Clover Health Investments, Corp. (CLOV) Earnings Call Transcript & Summary

Okay. I think we're going to go ahead and get started here. Thank you, everyone, for joining, and welcome to day 2 of the Citi Virtual Healthcare Conference. My name is Jason Cassorla, and I cover managed care and health care facilities and providers at Citi. We're happy to have Clover Health here today. Joining from the company is CEO, Vivek Garipalli; President and CTO, Andrew Toy; and Director of IR, Derrick Nueman. Thank you, guys, for being here today. Before we jump in, though, I'm going to -- this is going to be a fireside chat format. So I'll lead the discussion. But if anyone does have a question, there should be a box on the upper right-hand portion of your screen to submit, and I'll certainly do my best to toggle over and get them in. But -- so maybe to start, I think you guys are going to do a quick overview, and then we can delve into questions.

Great. Thanks, Jason. Appreciate the time today. So yes, just a quick overview. I know we had our earnings call yesterday. So just to kind of hit some of the -- some key points. Pretty excited about our revenue growth year-over-year. Direct Contracting growth ahead of expectations. And I think just importantly, on the Medicare Advantage side, strong growth in the face of what happened with a lot of other participants in -- on the MA -- on the managed care side. But I think importantly, when we look at Georgia, our second focus state, really, our first proof point -- external proof point of being able to grow significantly outside of New Jersey. I know that's been a question mark for folks outside, not one for us internally, but that was important to produce that data point. And then just from a -- as we think about profitability, we're at a pretty good position now when we think about size of membership and concentration of membership getting to around the $1 billion premium mark on the MA side and then building a huge presence in Direct Contracting, our first noninsurance line of business where Clover Assistant is powering all those practices and all those lives. We've got -- we think ahead of a step-wise improvement in MCR this year versus last year given our guidance. There's a lot of effort being put in this year, particularly around continued improvements around Clover Assistant additional clinical programs. So we do expect another improvement in 2023 versus this year on MCR beyond even the Stars impact. So when we pull that all together, along with synergies across our different lines of business and continued efficiencies, and even if you think about getting close to a somewhat standard OpEx structure as a percentage of premiums, we've got line of sight to profitability in the not too distant future.

Got it. Okay. No, it's a really good intro. Thank you for that, Vivek. Maybe just to bifurcate that a little bit, let's start on the Medicare Advantage side, right? And to go to your comments around Georgia, when you gave your preliminary 2022 commentary around the membership you first started -- or in 3Q, you had expected to have around 8,500 lives in Georgia, right? It's trending closer to 12,000 now as we start the year. So maybe can you just discuss the thought process around jumping into Georgia specifically. Why -- where you did in Georgia, what was about that area that was unique to you to think to jump in outside of New Jersey, right? And then what's resonated there? And why do you think the growth has been able to come through the way it has above your expectations as well?

Yes. I'll jump in here, Jason. So a couple of different things. The second question, I think, first, which is the way we've been expanding is we've been landing and expanding in MA, right, because it takes a while to build up networks, et cetera, but we need to be able to be in a market, stuff that get a feel for it, it's growth dynamics, it's network dynamics. So traditionally, on the MA side, we built up adequate networks. We did the bid. We entered a bunch of markets. And then once we land, then we invest, and we grow in certain ones of those markets. A quick commentary that now that we have something like Direct Contracting where we can go anywhere in the country where we're not the insurance company, but also there's no bid, there's no network adequacy, we're able to land not quite the same as having an MA plan, but a little bit more efficiently. And you'll be seeing us do that, right, because that gives us on the ground dynamic to the doctors earlier. So our expansion strategy, we're still going to expand on MA, but we are able to get data through the DCE side as well, which is interesting, in terms of just again, ground dynamics with the doctors. We give them Clover Assistant. They start using it. We're like, well, do we want to launch an MA plan here as well? Then for something like Georgia, what we're seeing is it's now trending, like you said, quite along the lines of the way we saw New Jersey grow in its earlier stages. We're very pleased that we're now expanding there in the expansion phase. And the value proposition is what Vivek and I have always emphasized, it's actually the wide network choice with a true wide network of physicians to pick from because with Clover Assistant, we're managing quality and value-based care on a broader set of physicians that a regular managed care organization would normally have in network. That's why PPO is our flagship, and that's always resonated. We're known for the lower out-of-pocket cost and affordability of health care, and that's part of our mission. But the thing we're really emphasizing now is we're seeing in Georgia and resonate that like, listen, you can go to the doctor you -- doctors that you want to see as long as they have room in their panel. Go ahead and see those doctors. We want you to see them, and they're powered by Clover Assistant. That's a very strong proposition that is not just seen in sort of co-pay numbers or co-payment numbers. And that resonated in Georgia. We're very pleased to see what we have there, and we think we'll have other states and markets following behind that as well.

Yes. That's very helpful. And maybe just to that point around the other markets, right, I mean you're in 7 other states as well in a number of county, obviously, outside of that. So you pushed into Georgia here. You're seeing the replication very much like New Jersey. You're very pleased with that. And you've talked about this argument around the need to build the network up to build the kind of entity. Is that kind of like this hopscotch argument? We're going to do GA. Now we've got the other states that we're in. We're going to build those out the same way? Or are you seeing differing either competitive dynamics? Or are the way the markets are construed in the states that you're already in that make that a bit of a different argument at this point?

Yes. Great question. So a couple of things. First of all, it is different market to market. We know health care is hyper local. One dimension would be the dynamics of the providers on the ground, right? Some places, only -- if you have one large monolithic provider who wants to do one special -- a value-based contract with one MA plan, that's not our ideal market, right? I'm not saying we'll never go there. That's just not our ideal market. That's better for other models that people might want. We think, fortunately, most of the country is not actually that kind of market, though. Most of it looks a little bit more like Jersey and Georgia. We're very good at that. So that's more of our focus in terms of how we go. The other thing I would emphasize is we take most of our share from the larger managed care organizations, right, from Humanas and from Uniteds and the Aetnas and CSSs. So because of that, we're less subject to on the ground, how do we roll up local smaller plans and take share from them. That dynamic doesn't exist for us. It tends to be just which of those players are in any given market, and we know we're pretty good because of our focus on PPO-wide network against the larger incumbents. And so we -- ground dynamics are important, but it's less important from there. It tends to be more the provider network and the desire for and efficiencies we can bring when we actually provide access to the full provider community versus just narrow networks.

Okay. Got it. No, that's helpful. And maybe just to piggyback on that taking share argument, taking from the large incumbents. You certainly realized above industry membership growth in MA. Is there any way you can help frame -- look, for example, you're thinking about 26% to 27% growth in 2022. How are you framing that in terms of share taking versus pure growth of new market entry or any of those things? Like how would you frame your ability to take share versus just the other ways you can organically grow from that angle?

Yes. Absolutely. So I do believe that -- first of all, we believe that fee-for-service original Medicare versus MA is a legitimate consumer choice, right? Like honestly, like they got different benefits, and we've met something there, et cetera. It's not one or the other. It's a consumer choice, which one you want to be in. We want to be able to provide Clover Assistant-powered data-driven primary care to both sides of that market and to take risk and be accountable for risk on both sides of that market in value-based care. That's our strategy. So I think traditional managed care and MA has framed it more as MA versus original Medicare, and we just don't see it that way. We're like you pick the one you want, right? And we're going to provide great care and be accountable for your better options at lower cost either way. And I think that's a different way of looking at the world, right? So if you want to stay in original Medicare, we're going to get you same doctor. That's fine. We'll be in that market. Now on the MA side, I do believe that a good number of our folks come to us from original Medicare, and that's because we are able to provide that affordability, right? For a certain part of the market, affordability is very important, that out-of-pocket process is very important. It tends to be the more underserved communities. It tends to be folks who need help affording their care, MA is very good at that, right? Med sup premiums are expensive. It's underwritten. It's good for a different kind of person, generally wealthier, generally more middle class, right? So MA, we take share from there, but we also take significant share from other plans in the area. Once again, affordability is one dynamic, but that's also the -- yes, but you want to see your doctor, right? You want to see doctors in your community. You want to see the doctors you trust. And because we let people see the doctors they trust, that works with Clover Assistant because when we now inform that doctor and give them sort of that guidance on how to be successful in value-based care, they can use that trusted relationship with their patient, use their clinical judgment and help provide those better results.

Okay. All right. Got it. Fair enough. Maybe switching over to the revenue and rate side of Medicare Advantage here. Vivek, you talked about this last night. I want to dig into the proposed 2023 MA rate. That 4.5% on a pure rate basis, excluding [ anti-coding ] trends. Just I guess a quick few questions related to the proposal. One, how did you see the proposed rate come in relative to your expectations, especially off of '22's rate in the 4% plus kind of cohort? Two, does the rate impact the way that you're thinking about your go-to-market strategy going forward? And then three, maybe highlight some of the health equity considerations in the proposal that you highlighted last night, just -- so we can have a discussion around those dynamics. So relative to your expectations, how does that impact your go-to forward market strategy and then how the equity component would be helpful.

Yes. I think in terms of relative to expectations, I don't think we're any different where it's better than what we thought and probably what others thought. And I think the other thing, Medicare Advantage is a pretty popular program for seniors. And we're entering a pretty big election cycle here in terms of midterm elections. So I don't think anyone wants to upset the apple cart when you have a bunch of folks that are going to be going to the polls towards the end of the year. So I think that -- I wouldn't discount that just potentially being a driver as well. Now kind of getting to the -- in terms of how it affects bids and so forth, we're still in kind of our development process on the bid design side, but we're definitely well aware of how rich our plan designs are and by an order of magnitude. So we're taking that into account as we think about balancing growth versus MCR and how much do we really need to be giving away to still kind of maintain a high growth rate. So that's all going to be part of our calculus. And I think just to the point Andrew made around choice. I think now public market investors may be at the early part of the learning curve on understanding how important choice is. Outside of health care, when you're in kind of traditional consumer products, choice matters. When you tell people they can't buy a lot of things, or if you go to a retail store and they only offer like items, you're just going to have less demand. It's not that different in health care. So I think we're going to -- I think health care investors are starting to see the power of choice, and I think that's just only going to accelerate. I think incumbents are still not thoughtful yet I'm thinking through how much choice matters. And then kind of getting to how choice impacts the health equity components that you mentioned. When you think about those that are disadvantaged are in kind of that lower half of socioeconomic status, that's where network choice matters the most because that's today where you actually see the narrowest networks. And there's -- it's -- you see in the rate proposal or the proposals in the rate notice, there's definitely unintentional components of MA that have created an artificial suppression of those of lower socioeconomic background. CMS has recognized that. I think there's 3 really powerful components in the proposals. One is having a direct adjuster on risk adjustment tied to socioeconomic background. There's a reference to area deprivation index that's U.S. census-driven. What we think is compelling around that is it can't be gamed by businesses. So when you kind of get into the take-home test component of submitting to the government codes or socioeconomic background, you end up reinforcing the health equity disparity. But when it's actually EDI-driven, census data-driven, you actually create a reliable measure for what parts of the country or components of the market should get a risk adjustment inflator and which ones should get a discount. You'll see probably the incumbents push back heavily on that because it's going to have a severe impact on their margins. But from a policy perspective, we'll create the right incentives with them, which is a really good thing. The second component is a Health Equity Index, which is drafting off of the Health Equity summary score, which was a study done by the RAND Group contracted by CMS. That's something Clover scored amongst the highest on. We don't know what the weighting of that measure is going to be. We don't know what measurement year it's going to start impacting or if it will even happen, but that's really important to -- from a Star rating perspective. And then one other component is within medication adherence, which is a highly weighted measure with the Star rating. There is a proposal around potentially taking into account, again, socioeconomic status on that measure itself. Again, that would affect Star rating. But when you think about risk adjustment in Stars, those are 2 huge drivers of revenue. So it'll be very interesting to see what the comments are going to be from industry on those. You can probably sense what our comments are going to be. But I think it's in line with what a lot of folks have learned during COVID that health in equity is a very real thing. I think the study is coming out of what happened during 2020, 2021, are only going to get more powerful and more eye opening and not necessarily in a good way. And I think this administration has made it super, super clear that health equity is a big priority. And interestingly, it was the prior administration that contracted about for the health equity summary score analysis. So I do think we're entering a realm of where there's bipartisan support on focusing on this as an issue because it affects all markets, rural markets as well. So we think the momentum is there. It's the right public policy goal. It's original [ tent of ] Medicare Advantage. The only thing standing on its way are big business interest.

Okay. Got it. No. I really appreciate the color and candor there. Maybe just to your point -- well, just shifting to Stars, right, for 2022, you got a 3.5 Star rating for your PPO plan. It's a half Star bump from where you were in '21, and I think ahead of your expectations as you were thinking about originally the glide path of your Stars improvement over time. Maybe just -- are there specific considerations that you believe drove the Stars performance specifically? And historically, you suggested your ability to drive Star performance as you layer in criteria into the Clover system itself. But maybe just how you how the development of going last year [Audio Gap] 3 to 3.5 in 2022, and we'll start there. That would be helpful.

Yes. So we got our Star -- just because it's always confusing. We got our Star result last year for measurement in year 2020. So we achieved 3.5 Stars for measurement year 2020, which will affect payment year 2023, which is next year. So just quickly as a discussion for that, for everybody, when we go to 3.5 Stars, we're very excited for that. That does change our rebate on our bids, which means that the government will pick up more of a percentage of supplemental benefit costs, which will effectively lower our MCR, as we've discussed. That's not the case for every plan. Many plans get 3.5 Stars, get that increased rebate, which makes those benefits cheaper effectively to provide and then provides additional benefits. And our goal has been -- we already provide very good benefits with market-leading benefits. We don't need to use that to actually increase benefits. We've effectively prefunded those benefits out of the MLR is one way to think about it. And we will enjoy the benefit of that starting next year because there is that lag between when you achieve Star ratings and when you actually get the financial benefit. So we -- I think that what happened there was there were a couple of different things. One, I acknowledge that we're still doing the pandemic and how Stars have been measured during the pandemic have changed, how points are measured, all those things. I think CMS is good at doing that. They'll continue doing that, and then they're going to add on new adjusters. Like Vivek said, almost what we believe is take the opportunity to say, well, since things got kind of thrown up in the air anyway during COVID, let's add these new components that we've always wanted to add to Stars as well because it's going to be different coming out of the pandemic anyway. We've always seen that the underserved population tended to get lower scores on these measures because the affordability of care is harder. They have less access to doctors in their local region, all of these dynamics, I think, will start to be adjusted for, which is very powerful. So we were excited that the features we launched with Clover Assistant could help us get towards 3.5 Stars. We believe we're very well set up for where we think CMS will go with the Star rating program going forward, and that will obviously help us move to 4 Stars and beyond.

Okay. I mean do you think that you'll be able to get 4 Stars? I mean top of the rating, but -- I mean if you go on to Medicare, for this year, you're going to show up -- for 2022 plan, you're going to show 3.5 Stars plans, right? So...

It'll be in this year's plan rating for 2023's plans will show up for 3.5 Stars, yes. In this calendar year, correct.

Yes, yes. Correct. That's what I was trying to get at. So the following year, right, the next year in that argument, are -- do you think you can get to 4 Stars? Or if a lot of those proposals that you talked about within the proposed rate on the health equity impacting Stars, I mean, let's just kind of build out a scenario, do you think you can get to 4 Stars pretty quickly here? Or are there considerations that we should be mindful of as we think about the progression of Stars over time?

I think that I would be very -- obviously, I would be delighted to get to 4 Stars. I'm not setting anyone's expectations to be at 4 Stars. I think 3.5 would be solid for us. And like I said, that 300 to 500 basis point improvement is already -- I'm not going to look past that, let's put it that way. So I wouldn't say that we wouldn't necessarily guide to 4 Stars, but we constantly are working on it. Like Stars is sort of one of the things where you just keep working on to keep working at it and your rating, you get rewarded, and your rating improves over time. I do think that we can get there even without any adjustments. For health equity, I think it's fairer if there are adjustments for health equity. I think it's fairer if wider networks are also looking at it differently, but I don't think those are necessary at the end of the day. I will call out that Vivek indicated that health equity was looked at 2 dimensions, the Stars, which we just talked about, but also the risk adjustment component. The risk adjustment component can be landed, to your point, Jason, a lot earlier. It's just in the rules, it can be adjusted quicker. Stars takes a little bit more time in order for it to be adjusted.

Okay. No, that's really helpful here. I just wanted to quickly hear -- maybe just going to your MCR guidance, right? Your thoughts around next year around your cost trend constructs. You largely kept that the same, 95% to 99% is your range. Can you help walk us through maybe the puts and takes as you consider the development for -- of MLR -- or MCR this year just outside of COVID? Just trying to bridge where you ended up in '21, how you think you got to '22 and maybe just the high level puts and takes that walk you to at the bridge there.

Yes. Makes sense. And so the way I would frame it would be this. Let's -- outside of COVID, there -- because we're still in a pandemic, even though we're all very hopeful, but this is still -- a year ago, we had vaccines already. We were like, oh, no, no more pandemic this year. We all know how that turned out. So we're still in a pandemic now. But outside of COVID, there are 2 things that I would indicate, right? For this year, we have discussed how in service year '20, the first year of the pandemic, it was hard to get encounters that counted for risk adjustment. Everyone saw that, right, which meant that payment year '21, there were things that -- we knew someone was diabetic, but we had -- we were in no way to get that code accepted by CMS, right? And so our revenue went down in '21. We have seen that come back already because we learned how to operate within the pandemic in service year '21. So for this payment year, '22, we are already seeing revenue come back to what we believe is appropriate levels, right? We always view they are diabetic. We just needed to get that code accepted by CMS.

Maybe just to dive in real quickly, what does the Delta and Omicron impact this year make the same exact argument for next year as well on your ability to [ restore in this SaaS ] and so on? Or is that not real mean for [indiscernible]?

Great point. So basically, the way I would answer that is we certainly did better in service year '21, affecting '22 than service year '20, affecting '21. So we're already probably, and I think we shared some slides around this, about 600 basis points and up better just from the bounce back, if that makes sense, right? Now is that the full value of the bounce back? We're still assessing that. I think there's still some latent in there that can be come all the way, right? Probably not. But at least what are already seeing happen is pretty material, and that makes us feel good already, obviously, for obvious reasons coming into '22 to have a -- to be paid appropriately for the risk we're taking on, right? So that really feels good. And I think there is some more room to improve on that because we're still in the pandemic, right, like at the end of the day. So that one's there. The Stars impact is already earned, right? That was earned for service year '20, and that will affect next year's MCR, right, which is that 300 to 500 basis points. So the revenue we hope will continue and maybe be improved a bit more, like you said, because of COVID. Stars effect will be for next year or 2. That's great. That's in the books. And so now the variable just tends to be the waves we're going through, Omicron, Omicron version 2 or like whatever is next. I think we're hoping that -- what we're seeing is while we might get more variants, maybe. The impact of the variants is flattening as we get better at managing this as a society and become more endemic vaccines. Most people have already gotten it, et cetera. So we're seeing that flatten, and some of it has been compensated for in the rate notice as well, if that makes sense, right? So we want to see that flatten out. However, we have still price into our projections significant effect from Omicron from last year because no one can predict the pandemic. Outpatient utilization, pent-up demand, all those things are still priced in.

Yes. And that's your argument around the 300 basis point construct that you baked in, right? So that is not just COVID costs. That's -- is that what you're alluding to -- okay.

Right. Exactly right. Exactly right.

Okay. Got it. Because you have 300 basis points of COVID costs. Yes, we're wondering, Jersey, what's going on up there? So...

No, no, no. It's COVID and related -- oh, by the way, just because you asked that question, there has been more data published where New York and New Jersey are, by far, above the national average. So I know you weren't intending to sort of make fun of it. I understand and accept the spirit of what you said. But urban centers, diverse centers hit hard by COVID, I think that's definitely something that we see on the fee-for-service side as well.

Okay. Got it. Perfect. I just want to be conscious. Let's shift over to Direct Contracting, right? Just -- the program only started in April of last year. But maybe at your highest level right now, how is that program developed so far for you? Just any high-level thoughts would be helpful on Direct Contracting for you as an entity.

Yes. Absolutely. So I think that the way the program is developing is it's a new CMMI program. We all know that, right? They could make adjustments to the program. We all know that as well. What I generally see is that we are majority claims aligned. That's fairly different for most DCEs -- certainly DCEs at our size. We think that's core to our model. Basically, that's what we would expect to see with our model, right? We sign up doctors, doctors who may not have been necessarily thinking of value-based care directly, but we can help them have that on-ramp, that digital on-ramp the value-based care that the Clover Assistant brings. They sign it with us. We get their panel assigned to us. So we get large numbers of their -- of claims aligned, folks set into our program starting January 1, and we reported on that last night that that's exactly what we saw happen. I think the fact that we're still heavily claims aligned is different than what other DCEs might talk about, but that's just a function of the model -- sorry, for the DCE model, their approach versus our approach. Our approach is bring in doctors, let them be successful, let them be folks who have not been successful in other programs before. So we like that. We do know that CMS is still looking at benchmarking and how that methodology works. I expect that maybe there'll be some tuning around that as CMS talked about these things. I think that's expected as well. And the last part is I do think there's a lot of aspects of the DCE program that have been well constructed and thought through, and that's a bipartisan kind of view on that, and that has sort of played out as well in terms of thinking of it as a next set of thinking along the ACO path.

Okay. Got it. Perfect. Just really quickly here. I mean beginning of the year, you kind of guided to 125,000 on average for the year. You got a 40,000 bump. Just so that folks are aware, why did that happen? But just a month later, you got 40,000 more. And could you get another 40,000 or 50,000 as the year progresses? Or just so that we're all aware of how that may work and thinking about the company.

I'm definitely not setting expectations to get another 40,000, [ you said 500,000 ]. So thank you for asking that question. I think the reason there is that thinking between voluntary alignment and MA where there's a B2C motion. You're thinking, wow, you must have gone out and signed up a lot more people. We're not doing that in DCE. What's actually happening is we're submitting all the doctors, that's not a variable. They are getting accepted, that's not a variable. What is a variable is who gets assigned to those doctors as a fee-for-service of the patient of that doctor. That is a variable. We saw that as a variable last year, right? We saw it as a variable this year. We don't -- we have access to the algorithm, but we don't have access to all exactly the same data as CMS. So even though we have, we know which doctors are coming in. Who is going to be assigned in their panel is our variable. So it's not like I'm going out there and saying, oh, look, I sign up a bunch more people. What I'm saying is, oh, look, we get a CMS, and Clover are getting sort of better at calculating who actually gets assigned into this program.

Okay. Got it. So the thought process here, you start the year with about 160-ish plus or minus. And it should be -- should trend regularly flat pretty much, right?

Yes. Basically, we'll get some voluntary alignment. We will get some mortality, for example, which would pull the number down. But I would say, yes, roughly flat.

Okay. Got it. That's helpful. And I know you commented on the claims versus -- alignment versus the voluntary, but just your model on the claims and how you're going against -- maybe just why can't the voluntary also work in your end, too, maybe just help on that argument. Because of the whole argument that you've discussed around others are saying it's a lot more voluntary base, your claims, that's part of your model, but why can't Clover also get the voluntary action?

Yes. We absolutely can if the question is whether we want to because doing the voluntary model comes with downsides and I think are not apparent, right? One downside is that if you think about that model, what you're basically saying is you're going to help your participating providers take patients from other practices. Do you see what I'm saying? By definition, you're voluntarily align them where they were not claims aligned, right? What that means is you're effectively telling everyone else in that market, you are favoring some people versus others. And what we would rather do is sign up everyone to be in our DCE and just take them claims aligned, then say, oh, I like you better, Jason -- Dr. Jason. Let's move people to you, right? And so I think that's fundamentally the difference between our models is we can work with anyone. We are -- does that make sense? Like that, that's really the...

Yes. No, absolutely. I just want to make sure there isn't anything else that we wanted flag there or not.

If you want to do it operationally and sort of take that operational cost, we could absolutely do it. There's nothing that's...

Okay. Yes. Perfect. Got it. That's extremely helpful in understanding that backdrop. I mean -- okay. So I think you alluded to this a bit on the call yesterday. Obviously, the headlines that are going around -- Direct Contracting is a huge portion of your revenue. Just wanted to flush out the pieces so folks can understand a little bit more. You're in Direct Contracting, but does that mean you can't -- what are some of the offsets that could happen if something were to happen? We just held a DCE panel here today where there's arguments and discussions around potential -- giving -- kicking out managed care out of this program from that argument. And I'm not trying to say one way or another. I just want to help -- delve into where the offsets could be other programs around taking risk in Medicare that you think you could pretty much easily jump into our thoughts around that to -- just help around that in that argument.

Yes. Absolutely. So a couple of different things. I think number one is kicking out managed care, like the majority of our revenue actually comes from non-managed care if you think about it that way, right? Like I -- like majority -- majority of our revenue actually comes from DCE at this point, right? So that's -- from that perspective, it's interesting because we're not seeing DCE as a feeder or something into managed care. It's an interesting consumer choice that can actually brought in. The other dimension I would say here is that we all know -- I think everyone knows, administration knows there needs to be a movement towards value-based care in original Medicare at the end of the day, right? We can all debate how design programs, all those things. That's not going to end, right? Like there will be program -- this is not even the first program that does this, right? This is the multigenerational program. So we are not pro-DCE people, if that makes sense. What we are is pro, how do we bring value care by base care to all of Medicare independently of the consumer choice of someone picking original Medicare versus MA, right? And so whatever programs exist over there, we think we'll be able to participate in because at the end of the day, what is our model? Our model is not to be a managed an MCO in fee-for-service. Our model is to enable physicians through software -- our software platform to be successful in those programs. And no one is trying to lock physicians out. We're just an enabler for them to move into the value-based care.

Yes. Absolutely. Okay. No, that's really helpful. The delineation here between the fact that you're a software. You're offering the software for the risk argument as opposed to cycling out the profit argument...

Exactly. I don't think anyone's going to say no one to provide software to physicians that helps them to be successful. And that would be only maybe someone could say that, but that would be a pretty weird argument to make.

Okay. No, good. I'm glad you guys have the opportunity to kind of discuss that here. Just real quickly on -- maybe just shifting a little bit gears to the Clover Assistant. I know you don't talk about that, Andrew. Just -- you've talked about continuously improving the product, right? But thinking ahead -- and this kind of got highlighted on the call last night, but just thinking ahead, what are some of the next areas -- the larger, deeper areas you're looking to build out in the Clover Assistant specifically, capabilities-wise services? Like what's the bigger pieces that you're looking for, for the Clover assistance that folks can get attached to, just to understand it more?

Yes. So let me start by saying that -- thank you for giving the opportunity. Like I love the idea of agility and the agility that software platforms bring, right? And so I always use the analogy of like turn-by-turn directions on GPS, if you remember what was like traveling before that, and what you remember afterwards, it's nice to just not have to be like, okay, I have to memorize Max. I can know traffic patterns, like it just adjusts to the right thing. So the weird answer to your question is I love the idea that I could change my mind if I wanted to on what's important at any given time. Let's say there are significant changes to the priorities of the DCE program. Let's say, you know what, we didn't have Stars before, but let's introduce Stars to the DCE program suddenly is what a CMI decides. Okay. Great. Rather than having to retrain a massive number of physicians, I just load those Stars guidelines into my turn-by-turn directions on Clover Assistant. They still use their clinical judgment. They read it. They're like, oh, okay, I'll do that or maybe I won't do that. And suddenly, within like a couple of days, I've rolled that out to the entire network, and I've reacted to any -- that's why I'm like, okay, I can't react to any change, right? If this program changes, no problem. If it's a new program, I'll load that to Clover Assistant. No problem. I've just empowered all those physicians to be successful in that program. That's super powerful, right, just on its own. Now talking about stuff that's applicable no matter what. I also like about CA that at the end of the day, we're caring for the same human being. Who cares about the value-based program? That's just a means to an end, better outcomes at lower costs. How do we give physicians superpowers to make better decisions armed with more data about as many clinical conditions as possible? So the way I think about that is that's our clinical road map, right? You could almost march through different diagnosis conditions and say, is this something that people are thinking about? What more data can we provide? What more lab data can we provide? How do we make -- enable people to make better decisions around this? Maybe it's just bringing them to their attention to certain things. So the way we think about it is how do we increase -- constantly increase engagement with the platform? And then how do we also then march through clinical conditions? We talked about oncology, CKD, just scratching the surface there. We can do diabetes. We can do all the major conditions that are in our population and just get better and better and better at that and be shipping updates. Just scratching the surface as well. So I'm happy with our engagement. Lots of stuff we could do there to make it easier to use. We're rolling out EHR integrations. We're rolling out triggers. We're launching integration into public health tools and then just interesting clinical content and data sources that we can build into CA.

Got it. Okay. That's really helpful. We got last minute here. I just want to go to a bigger picture, and then, Vivek, I'd be remiss not to say this after you flied it on the call here, but just the balancing -- argument you made about balancing your growth in profits, right? And you kind of teased us a little bit last night with an argument around the potential for profitability next year. Maybe just take a quick few minutes here, discuss the building blocks that, I mean, you alluded to it a little bit when you first introduced. But as you think about where Clover's come from and how you're thinking about next year and the years ahead, how are you balancing the growth versus profitability argument, the competitive landscape, all those pieces and the building blocks that gets you to something close to a profitability level for 2023 and beyond? That would be helpful.

Yes. No, happy to do so. And I think just -- even if we just look at it from an illustrative perspective, so let's just put Clover aside, if you take an MAO that's, let's say, call it, $1.2 billion, $1.3 billion in premiums, at that size, your OpEx as a percentage of premiums is going to be around 8%, 12%. And you -- and then for Clover, in our case, we'd add on our R&D team. I don't have the exact kind of numbers in front of me, but it's nowhere close to that percentage of premiums. And then we have sort of a modest OpEx incremental, but it's highly synergistic with our MA side on Direct Contracting. And then you can kind of run the numbers from there. As to why we think we're -- there is some potential possibility of certain things falling in place to get there. And not to mention the fact that we have a very, very wide differential between our plans and those in the market, even when you look at HMO plans that appear comparable to Clover, their HMO plans. And then when you look at PPO plans that appear comparable to Clover, you look -- you scan over the out-of-network cost sharing, and it's sky high. So I think one of the things that's really interesting is we have a lot of flexibility on plan design and still maintaining a really high growth. I'm not saying we're going to make any dramatic changes, but we do have a lot of that flexibility. And what the incumbents are facing is they're having to spend a lot of money on lead gen to hit their growth rate, but you're not -- you don't really know how much money they're really spending given just how big those organizations are. And their growth engine is the PPO side. When you talk to incumbents, they're not going to reveal to you their MCRs and HMO versus PPO. But if they do, I think you'd be shocked as to how wide of a gap that is. Whereas Clover, our business is predominantly PPO, and we're going to get over time to attractive MCRs. And I think it's going to be very, very difficult for incumbents to compete. I think part of their assumptions are there's no way Clover can do well on a PPO MA margin because we, as an incumbent, don't do well. That's their -- that could be their fatal flaw in how they're looking at it, but that's kind of what we think is going to happen over time. And there's all kind of hinges around what we developed with Clover systems starting many, many years ago. And yes, we're set up for a portion of our business as an MA plan, and the noninsurance side of our business is growing much larger. But we don't -- we're not really structured anymore as a traditional MA organization. We just look at kind of a revenue makeup or lives makeup and other lines of business, as Andrew alluded to, as we're getting into. So I think what folks are going to be seeing over time probably maybe next year or year after, this conclusion of, oh, wait, it's -- they really are a software company driving value across lots of different lives, across physician practices. And the question around kind of payment models, there's been so much policy effort and focus on like payment models -- payment model innovation. We have yet to meet a doctor that all of a sudden has introduced a new value-based care agreement. And then they say, oh, wow, now I'm going to start making great decisions for my patients. That's just not how they look at the world. What they are in dire need of is really great software that's not out to screw them that can't be gamed where they're just given it as an aid, in our case, an assistant to help them make right decisions. That is what's going to drive clinical value and business value. But in health care today, you can't really correlate a lot of the market caps to clinical consumer value. It's usually some sort of financial construct, but all that's going to go away over the next 10 years or so.

All right. Great. No, that was really helpful. Vivek, Andrew, Derrick, really appreciate your time here. We've come up on time here. Definitely got all over a little bit. So we're going to have it there. Thank you, guys, for your time here. Really appreciate it. And thank you for everyone on the line who are listening in on today. So everyone, have a great rest of your day. Thanks a lot.

Thanks, Jason.

Thank you very much.

Thank you.