Silicon Valley Is Trying to Reinvent Health Care, Starting in New Jersey

December 7, 2016

PUBLISHED BY Lizette Chapman

SOURCE Bloomberg Techology

Wearing blue scrubs and a 1,000-watt smile, Nikesha McPherson arrives for her annual visit to the home of an octogenarian couple in Plainfield, New Jersey. This time she’s going to pitch Margarita and Alfonso Varon on the benefits of brown rice. The nurse practitioner barely gets a sentence into her spiel before Margarita, 83, interrupts her with a long roll of laughter that bounces off the beige walls covered in family photos. “Oh! Speak to the devil,” Margarita says. “In Puerto Rico, we eat white rice.”

McPherson divides her attention between the couple and an iPad on the table, entering notes as they answer questions about their diets, medications and exercise habits. She tries again to explain that eating brown rice helps lower the risk of diabetes. Margarita rolls her eyes and then recites her recipe for oven-baked plantains, with the following conclusion: “What I like, I eat. I don’t know how long I’m going to live.”

For as long as the Varons do live, it’s McPherson’s job to make sure they’re taking care of themselves. She joined the health care startup Clover Health shortly after it started two years ago. The company thinks it can upend conventional insurers by using data to encourage healthier living and identify potential issues before they need to be treated. Now with a dozen nurse practitioners like McPherson, it has established a major presence in eastern and central New Jersey. Advertisements for Clover’s insurance plans for seniors are on buses, local radio, mailers and a billboard near Newark airport.

One of the most astonishing accomplishments in Clover’s short life is the amount of money it’s raised. Venture investors have put in almost $300 million since last year. Backing an insurance business reliant on Medicare payments is an unusual bet for Silicon Valley, especially one that only operates in nine counties of the Garden State. The company has 19,000 members, a rounding error for Aetna, United Health or other major providers.

But Sequoia Capital, known for its early investments in Apple and Google, thinks Clover’s impact will be enormous. Mike Dixon, a partner at the venture firm who led an investment in Clover last year, says the startup’s data-driven approach to health care could substantially bring down what Americans spend annually—about $3.2 trillion last year. With plenty of money in the bank, Clover can focus on improving its service, says Dixon, who sits on the company’s board. “This is one of the biggest opportunities to build a large company that I’ve come across,” he says.

Clover is now finishing up its busiest time of the year, with the end of Medicare’s open enrollment period on Wednesday. The company has a contract with the U.S. government to provide insurance plans for Medicare Advantage customers. Some 18 million seniors or people with disabilities are enrolled in the federal program nationwide.

New Jersey is something of a beta test for Clover. The real reason venture capitalists are bullish on the startup is the data science operation at headquarters in San Francisco. “We’re not just using [technology] to pay out claims,” says Vivek Garipalli, Clover’s co-founder and chief executive officer. “We’re building a learning machine, and we’re using it for health.”

Read the full article on Bloomberg Technology here.