Intro:
Decided to look into Clover Health (Ticker: CLOV) since I’ve been hearing recommendation on it for the dip. Started with all the pros of the company and thought it was great! Growth! Growth! Growth! But then once I got to the cons that hype dropped to the ground fast. I wanted to create this post to save time for anyone that might be interested in CLOV. Citations are at the end so you can do your own research. I do have a position in CLOV as I think the stock could rebound a little via technical analysis. Not a financial advice.
Summary (if lazy):
A stock that was hyped by Chamath. If cleared by DOJ and short, there are potential for growth. However, some allegations are hard to turn your head the other way. Also, important to note that it’s David vs bunch of Goliath in this heavily regulated industry. CEO kinda sketchy. At this point, cons over weighs the pros.
Atm price dropped down to a pretty good resistance near $10.60 - $11.00, I’ll be buying hoping for rebound with news fading away and earnings on March 1.
My position atm is 15 $12.5 CALL 5/21
\*Post will be edited and updated based off any informative comments.*
Basic Info of the Company:
1 About the company
- Clover health is a data driven healthcare technology company (Backed by Alphabet Inc/Google) based in San Francisco that provides Medicare Advantage products to seniors and low-income members. As of early 2020 they had 57,000 members with plans offered in 34 counties across seven state. Their plan for expansion will bring coverage to a total of 64 additional counties. This expansion will increase Clover’s market opportunity to nearly 5 million Medicare eligible.
2 Difference between Original Medicare and Medicare Advantage plan
- Original Medicare (parts A and B) is offered by the government and covers some of the costs of hospitals (part A) and doctor visits (part B) – but it may not offer the full coverage you need. This can have high copays and coinsurance, which can lead to significant costs if you need to visit the hospital.
- Medicare Advantage plans (part C) give you all the coverage of original Medicare and often include part D prescription drug coverage. In addition, they may offer dental and vision benefit + others…
3 What’s different about Clover Advantage Plan
- As stated at #1, Clover Health provides Medicare Advantage Plan. Which means they will cover everything stated above in #2. Additionally, they give you access to better prescription drug coverage than standalone part D plans, as well as additional benefits like low cost.
4 They have a unique model in health insurance
- Clover partners with primary care physicians using its software platform, the Clover Assistant, to deliver data-driven, personalized insights at the point of care.
Pros
1. Clover Assistant\)
- This is their flagship platform that aggregates millions of relevant health data points – including claims, medical charts, and diagnostics, among others – and uses machine learning to synthesize that data with member-specific information. This provides physicians with actionable and personalized insights at the point of care, offering suggestions for medications and dosages as well as the need for tests or referrals, among other, to ultimately improve health outcomes.
- Basically, this new software makes the doctors happy (unlike the legacy systems) and makes the patients happy as it allows them to save money and have better patient outcomes.
2. Fastest Growing Medicare advantage insurer in the US
- Clover captured an average of 50% of the net increase in membership across its established markets over the last three years. Because of their target demographic, it makes it easier for them to expand into historically undeserved and rural communities. As mentioned above, they are planning to expand into an additional 74 counties and announced a new partnership with Walmart to make joint Clover-Walmart plans available to half a million medicare-eligibles in the eight Georgia counties.
3. The market2\)
- The health market is one of the largest in the country representing $3.8 trillion or 17.8% of gross domestic product in 2019. Furthermore, healthcare expenditures are forecasted to grow to $6.2 trillion by 2028. An important part of this market is the insurance industry, and more specifically the Medicare plans which in 2020 had more than 62 million people enrolled in, and 39% of those people (24.1million) enrolled in Medicare advantage plans.
- Democratic government means expansion on ACA (affordable care act) increasing health insurer’s growth prospects in that market.
Cons
1. Hindenburg Research
This is one of the major catalysts to investors when it comes to investing in CLOV. I’ll go over some of the main issue from the Hindenburg research and answers provided by Clover Health. If you’d like to check out the report yourself checkout citation below3\).
It’s important to note that Clover Health did provide a rebuttal/answers (quite long) to all the points on Hindenburg Research4\). Hindenburg then replied to that as well lol5\).
Critically Clover has not disclosed that its business model and its software offering, called the clover assistant, are under active investigation by the DOJ, which is investigating at least 12 issues ranging from kick backs to marketing practices to undisclosed third-party deals, according to a civil investigative demand we obtained.
- Clover Response - Discussed to lawyer about it, and they said it’s not necessary to let the public know.
- Thoughts – Really comes down to SPEC vs IPO, with SPEC being looser and in the grey area. It would have been the right thing to inform the public investors of these information, now they’ll have to deal with all the lawsuits. Next, the civil investigative demand from DOJ was received by a formal employee of CLOV and not CLOV itself. CLOV did receive a request for information from DOJ but not a civil investigative demands or subpoenas from DOJ. This tells me it’s unclear if an investigation have been opened for CLOV or if it’s just inquiries jumping around.
Clover has a thinly disclosed subsidiary called “Seek Insurance”. Seek makes no mention of its relationship with Clover on its website yet misleadingly advertises to seniors that it offers “independent” and “unbiased” advice on selecting Medicare plans. It claims, “We don’t work for insurance companies. We work for you”, despite literally being owned by Clover, an insurance company. Its activities are also under investigation by the DOJ.
- Clover Response – Seek is a start up that is set up as a separate company from clover. Provides seek sales in the most recent AEP: #1 Cigna:20%, #2 Humana:20%, #3 CVS/Aetna:17%, #4 Clover:13.5%...
- Thoughts – Doesn’t look good on Clover’s end. Seek can’t state it provides unbiased report when 50% of its stake is owned by clover.
Multiple former employees explained that much of Clover’s sales are fueled by a major undisclosed relationship between Clover and an outside brokerage firm controlled by Clover’s Head of Sales, Hiram Bermudez. One former employee estimated Bermudez drove ~68% of Clover’s total sales, though was unclear on the amount coming from the undisclosed relationship.
- Clover Response – Admits that there is transaction between B&H assurance and says Bermudez still work on behalf of B&H in case he quits Clover.
- Thoughts – Admitting to this is good but 100% conflict of interest. However, its not unusual for insurance companies to use brokers.
Clover reported that “onboarded” physicians used Clover Assistant for 92% of member visits in 2019, but never defined “onboarded”. We found that less than half of Clover’s in-network doctors are considered “Clover Preferred”. What is the definition of an “onboarded” physician? What percentage of Clover’s in-network doctors actually use the Clover Assistant?
- Clover Response –onboarding = physicians that went through training for clover assistant.contracting = explained benefit of clover assistant to the physicians and they have agreed to use it.Currently 22% of all in-network primary care physicians are live. This correlate to 4% of the total in-network physicians. In YE2020 56% of the membership were attributed to one of those 22% live PCPs. And an additional 11% are attributed to a PCP who is contracted but in the onboarding pipeline. In conclusion, 67% total coverage of clover assistant as of YE2020
- Thoughts – wordings are confusing on clovers part, but the numbers do not look as bad.
Clover claims its software “delights” physicians, but according to doctors and former employees we interviewed, they use it because Clover pays them extra to use it. Physicians are paid $200 per visit to use the software, twice the normal reimbursement rate for a Medicare visit.
- Clover Response – just incentivizing to use the software. The $200 is not to use the software but represents the overall payment that covers both the PCP office visit and the use of the clover assistant.
- Thoughts – Clover were pretty up front about this issue, not too relevant imo.
In a CNBC interview announcing the Clover transaction, Chamath proclaimed, unprompted, “they create transparency…they don’t motivate doctors to up code or do all kinds of things to get paid”. A former employee explained to us that the DOJ is specifically asking about upcoding, or the practice of overbilling Medicare.
- Clover Response – agrees upcoding is a problem in the industry. They pay pcp fixed flat payment per office visit which does not incentivize physicians to up code. They keep old diagnosis just in case, so it shows up again
- Thoughts – I don’t think it was well addressed how their system fails to remove old irrelevant diagnoses which could affect Medicare advantage reimbursements leading to upcoding.
2. CEO of Clover Health is kinda sketchy
Before I start, it’s important to note that these information below were available in 2020 before the merger announcement. I’ll just directly copy paste what Hindenburg report wrote but you can find different articles on google3\).
- Prior to founding Clover, CEO Vivek Garipalli owned 3 New Jersey hospitals through a company called CarePoint Health. CarePoint was publicly lambasted for price-gouging; its hospital charged the highest prices for emergency room treatment in the entire country. For example, local media reported that Garipalli’s hospitals charged a teacher $9,000 for a bandaged finger and a tetanus shot, and another patient $17,000 for 5-6 stiches on a cut hand.
- CarePoint’s predatory price-gouging was lucrative. But in 2020, New Jersey legislators accused Garipalli – now a public company CEO – of siphoning over $157 million from his hospital network through a byzantine web of LLC shell entities. The transactions left the hospitals financially crippled, leading to layoffs and a liquidating sale process to new owners.
3. Hyped by Chamath Palihapaitityasfga
- People love Chamath
Again, Not a financial Advice.
* Citation:
- https://www.businesswire.com/news/home/20201006005484/en/Clover-Health-a-Next-Generation-Medicare-Advantage-Insurer-Announces-Plans-to-Become-Publicly-traded-via-Merger-with-Social-Capital-Hedosophia
- https://seek ingalpha.com/article/4405839-clover-health-growth-quality
- https://hindenburgresearch.com/clover/
- removed when posting, could be found when searched on google.
- https://hindenburgresearch.com/our-response-to-clover-regular-investors-and-senior-citizens-shouldnt-be-the-last-to-know/
Submitted February 19, 2021 at 11:47PM by Sweetsuns https://ift.tt/3k40Z0T
