Clover Health Investments Corp (NASDAQ:CLOV) Q2 2022 Earnings Conference Call August 8, 2022 5:00 PM ET
Company Participants
Ryan Schmidt – IR
Vivek Garipalli – Co-Founder, CEO & Chairman
Andrew Toy – Co-Founder, President, & Director
Mark Herbers – Principal Accounting Officer
Conference Call Participants
Richard Close – Canaccord Genuity
Kevin Fischbeck – Bank of America Merrill Lynch
Jason Cassorla – Citigroup
Benjamin Mayo – SVB Securities
Gary Taylor – Cowen and Company
Operator
Ladies and gentlemen, good afternoon, and welcome to the Clover Health Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the prepared remarks. [Operator Instructions]. As a reminder today’s call is being recorded.
I would now like to turn the call over to Ryan Schmidt, Investor Relations for Clover Health. Please go ahead.
Ryan Schmidt
Good afternoon, everyone. Joining me on the call today is our CEO, Vivek Garipalli; Andrew Toy, our President; and Mark Herbers, who served as our interim CFO during the second quarter. We will discuss first quarter results and answer your questions. This call is being recorded.
Before we get started, I would like to remind you that our second-quarter earnings materials, including the release, are available on our website at cloverhealth.com. I’d also like to caution you that we may make forward-looking statements during today’s call that are subject to risks and uncertainties, including expectations about future performance. Factors that may cause actual results to differ materially from our expectations are detailed in our SEC filings, including in the Risk Factors section of our most recent Annual Report on Form 10-K and in our other SEC filings. Information about non-GAAP financial measures referenced including a reconciliation of those measures to GAAP measures can also be found in earnings materials available on our website.
With that, let me now turn over the call to Vivek.
Vivek Garipalli
Thanks, Ryan, and thanks, everyone, for joining us today. We continue to build upon our strong start to the year, with second-quarter results proving to be another positive step forward. We remain excited about the continued progress against our goals as well as the strategies we are laying out for 2023 and beyond. We believe that we can deliver above-average industry growth and improved margins, all by [indiscernible] primary care at scale, the assistant. Let me now cover the highlights from the second quarter before handing it over to Andrew for a more in-depth discussion.
Firstly, our Q2 revenue of $847 million was more than double our revenue in the second quarter of last year. Our total lives in corporate management also nearly doubled year-over-year to over $255,000. We accomplished this while simultaneously slowing the growth of operating expenses. Insurance MCR and non insurance MCR improved versus the second quarter of 2021 to 92.1% and 106%, respectively. Clover System continues to be a differentiator, showing materially improved insurance MCR for members whose PCPs used older system versus those who don’t. Finally, we’ve continued to strengthen our leadership team this past quarter and are excited to welcome Scott Leffler as our permanent CFO. Since he has only been with us for a couple of weeks, we start on today’s call and look forward to introducing him properly during the next set of earnings.
In that same vein, I’d like to extend a heartfelt thank you to Mark on the entire Clover team. He was an partner over the past year and provided us with the of time to bring in an exceptional leader like Scott. Thank you, Mark. With that, let me turn the call over to Andrew.
Andrew Toy
Thanks, Vivek. I’m very pleased with our Q2 results, and I’m cautiously optimistic about the second half of the year. I’m excited to report year-over-year revenue growth of 105% and 99% growth in our life under management. This highlights how the Medicare population values physician’s choice. Clover Systems’ ability to work beyond the confine of an HMO allows us to tap into previously ignored and under served markets. This means we have access to a bigger, largely uncontested total addressable market. Further, our non insurance beneficiary growth of 172% year-over-year illustrates our unique ability via Clover assistance to support more doctors and therefore, more patients in transitioning into value-based care. There’s no question that by offering wide networks with high physician choice, we’ve proven our ability to grow rapidly. We believe that this focus is differentiated and will remain differentiated even as Medicare Advantage plans continue to proliferate.
That said, while we were so focused on growth in the past, fewer resources were dedicated to fine-tuning core operations, which now provides us with significant upside potential in a number of areas. This year, we’ve turned our attention to sustainability specifically to reduce MCR and operating expenses. And we’re proud of what we’ve been able to accomplish in the first half of the year. Let’s take MCR. Our insurance MCR of 92.1% reaffirmed that we can drive near-term efficiencies while continuing to provide high-quality care across a wide network. This is a result of systemic improvements to our internal operating processes over the year, which we expect to be the foundation of tighter, more predictable internal models going forward.
On the operating expense side, we see meaningful improvement in reducing OpEx as a percentage of revenues with an emphasized focus on building a path to profitability, these efforts will be a priority for the organization throughout the remainder of the year and into the future. These efforts carry over to the — non-insurance side. As one of the largest DCEs, we believe we are in a tremendous position to take the data learnings from last year to influence our go-to-market strategy for 2023. Our goal with DCE reach is to maintain our leading position while moving toward having a strong, profitable program. Again, we are pleased with our Q2 results. That said, I think we can all agree that there’s a lot of uncertainty in the world right now. So despite these improvements at a lower Covid impact during the quarter, we are maintaining a healthy degree of conservatism in our expectations for the rest of the year.
Now let’s turn to Clover Assistant. As we focus on building a sustainable and efficient growth model, we believe Clover Assistant is a true differentiator. , we believe Clover assisted has significant untapped potential, and we continue to invest heavily into the platform. We are enthusiastic about our CA accomplishments to date, including significant year-over-year growth in lives under Clover Assistant management, continued increased clinician use, and our rapid product iteration cycle. CA efficacy continues to improve and there continues to be a material difference in MCR between members who providers use Clover Assistant and those who do not. To build on this momentum and manifest the product’s full potential, we have a road map of new capabilities and features designed to further augment clinical value. I also want to reiterate Clover assistance capacity to bring more clinicians into value-based care on both the Medicare Advantage and the original Medicare . Our goal from a CA product standpoint is to allow for total Medicare panel coverage with any given PCP, including those that have never participated in value-based care, and we continue to orient the business with this in mind. We are continually working on ways for clinicians to use CA for more of their Medicare panel, and we see a number of future opportunities to advance the reach of Clover assistance.
Finally, I want to give a special shot out to our compliance and operations team as CMS recently issued its final report, and we received the best score that is planned to receive on a CMS program audit. I believe this result reflects the operational diligence we’ve developed at Clover as well as the efforts of the stellar team that works hard every day to maintain our high standards. With that, I will now hand it to Mark for the financial update.
Mark Herbers
Thanks, Andrew. We more than doubled our revenue year-over-year, delivering $847 million in revenue during the second quarter. Our out sized growth continues to be driven by strong year-over-year growth in lives on account of our differentiated ability to participate in both Medicare Advantage as well as original Medicare. Moving to medical expenses, our net medical claims incurred for the quarter were $859 million. Our GAAP insurance MCR was 92.1%, down approximately 1,900 basis points compared to the second quarter of 2021. This MCR improvement includes favorable prior period development and gives us confidence in our previously reported guidance ranges. As Andrew said, we are also remaining conservative with our expectations. Our non insurance MCR was 106%, down nearly 600 basis points year-over-year and in line with internal expectations given seasonal trends as well as prior period development, largely due to a CMS rate adjustment. CMS benchmarks in the program do not currently take into account seasonality, so we consider a quarterly fluctuation somewhat normal.
Second quarter non-GAAP adjusted operating expenses were $75.4 million, representing 8.9% of total revenues, down 590 basis points year-over-year. This quarter is evidence that our initial efforts to decrease operating expenses as a percent of revenues have been successful by improving vendor management as well as moderating head count. Our GAAP net loss for the quarter was $104.2 million. Our adjusted EBITDA loss for the second quarter was $87.5 million. Note that our adjusted EBITDA excludes $27.7 million of non cash premium deficiency reserve benefit as that is not reflective of operating results. Our cash, cash equivalents, and investments totaled $682 million with cash, cash equivalents, and investments at the parent company and unregulated subsidiaries of $440 million. And we have 477 million common shares outstanding as of June 30, 2022. We see no immediate need to raise new capital. And as Andrew said, we are focused on meaningfully reducing our insurance and non insurance MCRs while calibrating our business model for smart, sustainable growth.
Finally, we are maintaining our previously guided ranges. Now let me turn the call over to Vivek for some closing comments.
Vivek Garipalli
Thank you, Mark. To close, I’m sure many of you saw the press release issued earlier today. As of January 1 of next year, I will transition the role of CEO to somebody you all know very well, our President, Andrew Tory. I’ll continue along with many existing responsibilities in the role of executive chairperson, working closely with Andrew — to ensure a seamless transition and long-term collaborative relationship. I always believe the right long-term leader for Clover would have a technology-first mindset. When I first met Andrew, I saw a unique strategist operating in the intersection of business and technology with the fastest learning speed of anyone I’ve ever met. He’s a true founder in every sense of the word, having built companies from scratch, given abundance of needed to solve the hardest problems in health care. Since joining as a CTO in 2018, he has been an integral part of Clover, and this transition is the culmination of a succession plan we’ve had in place since then.
As for my role as Executive Chair, I’m not going anywhere. I will continue to remain the largest individual and institutional shareholder of Clover. I will continue to be active at the company well into the foreseeable future, just in a more strategic fashion. As CEO, Andrew will oversee all day-to-day operations and . I firmly believe this marks the beginning of a new chapter where we both play to our strengths and continue working closely together in Clover’s mission to improve every life. So with that, let’s take some questions.
Question-and-Answer Session
Operator
[Operator Instructions]. In the interest of time, we ask that you please limit yourself to one question and one quick follow-up. We’ll take our first question from Richard Close with Canaccord Genuity.
Richard Close
I have a couple of questions on the direct contracting. Can you go over the number of lives that seemed to decrease sequentially a little bit? And then second of all, on with respect to the reimbursement adjustment, I think you called that out in the non insurance MCR. Can you talk a little bit about how that impacts any type of revenue guidance for non insurance in the back half of the year?
Vivek Garipalli
Yes. So thanks, Richard. First of all, for the actual lives under management, what we are generally seeing is that in the ACO and if they are in our DCE, we will generally see a decrease in life due to mortality of people moving out of the program. That’s not anything that’s unexpected obviously, but we generally see that — so it’s more mortality driven. So maybe you see something different in the numbers you’re looking at to — for the second dimension in terms of the rate adjustment, we’ve priced in a significant portion of this due to our own calculations. I think that there have been a few other ACOs where the effect of the rate adjustment might have been more significant, to be honest, because the Q1 adjustment had a little bit more fluctuation in those other ACOs. Our team has been careful in terms of calculating based upon trends from last year and this year to sort of smooth that out. So we are maintaining and reiterating our generalized — views on this. We don’t see a major change in the program.
Richard Close
On the MCR for the second quarter was the true-up from the first quarter included in that? And if so, to what degree?
Mark Herbers
So we had [indiscernible] things in the second quarter. We had some prior period development that was actually inside that — inside the second quarter that from Q1, and that was due to the rate adjustment — with the prospective rate adjustment guidance that came out. Again, that was generally smaller than the effect of some other [indiscernible] have reported. The second dimension that was in there that I want to make sure that we emphasize is that CMS does look at NCR for the ACO program on an annualized basis, not on a quarterly basis. So we do expect seasonal fluctuations and we see some of that seasonal fluctuation in the Q2 number as well. So between the two of those, I think (technical difficulty) comfortable that we’re seeing what we expected within the ACO.
Operator
We will take our next question from Kevin Fischbeck with Bank of America.
Kevin Fischbeck
Okay. Great. Maybe stick with the DCE. Can you talk a little bit about your thoughts on the profitability and the growth outlook of that business? Your MLR is obviously better year-over-year, but still well above what a lot of the peers seem to be talking about. So can you give any update on kind of how you think about the trajectory in that business, but then also how you’re thinking about the growth? I know in the past, you talked about leveraging Clover into other ACO-type arrangements. So any thoughts there about how that’s shaping up for next year?
Vivek Garipalli
Yes. Thanks, Kevin. So respect to the NCR within the DCE, so we are one of the largest, as you will have seen, DCEs, ACOs out there, and it’s been growing rapidly. And I think that’s a testament to our ability to work with a lot of systems, a lot of doctors who want to come into value-based care, but haven’t had that that we could provide by our platform and by Clover assistant. So we’ve grown rapidly within there. And I think what you’ll see us do is four years now towards, — yes, still looking at growth in the ACO, but having shown that there’s a lot of appetite for this model, looking at the people who are participating in the ACO, looking at geographies more because now that we have a few quarters of data under our belt, we can see how CMS and CMMI are looking at geographic trends versus national trends and adjusting to the participants within the ACO with a mind towards the profitability of that particular program. So definitely a huge focus for us. We have a lot of data that we can use to make those decisions that you’ll see as we prepare for the [indiscernible] 2023, and we’re balancing growth within that program, but that’s very much looking towards the participant dynamics, the geographic dynamics with MCR in mind as well. So we feel like this is a very complementary part of our strategy something that we can bring to a profitable business for sure.
Kevin Fischbeck
Okay. Great. And then any comments on — I mean it sounds like you’re saying conservative in the back half of the year, but is there anything more specific about what it looks like the results certainly on the MA side at the very least much better than the [indiscernible] we are expecting. So any other color there besides just conservatism in the back half?
Vivek Garipalli
Yes, absolutely. So [indiscernible] story here, with the current macro environment around the world, et cetera, it makes sense for us to look at the back half of the year, even something like Covid, which we said in our remarks, does not significantly playing right now in our data, it still exists and the policies are still in place. We would love to see this policy sort of move on and removed in this case, there’s additional upside for us on the Covid side? Or to be clear, on the downside, we don’t know if there’s another resurgence coming. We don’t think so. We think vaccines are getting to a good place, but you never know. So that conservatism is really coming into place, because we just — the overall uncertainty of the world, as I said earlier. One thing I will point out is that we have focused very much on during this period, working on our core operations. I also indicated that, which I think is helping a lot with the management on the MA side, and we think that we will continue to enjoy benefits there going forward.
Operator
We’ll take our next question from Jason Cassorla with Citi.
Jason Cassorla
Just a quick clarification. What was the total number of lives under Clover Assistant management in the quarter, unless I missed it, it wasn’t included in the press release.
Vivek Garipalli
Yes, that’s correct. So actually, in the past, we have actually looked at the lives under Clover share those numbers. What we’re actually looking at out here is that going forward because there is actually some granular shifts in our quarter-to-quarter number on the ACO side that, that causes some fluctuations in the management number. So we aren’t actually sharing that number because we think that it’s not actually indicative of overall CA performance anymore because cause all potential fluctuations on the ACO side of people moving out of contracts of before the ACO. So we will not be sharing that [indiscernible] number, but that’s the reason why.
Jason Cassorla
Okay. I guess there was a really quick follow-up to that. Could you give any context around the [indiscernible] management penetration of your MA book in the lease or any other clarity if it’s improved quarter-to-quarter or year-over-year? Any kind of color on that?
Vivek Garipalli
MA books is helpful.
Andrew Toy
Yes, absolutely. So we are actually continuing to grow that because we always want that number to be moving up into the right. So while we’re not sharing the granular number, we don’t see any concerns in that number. We continue to contract doctors. We see that penetration generally be a huge area of focus for us and the total life on the insurance side has been increasing.
Jason Cassorla
Okay. Got it. And then I guess just as my follow-up question here, maybe just on the Medicare Advantage MLR, can you just walk through some of the drivers of improvement there sequentially, the Covid impacts were negligible, I guess, quarter-to-quarter. So I was hoping you could just pause a better maybe from lower utilization versus greater over assistant penetration or any other considerations, just quarter-to-quarter MA, MLR improvement?
Vivek Garipalli
On the MA side, you said right — on the insurance — on the insurance side. Yes, absolutely. So I think the improvement there, there’s a couple of different things. First of all, obviously, compared to last year, the Covid environment is significantly different. So we all know that. Second of all, during the Covid period, we were very much working on improving Clover-assisted performance and our generalized coverage on the insurance side. And I think you’re seeing some of those benefits flow through to now, but we don’t have that overarching pandemic sitting on top of all of the results that we’re seeing in the side. So all of those things are improvements. We’re also generally focused on our operations on getting more and more data, and we’ve seen a lot of improvements there as well year-over-year, and that has flowed through to better core-business performance as well. So part of it is a after the Covid period. Part of it is absolutely, — I think we’re seeing the results of hard work during the cover period flow through for this year.
Operator
And we’ll take our next question from Gary Taylor with Cowen.
Gary Taylor
Just had a couple. Have you guys allocated or would you be willing to allocate on the PDR benefit? How much of that’s been allocated to MA versus DCE?
Vivek Garipalli
[indiscernible] on the PDR benefit?
Mark Herbers
I’m sorry, I don’t have that right at my fingertips, but we can get back to you.
Gary Taylor
Okay. And the reported MLRs by segment, do you include that benefit? I’m pretty sure, is that correct?
Mark Herbers
That’s correct.
Gary Taylor
And then on the DCE per member per month, it does look like you took a pretty substantial step down in the first quarter. So I think you were only down about $10 sequentially. So to your credit, I do think you look like you really start looking at this more conservative. Can you tell us what the revenue adjustment was for the quarter on the retro trend?
Vivek Garipalli
We don’t actually share…
Mark Herbers
Yes, we don’t actually have that right now. We can look we can share that. I don’t think that’s actually in our release, and we’ll take that as a follow-up.
Gary Taylor
The last one would be we heard some feedback that as CMS transition to ACO reach and ask folks to reapply that there was a really high percentage of applications that were denied. Can you talk about — I know you answered, Kevin, a little bit. Is there anything else you could say about 23 or just kind of how you feel about contract retention on the DCE side heading into ’23?
Andrew Toy
Yes, absolutely. So we feel pretty good overall as we look at about our movement from this year, still a DCE, as you said, into the ACO program next year, feeling good about that, feeling about our overall ACOs migration. And then as I mentioned just now, in the answer to a previous question, we are looking at the participation within the program. We’ve grown it really quickly. We see a lot of data now about where we’re being successful and end up in a lot of different places. And we’re also seeing how that interacts with CMS rulings and the rule making decision [indiscernible] been going through as we move from PC into ACO, we’ve been giving a lot of feedback to CMS. So you’ll see us adjust the mix — we still want to work from anywhere from small health systems, a large health system, we want to be as many geos as possible, but we are looking at tuning that mix going into ’23. So nothing to share right now. We still want to be strongly participating in this program, and we can do so in a really smart way, given how much data we have. So more to come as we report on that.
Operator
[Operator Instructions]. And we’ll go next to Whit Mayo with SVB Securities.
Benjamin Mayo
Why don’t I just hear you guys talk about how you’re thinking about new county growth expectations. I know you press released something maybe a week or so ago. It doesn’t seem like you’re planning to move into as many new markets and counties perhaps as prior years. It seems that there’s probably more of a focus in where you have a presence today. But just maybe strategically, I just wanted to sort of make sure I understand how you guys are thinking about that, — that new market growth expectation for 2023.
Vivek Garipalli
Yes. Thanks, Whit. So as you said, we are very proud, all of the results we’ve had growing in our market. I have traditional markets in New Jersey and our newer markets very happy with, like Georgia and South Carolina. So while we’ve traditionally had a lot of expansion in terms of geography coverage, we are now allocating more resources to those areas where we’re seeing significant penetration. We are getting to critical mass. We think that we can take a lot of share in those particular areas. So irrespective from growth, part of our passion for expanding has been to bring our models as many markets as possible. I talked about that on the ACO side for MA, it’s all about getting that concentration for smart sustainable growth and that’s why we’re putting more resources into the specific markets that we’re in right now, a little bit less expansion as you noted. At Clover, I think you’ll see that we’re bringing the Clover-assisted model to larger geographies. We’re just being smart about that blend between the ACO and the MA plan.
Benjamin Mayo
Okay. That’s helpful. My second question is just around the strategy that you guys have with brokers, field marketing organizations, distribution points in the marketplace. It seems like some of your peers are sort of refining how they’re investing, how they partnered. I didn’t know if there’s any change in your posture for 2023, anything that you call you would share to call out.
Andrew Toy
Yes. So I think that what we’ll see is a couple of different things that I would call out. We had less exposure to the broker market, not no exposure. I talked about this, but far less exposure than some of the other players in this space. And I would say that we have talked about this maybe a couple of years ago in the first few years of Covid, that hurt us a little bit in our growth strategy, but actually, because we were not in the e-channel as strongly. That was because we really saw weakness and softness in the quality of leads and the quality of conversion coming from that market. And I do think that you see other players who were perhaps overexposed to the key broker market now seeing that they have to move from there into the more traditional line brokerage market. So there’s no change in our posture overall. We’ve always been strong on the individual broker market. We think our products are things that these brokers love to sell and that people love to see, brought into the various NA markets. It’s the other plans that perhaps on a little more in that space now because of their over reliance on [indiscernible] broker before.
Operator
And we’ll take a follow-up from Richard Close with Canaccord Genuity.
Richard Close
I had a couple of follow-ups. Maybe on Whit’s question, do you think not expand into as many counties, — does that negatively impact your growth at all? Or — and how should we think about like the member acquisition costs or tax associated with just concentrating your efforts in new counties? Existing ones, I should say.
Vivek Garipalli
Absolutely. So I think in those new markets, and this is the same for most MA plans, as you know, the cash is disproportionately high in the newer markets, in the new expansion counties, and the more recent expansion counties that caused the fixed cost of building that brand, building the network posture, building network brand are all amortized over [indiscernible], obviously. So that does make acquisition in those areas more expensive. You have a different new member versus returning member mix, which does affect the MCR of [indiscernible] of those markets. And so we’re in a good place where we think we can return to expanding on the MA side aggressively whenever we really like. We’ve proven that out. We continue to be able to contract on the ACO side across the country because that’s a very good program for that to bring Clover Assistant to many more doctors. And then we can be, as you said, much more CAC efficient, really driving the high penetration within the markets we’re already in. So we actually like the fact that it makes us more efficient for smart growth within those markets.
Benjamin Mayo
And like the impact of growth at all?
Vivek Garipalli
Sorry, can you repeat that? [indiscernible]
Benjamin Mayo
Yes. So does it impact your ability to grow above average on the MA side by not expanding to as many counties?
Vivek Garipalli
No, I don’t think so. We intend to maintain above industry average growth, and that’s what we’re looking at. So even as we look at being more efficient, looking at that cash equation, looking at sustainability within the MCR because as you know, new members do come generally with a higher MCR cost. All of those things, we think, when combined with our differentiated products, our wide network, still makes us very appealing and we should be able to deliver good, strong growth. So we’re looking at being sustainable, we’re looking at being about being smart. But I still think the expansion counties [indiscernible] negatively affect us in any way [indiscernible] us more efficient — to acquire those lives. And if you look at the total number of Medicare eligible within the markets we’re strongly playing in, there’s a very, very high feeling there. I don’t think we’re close to sort of saturating those particular markets.
Operator
There are no further questions over the phone line. I will now turn the call over to Ryan Schmidt for any community questions.
Ryan Schmidt
Thank you, operator. We’ll get started with the community questions. First off, Andrew, how do you plan to achieve profitability?
Andrew Toy
Yes. Thanks for that question. So the process to profitability is a huge focus for us right now and requires a number of moving pieces to fall into place, but we’re confident that we’re well oriented to achieving that. So number one is getting our MCR moving downwards and reducing MCRs. And we have a lot of progress towards that as we reported this quarter on both the MA side and on the ACO side. We’ve seen insurance MCR improvement year-over-year. And even though non insurance MCR is seasonally affected, that’s also improving year-over-year. That both combined with looking intelligently about how we play in various geographies and regions. As we said, we can still deliver above industry average growth and bring MCR down, resulting in overall sustainability and moving towards profitability. The second part is, of course, we’re looking at control in operating expense growth as a percentage of revenues. So we’re improving on that. We have a lot of efficiencies we can bring. As I said during my remarks, we’ve been so focused on growth in a number of the past number of years. There are a number of places that we can optimize and there’s like tremendous upside for us to be able to do that on the OpEx side as well. And so you’ll see us really focusing there.
Ryan Schmidt
Thank you. Our next question is how scalable and easily integrated is the Clover System. Any ongoing challenges are seen there?
Andrew Toy
Yes. So very interestingly that the biggest factor we can see and the biggest question we’re asked is providers coming to us and saying, how can I use Clover Assistance to look after more of my Medicare panel? I understand why you want us to use for your Clover members, I get that, and then even being able to add the fee-for-service original Medicare members, that’s great for the providers who are doing that. So we just ask all the time how do really use it for more of their panel because, A — that simplifies their work flows, love it; and then, B — it’s something whereby they can think about Clover Assistant really helping them manage multiple value-based care programs. So we really like doing that. We think that Clover Assistant [indiscernible] tools designed to make doctors’ lives easier. And so the more the we can cover, the better that’s going to be — so more coming soon on that particular strategy and how we can help doctors with that. But that’s the #1 question that we’re asked, and that’s something that we’re very focused on.
Ryan Schmidt
Our final community question is what are the prospects of Clover assisting [indiscernible] as a SaaS product?
Vivek Garipalli
Yes. So as we look at the SaaS world, it’s — we have nothing to announce at this time. I’ve said that we want to cover all of the PCPs Medicare panel. And SaaS is one business model we could use to get there. We, however, really do think that we’re in the business of managing medical risk and helping providers manage that risk. And so blending a SaaS-like approach, along with a risk management approach is something I think Clover can uniquely do. I’m really excited to develop that more, and we’ll talk about that in coming quarters.
Ryan Schmidt
Thank you. Operator, we’ll turn it back to you.
Operator
We’ll take our next question from Jonathan Yong with Credit Suisse. It’s Nick Giovacchini on for Jonathan today. Just looking ahead, can you talk about how you’re thinking about for payment year of ’24, especially with the CMS starting to think roll off some of its Covid flexibilities?
Andrew Toy
Yes, absolutely. So on the , I think that what we’ve seen is that it’s quite an interesting challenging environment right now because of all the adjustments that we made during Covid, and then now CMS is rolling some of those backup you said, cut points are moving around much more than they normally have been. So we are seeing that environment, I think other plans are seeing that environment. That said, we always have guided that we would be looking for 3.5 stars coming out of the 2021 measure this year, and we are continuing to reiterate that particular guidance. So it will be a great achievement for us in the current world, if we were able to push through to that, we think that we can still do that, we will have more to share in the coming few months.
Operator
And this concludes the Q&A portion of today’s conference. I would now like to turn the call over to Vivek Garipalli, for any additional and closing remarks.
Vivek Garipalli
Andrew, a really great job today just to close. While we feel good about where we are today. There’s really great and hard work being done this year to drive further progress. And just to reiterate, enabling all of our accomplishments the Clover Assistant, provides us with the growing technology mode, making a meaningfully positive impact in HealthEquity and advancing our mission to improve every life. Thank you all for joining us today.
Operator
And this concludes today’s Clover Health Second Quarter 2022 Earnings Call and webcast. You may disconnect your lines at this time, and have a wonderful day.
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