After a disappointing third quarter, Bright Health is focusing on healthcare services.

Bright Health Group expects its investment in a cost-oriented primary health care clinic to generate $ 2 billion in revenue for its health services division in 2022, up 66.7% from the previously projected $ 1.2 billion, reported the company in a press release on Tuesday.

NeueHealth attributes the increased income to new members through its insurance division, other member payers and beneficiaries managed under the Medicare and Medicaid Center Direct Contract Program, which makes private organizations responsible for managing the care of traditional Medicare patients.

Dan O’Neill, health consultant and chief commercial officer of Pine Park Health, which provides clinical services, said Dan O’Neill, CMS’s decision to block new applicants from direct contracting earlier this year has spurred existing groups approved for management. the risks of patients such as NeueHealth. staff for senior service communities.

The company’s focus on establishing new clinics rather than acquiring existing groups represents a strategic shift on the part of insurtech, and the realization that providing management services to organizations for direct contracting organizations is not a viable long-term step towards growth, he said. The company plans to build at least 25 new clinics in Florida, Texas and North Carolina this year and operate more than 70 clinics by early 2022. NeueHealth was unable to respond to the interview request on time.

“NeueHealth is actually becoming more of a provider. This is a more difficult and slower growth path, ”said O’Neill. “However, if they can do it, this is more of a value creation path than pure MSO. Because sooner or later, everyone looks at MSO like, “Why are you here? Why are you even at the table? You are trying to take part of the economy, and you are not doing much. ”

The announcement follows Bright Health Group’s disappointing third-quarter results after insurtech’s medical loss rate reached 103%, the highest among other insurance startups Clover Health, Oscar Health and Alignment Healthcare. The company blamed its inability to manage healthcare costs for the increase in COVID-19-related claims and its inability to accurately measure the risk of new enrollments received during the special enrollment period. Bright Health’s revenue increased 206.3% year-over-year to $ 1 billion in the third quarter, while net loss increased 400.7% year-over-year to $ 296.7 million.

Aside from the disappointing third-quarter results, investors also questioned the low earnings forecast that NeueHealth released in the second quarter of 2021, said Jeff Garro, senior equity research analyst at Piper Sandler. The updated forecasts will come as a pleasant surprise to investors ahead of analyst day next week, he said.

“They may be opening a new page in terms of meeting and exceeding expectations,” Garro said.

By updating its revenue forecast for its tech services division, Ari Gottlieb, head of A2 Strategy Group, said Bright Health Group may also be looking to raise its share price, which hit a record low of $ 3.26 on Tuesday. Bright Health went public in June at $ 16.64 a share, raising $ 924 million at a $ 12 billion valuation, making it the largest health insurance startup IPO to go public this year.

Investing in value-driven clinics that help Bright Healthcare manage the health of individual members could be a good business move – if the insurer can figure out how to cut their medical costs, Gottlieb said. This strategy reminds Gottlieb of Harken Health, a closed partnership between UnitedHealthcare and Iora Health. According to Gottlieb, the primary health care insurance business closed quietly in 2017 due to the unprofitable nature of the Affordable Care Act exchanges at the time. Four years later, exchanges have emerged as one of the most profitable insurance products, and account for a significant portion of Bright Health’s 890,899 members.

Bright Health was founded in 2017 by former executives of the UnitedHealth Group.

“You have to wonder if they will have to go on a sale when they have to sell the NeueHealth business to raise capital to fund the health plan’s liabilities,” Gottlieb said. “Bright has options. They may sell this asset because they desperately need capital and it can be difficult to raise capital when their shares are down. ”

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