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Clover Health laying off a quarter of its workforce, two months after $500M fundraise

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San Francisco, California-based Medicare Advantage startup Clover Health is laying off around 140 employees – roughly 25 percent of its workforce – in what it’s calling a company restructuring.

The move is happening less than two months after the company announced a new $500 million financing round led by Greenoaks Capital that valued the company at $1.2 billion. Clover currently serves around 40,000 members across seven states.

In a statement, the company said it is “in an incredibly strong position,” touting its recent fundraise as well as its 35 percent membership growth over the last year.

Clover says the layoffs are not financially motivated and are instead being made because of a need to redirect company resources away from tech talent and towards expertise in the Medicare Advantage market.

To that end, the company is opening an office in Nashville, Tennessee, a hub of healthcare and health IT, as part of an effort to tap the local talent pool.

“While layoffs are always difficult, the decision to honestly assess the team we have and the team we need is part of Clover’s unflinching commitment to building a company that is single-minded in the pursuit of enhancing the health of our members,” Clover’s statement reads.

Brandon Gee, a senior analyst at Decision Resources Group, said he sees the layoffs as a sign that the company has discovered that technology is only part of the solution to forging a new model in healthcare.

“Tech innovations alone won’t solve the industry’s entrenched cost challenges and the perverse incentives that exist throughout the healthcare ecosystem,” Gee said.

“Using innovative technology and analytics to identify gaps in care and potential risks is one thing. Getting doctors and patients to respond the way you want them to is another. I see these layoffs as a recognition of that.”

He added that Nashville’s proximity to major for-profit health systems like Community Health Systems, LifePoint, and Ardent Health Services could help Clover better understand how to engage these stakeholders as part of scaling its Medicare Advantage service nationwide.

Clover has been through major ups-and-downs throughout its seven year history as a company. While it has raised $925 million in total, Clover has also run headlong into the difficulties of trying to establish its place in the highly regulated insurance industry.

The company reportedly lost $40.9 million in 2018, nearly double its $22 million loss in 2017 and has faced a serious of complications ranging from payment disputes with diagnostics companies to the departure of its co-founder Kris Gale.

While the company has recently rolled out new data-enabled programs like its in-home primary care service informed by genomics, the Medicare Advantage space is becoming increasingly crowded, as both traditional health plans and other upstart insurers see a valuable opportunity.

Fellow Medicare Advantage startups Devoted Health and Bright Health both raised mega nine-figure fundraising rounds last year and have been focused on branching out into new geographies.

New York-based Oscar Health also raised $375 million from Google last year as part of an effort to expand into Medicare Advantage in 2020.

The new entrants are looking to compete with blue chip insurers like UnitedHealthcare, Humana, Aetna and Anthem, which all have more than 1 million Medicare Advantage members, vastly outstripping the membership of any of the MA startups.

Photo: MarsBars, Getty Images

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