Clover Health, A Data-Driven Health Insurance Startup, Raises $100M

Clover Health, an insurance startup based out of San Francisco, is hoping that with its data-driven approach it can rebuild healthcare for senior citizens from the ground up.

It wants that by tracking all the inputs of a person’s medical history from insurance claims and determining who the highest-risk patients are. Clover Health then works with those patients to help them become healthier and improve overall clinical outcomes. To pull that off, the company has raised $100 million in an equity round led by First Round Capital and debt.

“At the core we’re using data and software to build clinical profiles of people, identify gaps in care, and fill those gaps in care,” Kris Gale, Clover Health’s CTO, said. “We have a small team that will do targeted interventions to drive improved health outcomes of people. Every in-patient hospital admission we can prevent by filling these gaps in care, this ends up being a positive for us.”

Clover Health’s goal is to essentially go after the bigger, traditional Medicare health insurance companies that Gale argues don’t use data to aim for better patient outcomes. To do that, it collects information like lab test results, radiology results and such to get an overall profile of a person’s health — something only an insurance provider can do because it’s taking in all the claims, Clover Health CEO Vivek Garipalli said. It then uses software models to automatically identify issues — like patients not regularly taking a prescription — and intervening with its staff of nurse practitioners and social workers.

“You imagine a Medicare patient goes to a primary doctor’s office, goes to a cardiologist, goes to a hospital, there is no quarterback for that data,” Garipalli said. “No one has the time or the data to guide that patient and coordinate all those interactions and make sure each provider gets the right info at the right time.”

This is a tough unstructured data problem with all these reports coming to the company. It requires creating tools that are able to mesh all those different forms of data into a unified system that can then analyze whether or not a patient is at higher risk.

And the company has to figure out why that patient is at risk so it nows how to intervene. That’s why the company’s strength is its technology, Garipalli said — and of course it was probably part of the big selling point for investors.

clover teamClover also has a better sense of its customers due to the relationships it has with them through the staff members that work to improve the patient population’s overall health on a more frequent basis. For older individuals, addressing health issues is almost a daily occurrence, whereas for a younger population it’s less important.

Prior to raising this round the company was funded by its founders. Before Clover Health, Gale was an engineer at Yammer for more than six years, while Garipalli was an entrepreneur who started a number of different companies and started his career in finance.

The government pays out a patient’s health insurance premiums to Clover Health through Medicare — with Clover Health receiving lower premiums for healthy people, and higher for sicker people. So the company has an incentive to ensure that it can reduce the overall cost of care for all of its customers, both higher risk or otherwise.

One of Clover Health’s goals, for example, is to reduce the rate at which its customers end up in the hospital — and every unintentional hospitalization it prevents with more active, preventative care ends up a net positive to the company’s business.

At the moment, the company is particularly concerned with a few chronic diseases like type 2 diabetes, chronic obstructive pulmonary disease and congestive heart failure. Poorly managed type 2 diabetes care, for example, can lead to expensive treatments that can many times be prevented, Gale said. Clover Health, with its staff of nurse practitioners and social workers, can intervene at the right moment to try and prevent the condition from worsening.

“If we know something is on a 30-day refill and we haven’t seen a claim in 35 days, we know they aren’t taking it regularly,” Gale said. “We can reach out — for example, maybe do they not understand how they’re supposed to be taking this — and intervene. This is info that’s available to us because we’re the payer. The doctor that prescribed gave them a piece of paper that’s now on them. The doctor doesn’t know if they’re getting that filled unless they’re asking them regularly. That’s part of the data advantage.”

Clover Health’s primary competition are the traditional Medicare insurance companies, such as United Healthcare. But those companies aren’t collecting the data from their patients in the same way Clover Health does, First Round Capital’s Josh Kopelman said.

Still, those companies own much of the market, and they could always get their act together and throw larger resources toward crunching data in a similar way (or buy their way into doing so). But it still comes down to execution — which Garipalli is betting Clover Health will be able to nail.

There are other startups, too, that are also trying to re-invent the health insurance industry like Oscar Health. But the two companies are targeting a very different demographic, and Clover Health’s selling point is the technology that powers it.

“It’s extremely defensible from start, it takes years to be Medicare certified and you have to do state by state or sometimes county by county,” Kopelman said. “Now when you look at the existing players, they operate with a very different dynamic, have very different relationships with providers, and their core approach is not through technology. It’s like asking the question, ‘what if GM wanted to build a search engine?'”