After disappointing third quarter, Bright Health relies on healthcare services

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, an increase of 66.7% from 1 , $ 2 billion previously forecast, the company said in a press release Tuesday.

NeueHealth attributed the increase in revenue to new members earned through its insurance arm, other enrolled payers, and beneficiaries managed under the Center for Medicare and Medicaid Services Direct Contracting program, which places the responsibility on private entities. manage care for traditional Medicare patients.

CMS’s decision to block new applicants from signing up for the direct contract earlier this year gave a boost to existing groups approved to manage patient risk like NeueHealth, said Dan O’Neill, consultant in healthcare and business manager of Pine Park Health, which provides personal clinical services to senior service communities.

The company’s focus on creating new clinics rather than acquiring existing groups represents a strategic shift on the part of insurtech, and an awareness that management service organizations offer for direct contracting entities is not a viable long-term growth movement, 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 has been unable to meet demand for maintenance on time.

“NeueHealth is becoming more and more of a provider. It’s a more difficult and slower growth path,” O’Neill said. “If they can do it, though, it’s more of a value creation 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 slice of the economy and you’re not doing much. ‘”

The announcement follows the disappointing performance of Bright Health Group in the third quarter, after insurtech’s medical claims ratio reached 103%, the highest among other insurance startups Clover Health, Oscar Health and Alignment Healthcare . The company blamed its inability to manage medical costs on an increase in COVID-19-related claims and an inability to accurately measure the risk of new registrants gained during the special registration period. Bright Health’s revenue grew 206.3% year-on-year to $ 1 billion in the third quarter, while its net loss widened 400.7% year-on-year to $ 296.7 million .

In addition to a disappointing performance in the third quarter, investors had also questioned the weak earnings outlook provided by NeueHealth in the second quarter of 2021, said Jeff Garro, senior equity research analyst at Piper Sandler. The updated forecast will be a welcome surprise to investors ahead of the company’s analyst day next week, he said.

“They could turn a new leaf in terms of meeting and exceeding expectations,” Garro said.

By updating the revenue forecast for its tech services arm, Bright Health Group may also be looking to raise its stock price, which hit a record high of $ 3.26 on Tuesday, noted Ari Gottlieb, director 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 was the largest IPO among health insurance startups that went public this past. year.

Investing in value-based clinics that help Bright Healthcare manage the health of their individual members could be a good business decision, if the insurer finds a way to keep its medical costs under control, Gottlieb said. The strategy reminds Gottlieb Harken Health of the now closed partnership between UnitedHealthcare and Iora Health. The primary care insurance business closed in 2017 due to the unprofitable nature of the Affordable Care Act trading at the time, Gottlieb said. Four years later, exchanges have become one of the most profitable insurance products and a significant part of Bright Health’s 890,899 registrants.

Bright Health was launched in 2017 by former executives of the UnitedHealth Group.

“You have to ask yourself if they are going to be forced into a clearance sale where they have to sell the NeueHealth business to raise capital to fund the health plan bonds,” Gottlieb said. “Bright has options. They might sell this asset because they are in dire need of capital, and it can be difficult to raise capital when their stocks are down.”

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