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Alphabet-Backed Clover Health Posts $22 Million Loss in 2017

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Clover Health, an insurance startup backed by Alphabet Inc., reduced its loss last year as the health care company seeks to inch its way beyond its first market in New Jersey.

Despite being one of the most richly valued health-tech startups in the U.S., Clover only offered insurance to seniors living in New Jersey, until a recent expansion to parts of Georgia, Pennsylvania and Texas. The New Jersey operation lost $22 million last year, an improvement from a $35 million loss in 2016, Clover said. Revenue grew to $267 million from $184 million.

Clover is privately held but agreed to share some financial information in an interview with Bloomberg. The narrowing loss is a bright spot in an otherwise rough period for the four-year-old startup. Clover’s Medicare rating was recently downgraded, and it has seen turnover in the executive ranks.

Some of America’s top technology investors are making a big bet on Clover. The company has raised $425 million from the likes of Sequoia Capital and GV, Alphabet’s venture capital arm. An investment last year valued the business at $1.2 billion.

Clover’s goal is to reduce insurance costs through the use of improved data analysis and preventative health measures. When it identifies potential problems with customers, it dispatches its own nurse practitioners and other professionals to homes to address health issues before they require more costly treatment. Clover only services members of the U.S. Medicare Advantage program, which has 18 million total members. The government pays the company for handling insurance claims for its 28,000 elderly or disabled customers with Medicare Advantage.

This year, the U.S. dropped Clover’s Medicare rating to three stars from 3.5 out of a possible five. That means the government will pay Clover less for some claims next year, and the downgrade may deter customers from signing up. The ratings are based on annual member surveys conducted in 2017. Vivek Garipalli, Clover’s co-founder and chief executive officer, said the company was ill-prepared to handle the process. He said Clover now has plans in place to gauge customer satisfaction and resolve concerns before they’re reported to officials. “We went from having zero strategy to having a defined strategy,” he said.

Garipalli, who previously started hospital chain CarePoint Health, parted ways with Clover co-founder Kris Gale late last year. He said Gale provided crucial technical leadership during the startup’s early days but that the company is now more focused on developing services for nurses and other health workers. Gale, who remains an adviser, didn’t respond to multiple requests for comment.

Replacing Gale is Andrew Toy, a former Google product director who oversaw development of some business apps. Toy started work in February overhauling Clover’s software team as chief technology officer, the company said. The team is expected to more than double and expand from the San Francisco headquarters to New Jersey. Clover also hired Pritam Baxi from Sears Holdings Corp. to serve as chief financial officer.

Garipalli said he expects 2018 revenue to be about $330 million based on the current pace of enrollments. He said the lower Medicare rating wouldn’t affect this year’s revenue, but it will next year. The company said it doesn’t have revenue estimates for 2019.

Although investors have said they see Clover as a long-term play and aren’t clamoring for profit yet, Garipalli said he aims to better control costs by scrutinizing payments for services and renegotiating contracts with health care providers. The company will also expand a program it introduced late last year targeting the sickest of its customers for additional care. This group represents about 10% of its total membership, yet accounts for as much as 45% of Clover’s expenses. The ratio is fairly common across the health care industry, but Clover hopes to change that.


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