however, Kao said.

“[We need to] be confident with our provider engagement, which is good in all markets, and have the confidence with aggressive pricing on benefits [while still having] responsibility toward margin,” he said.

—Alex Kacik

5:30 p.m. CT: Investors share familiar themes for ‘tricky year ahead’

A panel of health tech investors shared advice with a familiar refrain: Digital health buyers are looking for a return on investment and more comprehensive solutions.

“If you’re selling to health systems, they’re struggling. They don’t have enough budget,” said Hemant Taneja, CEO of General Catalyst. “If you’re selling to employers…many of them are struggling. They’re trying to figure out the impact of inflation on their businesses. In these cases, the emphasis on ROI becomes far greater.”

The importance of ROI amid economic uncertainty has been a common theme across multiple sessions at the conference, shared by health system, health insurance, digital health and investors alike. Another widely shared thought: that companies offering tech services and products that only focus on only area of medical care may need to find acquisition or merger targets.

“There is consolidation that needs to be thought about,” Taneja said.

Amy Raimundo, managing director of Kaiser Permanente Ventures, said having too many single software solutions is expensive for systems and requires too much change management.

“There have been a lot of narrow [tech solutions] that have proliferated where the juice isn’t worth the squeeze,” Raimundo said. “We can’t justify the cost of putting those into place.”

Dr. Cheryl Pegus, managing director of Morgan Health Ventures, part of J.P. Morgan’s employer-focused health company, said the market will create opportunities for digital health companies, health systems, employers and health insurance companies to collaborate.

“Survival and ROI requires data-sharing. I think that we will see a lot more of that and we’re already seeing it occur,” Pegus said.

Taneja said it will be a “tricky year ahead” for digital health companies. The focus has shifted from revenue growth at all costs to generating a profit, he said. There were also a lot of wildly inflated valuations where healthcare services startups were getting valued at around 20 times their funding total, compared with the current rate of three times their total.

“Startups have to be creative in how they navigate these next couple of years in terms of figuring out how to grow into their valuations at normalized multiples,” Taneja said.

—Gabriel Perna

5 p.m. CT: Clover Health targets home care growth

Clover Health aims to generate $150 million this year by providing home care services to its Medicare Advantage members, CEO Andrew Toy said.

The insurtech currently offers in-home primary care services to 3,300 Medicare enrollees in New Jersey. Clover Health reports its clinical services revenue as part of its corporate segment’s financial reports, which earned a profit of $127.2 million through Sept. 30. Overall, Clover Health reported $75.3 million net loss during the first three quarters of 2022.

“Home care is strategically where healthcare will be moving toward in the next few years,” said Toy, who became CEO at the start of 2023.

Like the company’s Medicare Advantage plans and Accountable Care Organization REACH program, Clover Health’s home care business is powered by Clover Assistant, its technology platform. The tool combines artificial intelligence with data sources to prompt clinicians about conditions patients may have.

Clover Health pays physicians to use the assistant, and likewise pays patients to visit clinicians that do. The tool is “widely deployed” among doctors and integrates with all major electronic health record systems, Toy said.

By helping clinicians diagnose and treat conditions such as diabetes or chronic kidney disease earlier, Clover Assistant drives better outcomes and likely reduces costs, Toy said. “I’m sure down the line I’ll have actuarial studies that ties all this together,” he said.

Clover Assistant’s ability to accept feedback from clinicians helps drive uptake, he said.

As an example, the technology was programmed to prompt clinicians who prescribed a specific inhaler to diagnose patients with chronic obstructive pulmonary disease. Most doctors rejected the suggested diagnosis and Clover Health asked why. Many clinicians were prescribing the inhaler off-label to manage allergies so the company modified the tool, he said. “I think that earns a lot of credibility with folks,” Toy said.

—Nona Tepper

11:30 a.m. CT: Doctors ordering more tests, Quest Diagnostics says

Physician orders for testing are up as patients seek care they delayed earlier in the COVID-19 pandemic, Quest Diagnostics CEO Jim Davis said Wednesday.

The company’s testing volume exceeds pre-pandemic levels, he said.

“We have continued to see slight increases in test density. Some of that could’ve been because of delayed care,” said Davis, who became CEO in November. “As we enter into more of an inflationary environment from a healthcare cost standpoint, it is hitting employers’ bottom line. They are very motivated to work with us directly.”

Quest plans to expand its molecular and genetic testing as well as its home-based offerings. It will also reach out to more health systems, which may want to outsource some of their lab operations, Davis said.

“Given some of the financial pressures that hospitals are facing today, maybe they are going to choose not to go after this outreach business anymore—it is capital intensive and it may not be the first priority of a hospital [chief financial officer],” Davis said. “The funnel looks good for many hospital lab outreach deals; it helps them monetize that asset.”

The Centers for Medicare and Medicaid Services pays $100 for polymerase chain reaction COVID-19 tests, and that rate will drop to $51 once the public health emergency ends. Quest plans to charge insurers $51 and will urge them to cover all types of COVID-19 tests, Davis said.

—Alex Kacik

In case you missed Day 2, here’s more on what Tuesday’s presenters told investors:

• Northwell Health plans to grow its ambulatory network 5% this year to nearly 900 facilities.
• Clover Health expects to start the year with the same number of Medicare Advantage members as last year, the company disclosed ahead of its conference presentation.
• Fresenius Medical Care plans to close some of its U.S.-based dialysis clinics in 2023 as its patient volumes continue to decline.
• CVS Health CEO Karen Lynch said the company was in the market for a primary-care asset, but she steered clear of directly addressing speculation the company was exploring an acquisition of Oak Street Health.
• Drug developers, researchers and regulators can do better when it comes to clinical trials, Food and Drug Administration Commissioner Dr. Robert Califf said.

The conference kicked off Monday with plenty to report. Here’s a rundown from Day 1:

• Humana added at least 625,000 Medicare Advantage members during open enrollment this year, representing 13.6% year-over-year growth and far outpacing competitors, Chief Financial Officer Susan Diamond said.
• CommonSpirit Health is making progress on its performance improvement goals, pursuing $500 million in cost savings for fiscal year 2023.
• Oak Street Health, the Chicago-based primary-care provider for Medicare-aged patients, has big plans to open new clinics in 2023.
• Teladoc Health’s CEO said the company is better prepared than rival telehealth providers to weather economic headwinds.
• Centene’s exchange business is surging while its Medicare Advantage sign-ups slowed during open enrollment for 2023, CEO Sarah London said.