Clover Health exits ACO REACH after $82M in losses to chase profitability

Clover Health, the Tennessee-based insurer and physician enablement company, notified CMS that it would exit the ACO REACH value-based care program at the end of the 2023 performance year. CEO Andrew Toy said that while entering the business in 2021 had succeeded in putting more lives under Clover Assistant management and more physicians under direct contract, the company had 'not seen a clear line to profitability in this business.'

The scale of the failure was hard to overstate: when Clover went public in early 2021, it attributed 70% of its valuation to the direct contracting program. It instead delivered the worst dollar performance of any participant two years running — losing $30.4 million in 2021 and $51.7 million in 2022 — and after 2021 scaled back participating doctors by as much as two-thirds without improving results. Experts said Clover struggled because it couldn't effectively manage care for its large pool of beneficiaries.

The exit is part of a profitability chase: earlier in 2023 Clover restructured, laid off about 10% of its workforce and moved core operations to UST HealthProof. In Q2 2023 it posted its first-ever adjusted-earnings profitable quarter, slipped back to a loss in Q3, and says it should reach full-year adjusted earnings profitability in 2024, focused on its Medicare Advantage insurance business and the Clover Assistant software platform.

First-ever adjusted-earnings profitable quarter in Q2 2023; full-year adjusted profitability guided for 2024. The abandoned line lost $30.4M in 2021 and $51.7M in 2022.

The company walked away from the program it had credited with 70% of its IPO valuation — a rare public admission that a core growth thesis failed.

The numbers make the cost of staying legible: $30.4M and $51.7M lost in consecutive years, with no improvement even after cutting participating doctors by two-thirds.

It shows how program rules changed the game: ACO REACH replaced direct contracting in 2023 with stricter requirements on screening, design and provider-led structures.

Quitting a business that once justified most of your valuation is a legitimate turnaround move: it freed Clover to concentrate on insurance and software where a path to profit existed.

Clover guided to full-year adjusted earnings profitability in 2024 and refocused on Medicare Advantage and Clover Assistant; the exit took effect after the 2023 performance year.