Good day, and thank you for standing by. Welcome to the Clover Health's First Quarter 2021 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' prepared remarks, there will be a question and answer session. Please be advised that today's conference is being recorded.
I would now like to hand the conference over to your speaker today, Derek Newman, Head of Investor Relations and Corporate Strategy. Please go ahead.
Good morning, everyone. I want to introduce myself as this is the first earnings Call as the Head of Investor Relations and Corporate Strategy at Clover. And I wanted to express how excited I am about the opportunity here as well as Clover's opportunity to make healthcare better. With that out of the way, thank you for joining our call today, where our CEO, Vivek Garapali Our President, Andrew Toi and our CFO, Joe Wagner, will discuss Q1 results and answer your questions. Note this call is being recorded.
I'd also like to caution you that we may make forward looking statements during today's call that are subject to risks and uncertainties. Factors that may cause actual results to differ materially from expectations are detailed in our SEC filings, including the Form 8 ks filed today containing our earnings release. Information about any non GAAP financial measures referenced, including a reconciliation of those measures to GAAP measures, Can also be found in our SEC filings and the earnings materials available on our website. With that, I will now turn over the call to Vivek.
Thank you, Derek. Welcome aboard, and thank you, everyone, for joining us today. We founded Clover to improve every life and every day that passes brings us one step closer to that goal. We entered 2021 with strong momentum and continue to execute. Today, Clover is partnering with physicians to care for more than 130,000 individuals.
That is nearly double the number of lives we had under management on January 1. From the outside, we look like a typical health insurance company. From the inside, Clover is building and employing technology to refocus health insurance on improving patient outcomes. Our unconventional approach aligns interests and incentives so that healthcare puts people first. That's why we developed the Clover System.
Disruptive technology designed to drive systemic change on a nationwide scale. In particular, the Clover system lets us bring equitable care to a broad and diverse community. We were recently interviewed by the National Committee for Quality Assurance, which is conducting a study with Rand on behalf of CMS' Office on strategies to drive the delivery of equitable quality care. They contacted us because of preliminary evidence showing our plan's strong performance on a prototype of the Medicare Advantage Health Equity Summary Score or HES for short. This is a newly developed measurement tool We're identifying plans that do well at providing high quality equitable care to their members, including groups who are disproportionately affected by social risk factors.
As a reminder, at the end of 2019, CMS data show that approximately 50% of our members identify themselves as being of minority descent, which is substantially higher than the percentage of individuals who identify as minority in Medicare Advantage overall. CMS has stopped collecting and collating data on race and ethnicity, but we have no reason to believe that those figures have meaningfully changed. Thankfully, this new Hess score, we believe acknowledges the unique challenges and serving members at higher social risk and rightfully prioritizes health equity. We have consistently advocated that CMS reform its Star rating system to better account for social risk factors and are hopeful that CMS will incorporate Hess scores or something akin to it into the star rating soon. Doing so would recognize and reward rather than punish plans like Clover that take seriously the intractable problem of healthcare disparities in our nation and are committed to providing high quality care to underserved populations.
Importantly, this Hess score would hold plants Accountable if they do not ensure that solving this important problem is core to their model. Our high performance on this Health Equity score is significant validation of both our core mission to improve every life and our approach in doing so. In an effort to highlight strategies to drive equitable care that we shared with NCQA, We also intend to release a white paper soon summarizing our efforts around HealthEquity. We are focused on delivering equitable quality care and are hopeful that this becomes a significant topic of discussion across the entire industry. We urge you to read the document and join the conversation.
We believe our approach enables us to deliver what patients want, better care for less money, with more choice and what physicians want, information they need to make the best decisions every time. At quarter end, we had over 66,300 Medicare Advantage members. And during the quarter, we generated over $200,000,000 in revenue, a record for Clover. On April 1, we launched our direct contracting entity or DCE named Clover Health Partners and with it Added approximately 65,000 new lives across 8 states through claims alignment alone. And we do not intend to stop there as we will be adding more lives to our management through the voluntary alignment process throughout the year.
Moving beyond Medicare Advantage Into the largest segment of Medicare, original Medicare, not only is a strategic milestone for Clover, but also demonstrates the scalability of the Clover Assistant. While other companies may be constrained by antiquated technologies, geographic limitations or asset heavy approaches, We believe our tech centric strategy enables us to quickly and cost effectively deploy software to positions nationwide. Strategically, growing lives under management through DC feeds our virtuous cycle because we believe that as more physicians use the Clover Assistant, The software will get smarter and outcomes will improve, which will then reduce the cost of care. And perhaps just as importantly, it allows us to more effectively scale to new geographies in Medicare Managed. As we follow into DC geographies with MA plans, we'll already have an installed base of physicians actively engaging with the CA platform.
Additionally, we believe our direct contracting entity will have a material impact on lowering costs and improving outcomes For all patients across the Clover ecosystem. Clover is perfectly positioned to be a pioneer of the DC program for a few important reasons. First, our market leading technology platform, the Clover Assistant, is designed specifically to align priorities, I. E, to lower overall medical expenses, while enhancing the quality of care. And 100 percent of our DCE primary care providers are expected to use the Clovis system, which perpetuates our flywheel.
We believe that having our value proposition centered around software will allow us to scale more rapidly than others who are dependent on brick and mortar or other asset heavy approaches. 2nd, we already specialize in managing care on a wide and open network, which is critical expertise when seeking to manage a large population within original Medicare. At launch, we had contracted with Approximately 1800 individual providers across 8 states and had over 65,000 claims aligned beneficiaries. We believe we have access to up to 200,000 Medicare beneficiaries through our contracts with participating providers and are focused on growing our beneficiary base through voluntary alignment throughout the year. Our provider partners have already begun voluntary alignment activities, including making available both online digital enrollment forms and paper based enrollment kits.
There are still a lot of unknowns as this is a brand new program, but we see substantial opportunities to grow lives attributed to our direct contracting entity. The traction we have seen to date gives us conviction in our ability And as we do, we'll also be scaling our innovative home based care operation. Today, the vast majority of Clover's members receive care through primary care physicians and get the benefits of Clover Assistant through this channel. But what most don't realize is that Clover System also powers our home based care operation. The Clover System is vital here, underpinning 2 clinical models.
The first clinical model covers the majority of our lives under management, those who receive care via regular visits with their PCP. In this sense, we believe we can truly scale like software. Our influence and scale to any PCP in the provider ecosystem through the deployment of the Clover Assistant. The second clinical model is our approach to home based care called Clover Home Care. It caters to our sickest, most medically complex members, often with advanced comorbidities.
Our home based care program is an innovative model and a further opportunity for the Clover Assistant We believe that unlike healthier members who could visit their PCP, The best place to care for our sickest members is in the home, and that's exactly what Clover Home Care does. We consider the Clover Home Care model to be progressive and note that there is a Significant opportunity to control Medex as this small minority of members accounts for a disproportionate portion of our overall Medex. Powered by the Clover Assistant, we are enabling primary care providers to help patients, whether they are homebound or able to attend visits, which helps deliver more efficient and better outcomes. We're encouraged by data showing Clover Home Care's ability to reduce hospitalizations, Emergency room visits and skilled nursing facility stays and the impact that has had on patients' quality of life. Finally, we continue to strengthen our organization This quarter, we announced 2 new Board members, Bill Robinson, formerly the President of Broadgate Human Capital And an HR Executive at General Electric and Dimitris Kuzukas, who served as General Counsel of UnitedHealthcare's Medicare and Retirement Division and as the Director of the Center For Medicare and Principal Deputy Administrator of CMS.
We believe both will add a lot of value. We also hired Derek Newman, whom you met earlier, who will run our Investor Relations and Corporate Strategy. I'm proud of what we've accomplished and energized by the opportunities ahead of us despite the pandemic's near term uncertainty. Our software based infrastructure enabled us to quickly stand up a direct contracting And rapidly double our lives under management. We believe this foreshadows our ability to enter adjacent markets in a highly scalable way, enabling Clover Health to lower costs, increase choice and improve care for 100 of thousands of people.
We have a lot of hard work to do and we're hard at work doing it. With that, I'll turn the call over to Andrew, who will talk about our tech and our work to expand the number of places where members can get care.
Andrew? Thanks Vivek. As everyone knows, we believe that our technology, Specifically, the Clover Assistant is what differentiates Clover from anyone else in the market. Continuous iteration of the Clover Assistant It's not only critical to our mission to improve every life, but also directly ties back to our financials, supporting the positive alignment between our business and the health of our members. In recent months, we have been focused on ensuring that the Clovirus system is built out with specific functionality to support our direct contracting efforts.
I'm pleased to say that these features have now launched with the 1st direct contracting users beginning to use the system now. An example of this is the integration of additional rich real time clinical data sources to power the Clovira system. These include historic personalized claim file data and EHR extracts from our partners. This data further enables the Clover Assistant to personalize its recommendations for everything from powering specialist referrals to calculating care gaps to making recommendations for enrollment into our home based care program. I'd like to also emphasize the real time aspect of this data as we believe this differentiates us from other managed care companies.
For example, we are now able to ingest admission and discharge event data From a wide network of hospitals and surface numerous actionable events in Clover Assistant in less than a second. As a reminder, the power of the Clover Assistant lies not only in the total size of the data set, but also in making it actionable by a physician. And moving towards real time processing is just another step towards that. For all these features, what is also interesting is the synergistic relationship between the impact we expect to see in direct contracting and the impact we expect to see in Medicare Advantage. That is, we believe we have identified opportunities for significant cost management in the direct contracting program that have the potential to positively impact I also want to touch on our efforts to reduce access to care barriers that our members face by ensuring that Clover Assistant is managing their care outside of formal healthcare environment.
In our first example, We have improved the technology that drives member identification and enrollment in Clover Home Care. We believe our approach of using a sophisticated software algorithm for risk targeting combined with PCP led enrollment in the program is industry leading and differentiating. This approach to home based care combines all aspects of what I think makes Clover, Clover. First, we use technology and data to identify those most in need. 2nd, we partner with our existing wide network of PCPs to enroll members in these supportive services.
And 3rd, we continue to support the member across the care continuum using the Clover Assistant. In a second example of broadening the reach of the Clivver Assistant, we intend to soon launch a beta view of the Assistant that is designed specifically for hospitalists operating in an inpatient setting. Powered by the real time admit discharge I spoke about earlier, we believe this feature will enable us to get Clover Assistant usage into one of the most critical locations In a member's health journey. In our third example of driving care more broadly with the Clobra assistant, I want to touch on a pilot partnership with Walgreens aimed at increasing access to basic healthcare services in our communities starting in New Jersey. We have been working with Walgreens to integrate data from the Clover Assistant into Walgreens Health Quarters, which are custom built Health destinations within select Walgreens stores.
Clover members have been visiting HealthCorners in Walgreens for blood pressure testing, BMI measurements, Currently, over 30 Health Corners are open to Clivra members And approximately 26,000 or almost 50 percent of our New Jersey membership now live within 1 mile of a Clover powered Walgreens Health Corner. Since we began the program, over 1100 care gaps have been closed. As you can see, the Clovis system continues to scale and grow Within our core Medicare Advantage business and into new lines of business like direct contracting, we're focused on constant iteration, Deployment to new practices and sites of care as well as integrating into new data sources. Before I hand it off to Joe and on a personal note, I want to express how proud I am of every member of Clover's team. I recently put up a post on LinkedIn calling out a reporter from Bloomberg What I saw as a dismissive comment on the quality of our engineers based solely on his skepticism regarding the quality of talent outside the U.
S. I want to make it clear to everyone, all of our engineers and all Cloverite are crucial to our success, growth and strong long term potential. To everyone from our Clover members, to our employees, to our physician partners, our regulators and our investors, My commitment is that we at Clover will fight for all of us as human beings. Our mission is to improve every life and we mean it. Thank you.
Now over to Joe.
Thanks, Andrew. We are thrilled to have delivered a Q1 of more than $200,000,000 in revenue. Our total revenue increased 21% compared to the year ago quarter, primarily due to an increase in membership. As of quarter end, we are now serving approximately 66,300 Medicare Advantage members, which represents an increase of approximately 18% over Q1 of 2020. We expect to continue to expand both inside and outside New Jersey as well as through direct contracting as we view market expansion as a key to driving growth and proliferation of the Clover Assistant.
Moving to MCR, Our total estimated medical costs for the quarter were $214,400,000 resulting in a GAAP MCR of 107.6%. Similar to the Q4 of last year, we incurred significant costs caring for members that were diagnosed with COVID-nineteen, and these costs are the primary driver of our elevated MCR. To put some specificity around the impact that the pandemic is having on our medical costs, Remember that we focus solely on Medicare, which inherently means an older population, 90% of our members resided in New Jersey, and we have a significant percentage of minority members. CMS data shows that the COVID hospitalization rate of Medicare beneficiaries in New Jersey is roughly 1.5 times the national average and that minorities have been disproportionately affected by the pandemic. The combination of these factors has resulted in short term disruption to our MCR.
Fortunately, we are seeing lower COVID costs from month to month in 2021 thus far as more and more of our members become vaccinated. Our non GAAP normalized MCR for the quarter, which excludes the net impact of the COVID pandemic and any changes to our estimate of prior period revenue and medical costs, was 95.4%. This is an increase compared to the 90.5% normalized MCR that we reported for full year 2020. We believe our relative performance here is related to a few factors. First,
we are
seeing some return of previously deferred care in certain non COVID utilization patterns. 2nd, we have the continued impacts of the physician fee schedule increase that was implemented in late December as well as some limited COVID related headwinds relating to lower risk score capture for 2020 days of service. 3rd, we identified several areas where enhancements to our internal processes and cost reduction initiatives, while making progress, are taking longer to be realized. In an effort to address the COVID-nineteen pandemic, We made rapid and substantive changes to help our members get the care they needed. And now with the increase in vaccination rates, we are just starting to reprioritize our ongoing We would like to highlight a few key points from our MCRs that we believe are relevant to our investors.
First, our Q1 normalized MCR for returning members who see a primary care physician that uses the Clover Assistant Continues to be lower than the normalized MCR for those who don't, and this differential was over 1,000 basis points as compared to an approximate 700 basis point differential for full year 2020 normalized for COVID. We believe that this illustrates the Clover Assistant continues to The second point is that our Q1 MCR for markets outside of New Jersey remained lower than our MCR in our New Jersey market, which supports our thesis and strategy for geographic diversification. Lastly, when considering MCRs, remember that Clover today has higher than industry average growth rates, Obvious plan designs that have richer benefits and lower out of pocket costs than many of our competitors' plans and a current 3 star plan rating. For now, we estimate that these differences add as much as 1500 basis points to our MCRs when lined up next to those of our competitors. As these factors play out over time, continued scale and geographic diversification, higher star ratings and continued iteration and coverage of our Clover Assistant technology.
We maintain full conviction these items provide a tailwind for future margin expansion since we are just in the early innings of our story. 1st quarter non GAAP adjusted operating expenses, which exclude non cash Stock based compensation were $61,900,000 compared to $48,000,000 in the Q1 of 2020. This was in line with our expectations An increase by $13,900,000 from the Q1 of 2020, primarily due to investments made in infrastructure to support our direct contracting initiative, as well as higher professional, legal and consulting expenses to support Clover's status as a public company. Our non GAAP adjusted EBITDA loss for the first Quarter was $76,200,000 compared to last year's Q1 adjusted EBITDA loss of $21,700,000 driven by the higher MCR and operational investments. After normalizing for the MCR impact of COVID, our non GAAP normalized adjusted EBITDA loss for Quarter was $52,100,000 We reported GAAP net loss for the quarter of $48,400,000 compared to a net loss of $28,200,000 for the Q1 of 2020.
Like many de SPAC companies, our current period results were impacted by SEC guidance related to our accounting for public and private placement warrants. Applying the updated accounting treatment, we recognized a gain of 85,500,000 The Q1 of this year for the change in fair value of the warrant liability. Clover had approximately 408,100,000 shares outstanding at the end of the Q1. And our cash, cash equivalents and investments totaled $720,100,000 as of March 31, 2021. Our merger with Social Capital, which closed in the Q1 of this year, delivered approximately $670,000,000 net of deal related expenses to support growth and working capital.
Despite near term impacts and volatility, especially around expenses due to COVID, We expect to continue delivering solid revenue growth as we continue to expand our market share and begin the new direct contracting opportunity. We are reaffirming our guidance that Medicare Advantage membership is expected to be in the range of 68,000 to 70,000 by December 31, 2021. On direct contracting, as Vivek noted, we started the DCE program year on April 1 with more than 65,000 aligned beneficiaries, virtually all of which were claims aligned. Similar to many of our fellow DCE participants, we began the program with fewer claims aligned beneficiaries than initially expected. This was driven by a few factors.
First, some beneficiaries belonging to select participating providers did not Successfully exit their pre existing Medicare Shared Savings Program relationships. 2nd, some beneficiaries lost Medicare eligibility, passed away or enrolled in Medicare Advantage. We believe that we still have access to up to 200,000 Medicare beneficiaries through our DCE contracts with participating providers. We expect to see increases in the number of our aligned beneficiaries as voluntary alignment continues throughout the year, but the specific timing for such increases It's difficult to predict. We are taking a conservative approach, leading us to forecast that we will end 2021 with between 70,000 and 100,000 total aligned beneficiaries.
Voluntary alignment will occur quarterly, and we expect the majority of the incremental voluntary alignment to become effective in the Q4 given CMS' submission calendar and programmatic ramp up time. We look forward to bringing on many new lives for the claims alignment Based on these updates to direct contracting lives, we are updating our guidance on total combined revenue for the year, which is now expected to be in the range of $810,000,000 to $830,000,000 inclusive of a preliminary estimate of approximately $20,000,000 to 30,000,000 of revenue generated from direct contracting. We are reiterating our revenue guidance for Medicare Advantage since the Q1 was in line with our expectations. Consistent with our discussion a couple of months ago, GAAP estimates for direct contracting revenue are dependent on the finalization of accounting treatment, which we expect will be complete by the end of the Q2. Our initial direct contracting per member benchmark is higher than originally predicted.
Medicare benchmark expenditures under management for direct contracting are now expected to be in the range of $700,000,000 to $800,000,000 reflecting the revised forecast on 2021 Align Lives and this higher per member benchmark. The Medicare benchmark represents the level of estimated medical For the beneficiary population being managed by the direct contracting entity. Given the nuances of revenue recognition under this program, We continue to believe the estimated CMS benchmark expenditures are a more appropriate measure of the size of the opportunity and its impact on the company's financial outcomes. Total Medicare spend under management, which includes revenue from the Medicare Advantage program plus the estimated CMS benchmark for direct contracting It is therefore expected to be in the range of $1,500,000,000 to $1,600,000,000 more than double 2020's level. Normalized non GAAP MCR for Medicare Advantage is now expected to be in the range of 94% to 97% for full year 2021.
We anticipate that certain factors that are driving our Q1 results will continue somewhat into future quarters as well. We believe this range captures the impact of seasonality, but also allows for improvement in core processes that will occur throughout the year. We estimate full year non GAAP adjusted operating expenses, which excludes stock based compensation, will remain within the range of $250,000,000 to $270,000,000 reflecting the use of a portion of the proceeds from the January merger to make investments in marketing, Network expansion and technology to support future growth. As always, we remain focused on growth and continue to make appropriate investments to fuel that future growth. Normalized adjusted EBITDA loss is expected to be in the range of $240,000,000 to $190,000,000 Note that we are not providing net loss guidance due to the potential for significant variability of several components of net income, including mark to market accounting of the fair value of the warrant liability that we discussed earlier.
As a reminder, the liability was reduced by $85,500,000 in the Q1, but could materially increase in future quarters due to stock appreciation, which would in turn negatively impact net income. We are seeing encouraging traction across our business, but we are only in the early innings. We continue to build Clover for the long term and have several levers to drive growth and initiatives underway to improve our cost profile. We are committed to delivering shareholder value over the long term. I'll now hand it over to Vivek for closing remarks.
Thank you, Joe. We built CloverHouse to improve every life. And in the face of the challenging environment Joe outlined, Our 2 key clinical differentiators, the Clover Assistant and Clover Home Care have already helped us to lower costs, increased choice and improved care for tens of thousands of people, and we believe it will help us do so for many more as we continue our expansion. The launch of our direct contracting entity illustrates the scalability of our software based model and foreshadows the potential breadth and depth of our future reach. Before we take questions,
I want to leave you with 3 things.
Firstly, we're extremely excited about the launch of direct contracting and very bullish on the opportunity ahead. Secondly, our Clover Assistant technology is a market leading differentiator for Clover. And finally, we are focused on creating a healthier society, which means delivering high quality equitable care to everyone. We look forward to demonstrating our progress in the quarters and years to come. Before we start on questions, today and a first for Clover, we are also including some questions from the strong community of Clover Investors on Reddit.
As a quick aside, we are a big believer in the retail investor community. On a personal basis, I started off as a retail investor over 20 years ago, Probably trading too frequently. I made money, then lost money through that experience, but that experience really made me want to become a great investor and importantly wanted to understand business and industries in much more detail. I'm very much a buy and hold retail investor today, focused on companies with a long term orientation going after an important mission with technology at the core. In the spirit of that, we believe it is vital we play a role in engaging our With that, operator, let's please take the first question.
Thank you. Our first question comes from Kevin Fischbeck with Bank of America. Your line is open.
All right, great. Thanks. I guess a few questions here. So, when you guys First, did the transaction. You guys had a pretty aggressive ramp, the number of members, You're getting to 500,000 members in a couple of years.
How do you think about that outlook today for direct contracting? Is that still right that we should be thinking about that as members that you would have access to? Is that necessarily members that would be signed up? Or is there some reason to think differently about that
Thanks for the question. Joe, do you want to take that? I can jump in.
Sure. Hey, Kevin. Good morning. Thanks for the question. Yes, I think, Kevin, we're not going to Give guidance for future years at this point, but I can say that a couple of things, I think, as we think about the opportunity.
First, We're excited that we still have access to 200,000 members, 200,000 assigned lives this year. So that has not changed and that's been consistent with kind of what we've said all along. I think as we know more and more about claims alignment and voluntary alignment, we'll certainly You'll refine some of those numbers for future years. I think one certainly encouraging thing, I mean, I guess couple of encouraging things is, one, we've got a great start relative to others in the program. So we're super excited about that.
And secondly, as we think about tailwinds looking ahead, obviously, we're in the program now, which is great. There are others that aren't in the program at this point. And so, we're revisiting a lot of conversations that we've had earlier in the year with some ACO partners Originally, we're looking to do other things and now are looking to potentially partner with us again. So I think we're really excited about where we are. I think it's too early To say for future years kind of exactly where we're going to end up, but I think we have great traction so far in voluntary alignment and we're excited about the rest of this
year. Okay. And then I guess Just trying to understand the MLR bridge. When we think about maybe A normalized number for this year versus last year versus maybe 2019, which is the last Year where it was not impacted by COVID. I mean, I guess on a specific like MRR is going down 200 to 500 basis Point to kind of saying that these adjustments that you mentioned, bridging from last quarter to this quarter order, You know, still point to kind of a true core improvement of closer to 800 basis points or 90 basis points.
So how should we think about The progress over the last 2 years within this guidance?
Yes. Kevin, that's a great question.
I think certainly, From a normalized perspective, I think when we go back to 2019, obviously, our business was very different, different benefits, different membership mix, etcetera. And We ran kind of 98%, 99% back then. And so certainly seeing progress, no question about that. And I think for us, as we look at Kind of the mix of tailwinds and headwinds. There's a lot happening in this Q1.
Obviously, we got hit pretty hard with COVID. We've Seeing some return of deferred care. We also have some headwinds as every other MA plan does in terms of Some depressed risk for coding, although again, not as much of an issue for us and the sufficient fee schedule increase. So I think Your statement is absolutely true and that we are absolutely seeing momentum as we look kind of over longer term in terms of normalized MCR. I think the guidance that we're giving for the remainder of this year is appropriately conservative, just given kind of what we're seeing in the Q1.
And I think we'll certainly see progress as we continue throughout the year.
But I
think that's the way to look at it, right? If you look at it over the course of 2 years, we're seeing certainly progress From, I'd say, the high 90s into the low and mid 90s. And then I think as we think about kind
of longer
term, our view is What is our earnings power kind of going forward? Obviously, tailwinds for this year, not only as it relates COVID, but also as it relates to risk scoring, physician fee schedule, etcetera. As we think about the long term earnings power of the business, We really think about for MCRs kind of the two points that I mentioned just a little bit ago. One is, How do we think about the differential of clover system versus non clover system? That's really the most important metric for us and we'll continue to focus on that metric.
And then secondly, as we think about kind of MCRs compared to others, when you think about growth rates and more importantly, star scores, we line Very well. So I think we're certainly happy with the progress that we're making, as we look long term for the business.
Okay. Maybe just Question, is there a way to size what you guys think the coding headwind was this year, maybe in the basis points to MOR?
Yes, I think it's a range for us Kevin, I think for us it's probably around 150 basis points to 200 basis points, A little bit higher than we had originally anticipated. I think last quarter I said 100 to 150 is probably a little bit higher than that. Again, I'd say roughly that $150,000,000 to $200,000,000 is kind of where we are, where we came out just when we looked at the coating impact.
Okay, great. Thanks.
Okay, great. This is Andrew. So we'll take our first question from Reddit now. The first question is a compound question, but it came to us in 1 piece. What is Clover Health doing to make sure that Clover Assistance remains the leading AI for healthcare?
Are you working with any data analytic companies or data scientists, data sets? Will you license out this technology to other insurance agency? How does Clover Assistant help physicians offer individualized care? So I will take this first question. And so thanks for that.
A couple a few different answers. Number 1, We see ClarusisNet being unique because while there's a few technology powered insurance companies out there, we're really focused Clinical care, right? There are physicians on a wide network using Clover Assistant. And what that lets us do is focus on providing actionability around any data model. So to the question about how do we remain the leading AI for healthcare, that closed loop On clinical models where our data is being sort of reacted to and actioned on by real physicians, Then we take those actions in the conversation and figure out what happened.
That lets us train models further, advance them further, iterate faster than We feel anybody else whether it be big tech companies or other insurance companies or the clinical companies, we feel we have all those components in Clover Assistant and we can iterate faster and that's how we stay ahead. On the point about licensing out, that's a really interesting one. Our mission is to improve every life. So It's something that we might consider in the future. Something I find interesting here is a few years ago, we did do some Testing with the Culver assisted data engine and ML engine in international markets where we verified that our data platform and training actually does Worked very well, in non U.
S. And even non English data sets. So we were pleased by how well that works. I think that Set us up technically for some pretty good advancements in the future if we ever want to expand. On the question in terms of individualization of Care.
So Clover Systems sessions are personalized to the individual in the care encounter And that's rerun every single time a senior comes back and has another PTP visit. So we are already Deeply personalized in the content, data and suggestions that we show through Clover Assistant, and we think that that's a very powerful Part of the overall product. So that can range from suggesting clinical program enrollment to deliver home care To just something simple like a diagnosis reconfirmation to a care gap closure, all of these things are absolutely Personalized in any care encounter that is based upon the Clover Assistant platform. So that's we're always developing new models, new rules, Things that drive those actions, we'll talk about those as we roll those out. And so yes, going into the future, I think that the way to think about this Overall, is that Clover Assistant, number 1, as Clover, as a Medicare payer, our technology is uniquely focused on the clinical side of the business.
We are focused on helping clinicians. That is where our R and D is focused. All of our data models that we build Have an actionability component to them. So it's not just about prediction, but prediction and action. And then we're always speeding those actions back into our core model training, which we think gives us a systemic technical advantage in terms of improving the overall product and improving the Outcomes and benefits for our seniors.
So thank you for that question, whoever asked it. And operator, we can go ahead and take the next I have a question.
Thank you. Our next question comes from Jalendra Singh with Credit Suisse. Your line is open.
Yes, thanks. I almost thought I didn't make the cut, but thanks for taking questions. Just quickly on direct contracting, thanks for all the color on your updated expectations there. I was wondering if you could flush out a little bit more on your confidence in voluntary alignments mostly coming in 4Q. Have you seen any indicators or data points that gives you some visibility there?
And how much revenue is assumed in your outlook from these voluntary beneficiaries?
Thanks, Shailendra. I'll pass that to Joe.
Sure.
Thanks, Shailendra. Thanks for the question. Thanks for calling in this morning. Appreciate it. Yes.
So on voluntary alignment, I mean, again, it's early in the process. I think one of the things that we wanted to make sure we did this time is Just kind of reset expectations based a little bit upon the unknown. I can say initial Kind of results from our voluntary alignment outreach has been positive. We've been seeing some good traction there. I think just One
of the things we have to keep
in mind is just kind of the CMS timing for voluntary alignment for this year. And so in order to get Member effective for July 1, they need to be voluntary aligned by the
end of this month. And then
similarly, for Q4, they need to be voluntary aligned From a form from a documentation perspective by August 31. And so for us, that's why we kind of Came out with a more conservative range, just given some of the timing there, as we learn more about the program. But again, we've got a few different methods For voluntary alignment that we are using and we're seeing really good traction early on. And so just in terms of revenue there And benchmark, obviously, the range that we're giving the $70,000 to $100,000 full year, That's based on a base right now of roughly $65,000,000 $66,000,000 which is where we started. And so I think for us, both the revenue and benchmark for voluntary alignment, there's, I'd say, a relatively small piece for voluntary alignment.
We have not assumed A ton in our guidance, whether revenue or benchmark. And again, just to keep in mind, right now, we are only assuming from a revenue recognition standpoint That we have roughly 45% of benchmark as technical revenue recorded. So if you're comparing us to others that Have come out with different accounting treatment. The benchmark coming to that kind of $700,000,000 to $800,000,000 range that we're giving is probably more appropriate from a comparison standpoint.
Okay. That makes sense. And then following up on Kevin's question earlier about expectations for next year. I know you're not willing to give any guidance there for lives coming from direct contracting program for 2022. But just wondering if you can share some thoughts around CMMI's Just to close the direct contracting program for new applicants, just wondering how that affects the opportunity for you guys, I mean, as you guys have been already approved for the program?
Yes. I'll take that Julien.
So I think it's hard to tell
Exactly, where CMMI will land on kind of opening up more applicants in the program. But I think they're most likely reviewing the program to make sure that rules and regulations are set up appropriately to not Have an excess number of applicants come in and make the program difficult to manage, at least it's our current view. But at the same time, we don't think it's going to we don't really view it affecting too much in our thinking. At the end of the day, any practice joining the program is going to make that decision based on whether value can be driven out of Irrespective whether it's 52 applicants now or 100, Clover is really the only direct Contracting participant we're aware of that's actually software enabled, and enables practices to succeed in direct Contracting, whereas a significant amount of the applicants are actually provider centric. Okay.
Just one last one on your partnership with Walgreens. Can you remind us how economics work there? And one thing I'm trying to understand, like aren't your Members better off seen by a PCP who is using clover resistant platform as that was essentially leads to much better outcomes and carry improvements. Trying to understand like how you have that between getting them to some other channels of platform versus like going through your PCP who is using Clover Assistant platform?
Yes, absolutely. So we're not sharing any of the details on the actual deal Or the partnership, to that part of the question, but I can elaborate more on the care journey here. So the idea with the Walgreens HealthCorners is that they are providing supplemental services to support the PCP. So this is as an alternative to a model where they are We're sort of becoming the PCP. So you've seen that in other models that are out there that they you actually put the PCP in the store.
That is not what's happening with the HealthCorner. The HealthCorner is not replacing the PCP, but instead of the same care gaps or things that the PCP might be looking to order For the patient, for example, fit kits, etcetera, are actually fulfilled at the health corner to make it easier For our seniors and for the patient of the PCP to get the supplemental care. So like the flu shots, additional sort of data readings like BMI, Like I said, like FitKits can be deployed there. So think of it as it's all part of one care journey with Over the system backing up the coordination and sharing data, the PCP is still in sort of in the quarterback position and then the HealthCorner is Supplementing that by making it easier for them to access this extra care.
Okay. Thank you.
All right. Thank you for that. So I'm back through those questions. Appreciate it. For our next question that comes to Reddit, what is the latest with the SEC?
I would also particularly like to know your strategy Around the stock price. Vivek, do you want to go ahead and take this one?
Yes. Thanks, Andrew. It's our policy generally not Comment on pending inquiries, but we'll of course always make any disclosures required by law. I'd note that we always welcome the opportunity to introduce our company and And disruptive model to government agencies and regulators.
Just in terms of
as we think about stock price, We take a very long term orientation around stock price. So one of the advantages we think we have versus Other incumbent insurers, myself and Andrew obviously heavily invested in Clover for the long term on a personal basis, but even from A mission orientation, being a clinical organization, it's definitely a different approach than when we think about our competition. And so What we think will happen over the next couple of years is it will become more well understood, how Clobr Assistant is Driving value at scale with software really enabling that. If we think about kind of our model really enabling a wide network of physicians to be successful Versus the traditional narrow network. That's going to become more and more well understood as well.
And we also think it will become more and
more well understood over time That our plan designs are meaningfully more attractive in value to consumers versus the competition. And Stock price has a way of taking care of itself over the long term as long as we're able to execute over the long term towards our goals.
All right. Thanks a lot, Yves. Operator, we can take the next analyst question.
Our next question comes from Lisa Gill with JPMorgan. Your line is open.
Good morning and thank you for taking my question. I just want to go back to your comments around Walgreens. And I understand you're not talking about the economic impact, but I just really want to understand a couple of things. 1, Is it the pharmacist that's actually providing these services? 2, do they have access to Clover Assist so that they can Feed that information back into the PCP.
And 3, are you doing anything to then encourage the member To have their prescription filled at Walgreens in any way so that you kind of close that gap in care potentially?
Yes. This is Juanita.
Yes. Hi, Lisa. Great question. So you had a couple there. So first of all, it's in a Walgreens the health quarters are actually a built out separate dedicated part Of the Walgreens and you can see this on Walgreens website as well.
And so sometimes they're staffed they're certainly staffed With the capability to be able to act as a pharmacist, but it's not the actual pharmacy counter, if that's your question, like where you go to get your fills, it's a different part of the store. So but obviously pharmacy is something that they can help with if the member has questions. The next thing is on Clover Assistant. Yes. So part of this is all is that, we have a certain view of the Clover Assistant data.
So they're not using the PCP view as per the other conversation. The PCP has that view, but they haven't access to the same platform, the same care gaps that are available to the PCP and any open things that need to be filled, so that when the member shows up, it's part of a more seamless care journey, right? So they could say, yes, I can This etcetera in that particular site of care. So we are providing that data from the Kluver system platform to be used In that last question, we this is not unified with any part of the Part D pharmacy benefit right now. Obviously, there's things in Sure, we could look at there, but we separated out having care being given at a health core and Walgreens from whether or not a given individual wants They use Walgreens as their pharmacy.
We believe in choice at Clover. So our members can continue to choose Whatever pharmacy they like, but they also have on whether they want to get care at a HealthCorter, the ability to go into that And get additional supplemental care as well. So hopefully that helps your question.
Yes, that definitely helps. And then secondly, I just want to understand the Clover Home care, is that actually a provider coming into the home? Is there a virtual care component to that? And how do I think about that on a go forward basis? Are there other services you're going to add?
I mean, just more broadly speaking, when we think about
in the home?
Thanks, Lisa. That's a great question. So the way to think about our Clover Home Care program is, We built an in house to simplify an in house Oak Street or in house ChenMed 4 years ago, but via a home based model. So the reason we did that and wanted to own that internally, as we felt we would end up with a much higher engagement rate Of those who are eligible because we could also, 1, collaborate with existing primary care practices in the marketplace, in terms of helping enroll their most at risk lives, but also end up being able to service the homebound individuals as well. So as an example, last year, We ended up with a little bit over 70% of the most at risk members that are eligible actually enrolled in home based primary care.
And when we say in collaboration with primary care physicians, it's Clover's actual employed primary care physicians delivering cares physically in the home. Obviously, last year, we included virtual care as part of that, but it is a physically home based model. And when we talk about in conjunction with existing primary care physicians, We routinely will share data back to the existing primary care provider to make sure they're included in that process. And then we obviously get to own The savings that we generate and because it's internal home based primary care physicians employed by Clover, We're not in an arm's length vendor relationship where sometimes there can be dispute over kind of who's in the eligible pools. And we have also ported this model over to direct contracting.
So when we think about direct contracting, we're actually bringing this service To our permanent care practice partners. So we think about a lot of these brick and mortar models that are proliferated. What sometimes gets lost is These models are actually taking patients from existing primary care practices. That creates a lot of friction in the marketplace and ends up with much lower enrollment rates of the eligibles versus Clover's Home Care Program. Clover's Home Care Program is popular because we're actually working with existing Primary care physicians in a collaborative way and particularly in direct contracting where practices are actually benefiting from the savings that we can generate.
So it creates kind of the opposite reaction in the local marketplace. And it's all powered off of the Clover Assistant as we mentioned in the OA part.
Okay, great. That's very helpful. Thank you.
Thanks, Alicia. We'll do one more we'll do one more clover Reddit question, which happens to be on clover assistance, And then we'll wrap up. So we had a combination of questions asking about will the assistant ever replace the physician for basic elements And also about our vision on telemedicine. So this is a future looking statement, meaning I'm not making any commitments here. But Looking at our technology for where we can go with something like telemedicine, looking at something like where clobrasystib could go With the physician, Clovis is not about replacing the physician, right?
It's about helping the physician be the best version of themselves, arming them with information at Their fingertips, personalized information, personalized suggestions, always using their clinical judgment. As part of that, You can sort of see where we think we might go with telemedicine is it's more than just simply a face to face visit over a video call. I do think that this is me putting on my futurist hat that we're in striking distance in the next few years of being able to combine Clover Assistant With something like ZR and AR technologies to provide really detailed virtual visits Where the patient and the physician might not be co located in the same room, but provide the physician with more ability To be able to do an examination or to have a more impactful encounter. Now I think that under CMS guidelines that We'll be under the existing telemedicine regulation for a while, but from a technology perspective, this will help us move into things like rural healthcare, Help us guard against future pandemics. From an equipment perspective, we already did something called video on wheels during the pandemic where we delivered equipment In a very safe way, sterilize equipment to underserved figures who did not have video capabilities.
So we do know that it's possible to sort of set up an environment within their home in a safe way so they can have these kinds of encounters. And it makes a lot of sense that we will build much more upon that going forward. So once again, the assistant is called the assistant because it's there not to replace the physician, But to make them the best version of themselves, and I think that you'll see more and more capability in doing that with technology over remote distances. So thanks so much for the questions from the analysts. Thank you from all the questions on Reddit as well.
I will now hand off to Vivek to close-up.
Thanks, Andrew. I just want to thank everyone for the time today. We're incredibly excited about our future and the beginning of