Devoted Health... devoted a lot of energy to '22 growth and it worked*
Massive membership growth reported by the insure-tech startup, but CMS data availability forced Devoted to caveat its numbers
As many of you know I am a pretty big geek as it relates to following trends, and especially growth, in Medicare Advantage (MA). Which is why when I saw a recent press release in my LinkedIn feed reposted by a former, fantastic Health Dialog colleague of mine, I was intrigued by the result.
That headline should pop for MA watchers. For those of you who may not know - 124,000 is impressive. That is almost 2x the membership in January 2022 of 66,000.
Devoted Health’s Success
Devoted’s success is not a flash in a pan, and their progress has been well chronicled by folks who are more familiar to the business than I am . Back in October of 2021, timed for the 2022 Annual Election Period sales season, the company put out a recap of its past successes and future endeavors and performance was featured extensively by Shelby Livingston in a well-written Business Insider piece. Given my personal experience with how hard execution is in Medicare Advantage the highlights that stuck out for me back in 2021 were:
Quality: 4.5 Star Ratings in some of its plans (in the top quartile/decile of MA plans)
Experience: 79 NPS (the top MA plan)
Growth: Membership year-over-year doubled, to over 40,000 lives by end of 2021 from 20,000 the year prior1
Underwriting margin: MLR of 92% vs. 101% the year prior (very difficult to show that improvement with all that growth)
These are great numbers from 2021. But the bear case / subtext from some in the industry was “yeah, but this is small potatoes. Yawn. To what degree can they 1) grow to be a scalable threat to the industry and 2) continue to deliver on quality while scaling and 3) make progress on MLR so that they can continue to attract capital to fund the growth, in 4) a very different capital climate than 12 months ago.” Lots of prominent insure-tech haters were skeptical, lumping the Devoted business model with other publicly traded startups that were experiencing painful stock price declines.
As a big fan of those entrepreneurs who are trying to bring insurance into the future in all lines of business, I was hopeful but anxious for signals of operating performance from Devoted.
Fast forward to today, and fall 2022 press releases around Star Ratings, it is becoming more clear that Devoted is no fluke. Take a look at these recent press releases from the company.
These numbers around growth and Star Ratings are a big deal b/c it suggests that despite the strain on growth to 124,000 members across more geographies, Devoted appears to be generating some of the best quality results in the industry. This gives it a reimbursement advantage over its competitors, which is unique leverage that is not available in other insurance markets. And if they can do it at this scale, who is to say that they cannot continue to deliver at a quarter of a million lives, or a million lives?
Obviously we will need to see the medical loss ratio (MLR) numbers as well, but this P&L advantage from quality means a differentiation strategy in MA can really win, and a growth-at-all-costs approach that really handcuffed its insure-tech peers is not necessary to compete with the industry giants.
What is behind this early success?
First - I have zero personal financial interest in the company or any of its employees, but I have always been very impressed with the Devoted Health. Driving change in health care is hard and I like to look for examples of smart teams who are mission driven and execution-focused on really good ideas. They give me inspiration for how to better build companies.
Transforming health insurance is a really big idea that is also maybe the hardest idea in health care to pull off. If you listen to the pundits, you would include that one should never attempt to disrupt traditional health insurance. To that end, the players in this space attract some of the most (sometimes unwarranted) criticism, and even Devoted has not been spared. However, these above early indicators suggest Devoted has the potential to achieve its mission, despite some of the real obstacles that make the journey difficult. I don’t have any inside knowledge of how Devoted has been so successful, however from the outside I would attribute the progress to 1) people 2) intense clinical focus on Medicare, and 3) the best of a tough business models in health insurance.
People: In 2017, early in Devoted’s life my colleagues at Iora and I had the opportunity to meet with the Devoted leadership team to hear their vision. “Whoa” and “that is a lot of horsepower” was the collective reaction after the meeting. Since that day, all the people I know who have gone to work at Devoted are excellent. They have also benefited from an early investor base who believed in the long-term potential of the company.
Intense clinical focus on Medicare: Unlike other startup insurance companies that have been forced into a variety of geographies, business lines, and business models, from Day-1 Devoted has been focused on Medicare Advantage and a series of operating principles that has allowed it to execute.
Pick geographies where there is innovation in risk-bearing medical groups/PCPs who have the resources, technology and payment to deliver better care than traditional, FFS-constrained, health-system organized groups
Deeply partner with said PCPs, inclusive of risk-based contracts but also data and workflow interoperability
Provide Devoted-employed medical care to fill holes in the network
Build software that supports its operational teams and partners, with particular focus on quality
Differentiate in the broker and clinical community on quality and care
The best business model. Medicare Advantage has been the most stable, growing and lucrative insurance line of business. The Affordable Care Act exchanges, Managed Medicaid, and Commercial Group lines of business have been much trickier to perform. Particularly in low margin arenas where historically scale has proven essential in order to compete against well capitalized and rate-advantaged incumbents. While it is likely true that the Devoted founders could not have perfectly predicted the future success of Medicare Advantage → they certainly believed it was the right plan, and then they obviously get credit for maintaining focus.
It is important to note that Devoted cannot afford to rest on its laurels. Nor is the team likely remotely doing so. Growth only makes the work harder. However given the above assets, the early progress, and the effect that they will have to encourage others to drive progress forward, I enthusiastically root them on.
Why did Devoted have to caveat its numbers?
The other reason I was intrigued about writing about Devoted in that they seemed to hedge the membership number they posted. Did anyone else see the bolded line with the asterisk?
That looked really weird to me. Particularly when you read the explanation.
What gives? It looks like a data snafu at the CMS is preventing the agency from sharing official membership counts for January 2023.
Usually the files are available on the 15th of every month here, and as of this AM on January 24, 2023, those files were still not available. This has been really annoying for me b/c I was excited to write a “lets see what happened in Las Vegas post” in follow up to my last post about growth strategies in Clark County. I have no idea, but my bet is that Devoted was similarly annoyed, and decided it didn’t want to wait any longer to share its Happy New Year letter to members and the broader community.
The CMS - you are holding back company all-hands announcements, 2024 strategy MA bid planning valentines day prep, company press releases, and yours truly from shipping posts on his world acclaimed substack! Help us out!
Update: The CMS fixed it.
Literally an hour after I wrote this, and less than 12 hours since Devoted’s blog post, the CMS made its membership files available publicly 😭. And sure enough it was good that Devoted put that asterisk next to its number. The CMS numbers indicated that 1/1/23 Devoted membership closer to 114,000 lives vs. the 124,000 they published publicly. Still great!
Data availability/accuracy - just one of the challenges Medicare Advantage plans and their partners need to work with!
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MCRAdvPartDEnrolData
Thanks for this, learned a lot. Next is getting someone from Devoted on a CareOps panel 😇
Great article! Devoted Health’s growth is impressive.