Clover Health will exit the ACO REACH program as it focuses on profitability

Clover Health is leaving the ACO REACH program at the end of the 2023 performance year, the company recently announced.

While the insurer said that Clover will continue to fulfill all its ACO Reach obligations for the rest of this year, including sending a written notification to participating physicians as required by Centers for Medicare and Medicaid Services, CEO Andrew Toy said continuing in ACO Reach does not make sound business sense.

“When we entered the ACO REACH business in 2021, we felt that expanding our platform to original Medicare would have a number of benefits, including increasing the number of lives under Clover Assistant management and enabling us to rapidly increase the number of physicians we worked with directly,” said Toy in a statement. “And, while we were successful in those goals, we have not seen a clear line to profitability in this business and it has also become quite clear that, over the same period of time, we have made far greater and swifter strides on our path to profitability in our Medicare Advantage insurance business.”

Ari Gottlieb, principal for A2 Strategy Corp, called the decision the latest example of “wise moves” the company has made regarding its long-term strategy in a recent LinkedIn post. He praised Clover for outsourcing its Medicare Advantage plan administration to UST HealthProof to save $30 million.

That change coincided with Clover laying off 10% of its staff in April as part of restructuring plans to obtain profitability.

“Our focus at Clover is helping physicians detect and treat disease sooner via Clover Assistant,” said Toy in a statement at the time. “Our partnership with UST HealthProof will allow us to rapidly improve the efficiency of non-strategic core MA operations and greatly reduce our administrative costs."

Clover went public in early 2021 but turning a profit has proven difficult. Toy remained optimistic during a recent earnings call that the company would reverse the losses. Executives announced that the insurer was in the green for adjusted EBITDA for the first time, driven by outperformance in the insurance segment.

CMS announced in October that the Direct Contracting Model, the predecessor to the ACO REACH program, reached nearly $500 million in savings for participants and 23% of participants recorded losses.