Bright Health Group expects its investment in value-based primary care clinics to generate $2 billion in revenue for its health services arm in 2022, a 66.7% increase from the $1.2 billion previously forecast, the company announced in a news release Tuesday.
NeueHealth credited the revenue bump to new members gained through its insurance arm, other payers enrollees and beneficiaries managed under the Center for Medicare and Medicaid Services Direct Contracting program, which puts private entities in charge of managing care for traditional Medicare patients.
CMS' move to block new applicants from enrolling in Direct Contracting earlier this year provided a boost to existing groups approved to manage patient risk like NeueHealth, said Dan O'Neill, a healthcare consultant and chief commercial officer of Pine Park Health, which provides clinical staff to senior services communities.
The company's focus on building out new clinics rather than acquiring existing groups represents a strategic shift by the insurtech, and an awareness that offering management services organizations for Direct Contracting entities is not a viable long-term growth move, he said. The company plans to build at least 25 new clinics in Florida, Texas and North Carolina this year and operate more than 70 clinics by early 2022. NeueHealth was unable to respond to an interview request by deadline.
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"NeueHealth is actually moving more into becoming a provider. That's a harder, slower growth path," O'Neill said. "If they can pull it off, though, it's more of a value creating path than a pure MSO. Because sooner or later, everyone looks at MSOs like, 'Why are you here? Why are you even at the table? You're trying to take a piece of the economics and you're not doing much.'"
The announcement follows Bright Health Group's disappointing performance during the third quarter, after the insurtech's medical loss ratio reached 103%, the highest among other insurer startups Clover Health, Oscar Health and Alignment Healthcare. The company blamed its failure to manage medical costs on an increase in COVID-19-related claims and a failure to accurately measure the risk of new enrollees gained during the special enrollment period. Bright Health's revenue increased 206.3% year-over-year to $1 billion in the third quarter, while its net loss widened 400.7% year-over-year to $296.7 million.
In addition to a disappointing performance during Q3, investors had also questioned the low revenue outlook NeueHealth provided in the second quarter of 2021, said Jeff Garro, senior equity research analyst at Piper Sandler. The updated guidance will come as a welcome surprise for investors ahead of the company's analyst day next week, he said.
"They might be turning over a new leaf in terms of meeting and exceeding expectations," Garro said.
By updating the revenue guidance for its tech services arm, Bright Health Group could also be looking to raise its stock price, which hit a record low of $3.26 on Tuesday, noted Ari Gottlieb, a principal at A2 Strategy Group. Bright Health went public at $16.64 per share in June, raising $924 million on a valuation of $12 billion, which represented the largest IPO among the health insurance startups that went public this year.
Investing in value-based clinics that help Bright Healthcare manage their individual members' health could be a good business move—if the insurer figures out how to rein in their medical costs, Gottlieb said. The strategy reminds Gottlieb of Harken Health, the now-shuttered partnership between UnitedHealthcare and Iora Health. The insurance-primary care venture quietly closed in 2017 due to the unprofitable nature of the Affordable Care Act exchanges at the time, Gottlieb said. Four years later, the exchanges have evolved into one of the most profitable insurance products and a significant portion of Bright Health's 890,899 total enrollees.
Bright Health was started in 2017 by former UnitedHealth Group executives.
"You have to wonder, are they going to be forced into a fire sale where they have to sell off the NeueHealth business to raise capital to fund the health plan's obligations," Gottlieb said. "Bright has options. They could sell this asset because they badly need capital, and it may be hard to raise capital when their stock is down."
