How The King Of SPACs “Clover Health” Misled Investors

How The King Of SPACs “Clover Health” Misled Investors

Clover Well being Investments Corp (NASDAQ:CLOV): How the “King of SPACs” Lured Retail Buyers Right into a Damaged Enterprise Going through an Lively, Undisclosed DOJ Investigation.

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  • Right now, we reveal how Clover Well being and its Wall Road movie star promoter, Chamath Palihapitiya, misled buyers about important features of Clover’s enterprise within the run-up to the corporate’s SPAC go-public transaction final month.
  • Our investigation into Clover Well being has spanned virtually 4 months and has included greater than a dozen interviews with former staff, opponents, and {industry} specialists, dozens of calls to physician’s workplaces, and a evaluation of 1000’s of pages of presidency reviews, insurance coverage filings, regulatory filings, and firm advertising supplies.
  • Critically, Clover has not disclosed that its enterprise mannequin and its software program providing, known as the Clover Assistant, are beneath energetic investigation by the Division of Justice (DOJ), which is investigating at the very least 12 points starting from kickbacks to advertising practices to undisclosed third-party offers, in line with a Civil Investigative Demand (much like a subpoena) we obtained.
  • This Civil Investigative Demand and the corresponding investigation current a possible existential threat for an organization that derives virtually all of its income from Medicare, a authorities payor. Our analysis signifies that the investigation has advantage.
  • Clover claims that its best-in-class expertise fuels its gross sales development. We discovered that a lot of Clover’s gross sales are pushed by a significant undisclosed associated social gathering deal and deceptive advertising focusing on the aged.
  • These practices mustn’t come as a shock, provided that in 2016, Clover was fined for deceptive advertising practices by the Facilities for Medicare & Medicaid Companies (CMS). The advantageous was issued after Clover’s repeated failure to amend deceptive statements about its plan choices. A former worker instructed us the advantageous was so small it simply emboldened Clover to push the envelope additional.
  • Clover has a thinly-disclosed subsidiary known as “Search Insurance coverage”. Search makes no point out of its relationship with Clover on its web site but misleadingly advertises to seniors that it presents “unbiased” and “unbiased” recommendation on choosing Medicare plans. It claims, “We don’t work for insurance coverage corporations. We be just right for you”, regardless of actually being owned by Clover, an insurance coverage firm. Its actions are additionally beneath investigation by the DOJ.
  • A number of former staff defined that a lot of Clover’s gross sales are fueled by a significant undisclosed relationship between Clover and an out of doors brokerage agency managed by Clover’s Head of Gross sales, Hiram Bermudez. One former worker estimated Bermudez drove ~68% of Clover’s complete gross sales, although was unclear on the quantity coming from the undisclosed relationship.
  • One of many former staff defined that Clover’s Head of Gross sales took efforts to hide the connection by placing it in his spouse’s identify “for compliance functions”. Insurance coverage filings verify this. The Clover contract was quietly put into his spouse’s identify within the weeks after Clover’s go-public announcement.
  • In a CNBC interview asserting the Clover transaction, Chamath proclaimed, unprompted, “they create transparency…they don’t inspire medical doctors to upcode or do every kind of issues to receives a commission”. A former worker defined to us that the DOJ is particularly asking about upcoding, or the apply of overbilling Medicare.
  • A number of former staff defined that Clover’s software program is primarily a instrument to assist the corporate enhance coding reimbursement. We offer element on how the software program captures and retains irrelevant diagnoses, which we consider deceives the healthcare system, and poses a big regulatory threat.
  • Clover claims its software program “delights” physicians, however in line with medical doctors and former staff we interviewed, they use it as a result of Clover pays them further to make use of it. Physicians are paid $200 per go to to make use of the software program, twice the conventional reimbursement fee for a Medicare go to.
  • Medical doctors at key Clover suppliers described the software program as “embarrassingly rudimentary”, “a waste of my time” and as simply one other administrative trouble to take care of.
  • Clover’s CTO left 6 months earlier than the primary launch of the supposed “disruptive” Clover Assistant software program in July 2018 (probably an indication that growth wasn’t going nice.) Clover’s government crew has been in turmoil, with 3 CFOs, 3 COOs, and a couple of Basic Counsels within the final 4 years.
  • Previous to founding Clover, CEO Vivek Garipalli owned 3 New Jersey hospitals via an organization known as CarePoint Well being. CarePoint was publicly lambasted for price-gouging; its hospital charged the best costs for emergency room remedy in your complete nation.
  • For instance, native media reported that Garipalli’s hospitals charged a instructor $9,000 for a bandaged finger and a tetanus shot, and one other affected person $17,000 for 5-6 stiches on a minimize hand.
  • In 2015, because it got here beneath rising regulatory scrutiny, Garipalli made a secret $1 million donation to the Jersey Metropolis Mayor via a shell entity. Garipalli was solely revealed because the donor after a non-profit sued to reveal the thriller backer.
  • CarePoint’s predatory price-gouging was profitable. However in 2020, New Jersey legislators accused Garipalli – now a public firm CEO – of siphoning over $157 million from his hospital community via a byzantine net of LLC shell entities. The transactions left the hospitals financially crippled, resulting in layoffs and a liquidating sale course of to new house owners.
  • In the meantime, Chamath has described Garipalli as “an absolute confirmed moneymaker”.
  • That could possibly be as a result of Chamath’s agency acquired over 20 million “founders shares” (price ~$290 million at present costs) in change for $25,000 and for selling the Clover Well being SPAC.
  • On condition that buyers are paying over 1 / 4 billion {dollars} for Chamath’s due diligence, we predict they should know whether or not Chamath knew of those points and hid them, or whether or not he merely failed to note them in any respect.
  • Brief sellers have uncovered virtually each main market fraud previously a number of many years, but there have been current questions on whether or not short-sellers and demanding researchers play an essential position in a wholesome, functioning market. We hope our analysis in the present day serves as a well timed reminder that they do. For extra on this, see our conclusion.

Preliminary Disclosure: This report represents our opinion, and we encourage each reader to do their very own due diligence. Please see our full disclaimer on the backside of the report. We have now no place (brief or lengthy) in Clover Well being as a result of we predict on this second for public markets, it’s extra essential for folks to know the position brief sellers play in exposing fraud and company malfeasance. For extra on that dialogue, see our conclusion. For members of the media who want to independently corroborate our work, please contact us for data on sources provided that their anonymity is maintained until they explicitly conform to go on-record.

Screenshot 45Sahm Adrangi’s Kerrisdale Capital was up 6.5% for the fourth quarter, together with a decline of 0.3% in October and positive factors of three.2% and three.5% for November and December, respectively. For comparability, the S&P 500 gained 12.2% in the course of the fourth quarter, whereas the Barclay Hedge Fund Index was up 9.3%. This autumn 2020 hedge fund letters, conferences Read More


Clover “has been diligenced and validated not simply by me and my crew at Social Capital, however by a few of the most revered blue chip expertise buyers on the planet.

– Chamath Palihapitiya, October 6, 2020, Investor Presentation

The market has seen an epic upheaval over the previous a number of weeks, with common buyers realizing their power in an setting that has lengthy been dominated by massive establishments and company insiders.

On the middle of this shift, a vocal determine has appeared: Social Capital founder Chamath Palihapitiya, who has taken interviews with all people from CNBC to AOC, railing towards the institution elite and expressing his help for the rise of particular person merchants.

Chamath has expressed views we wholeheartedly agree with:

  1. Wall Road is a corrupt cesspool. That is why we’ve got been shining light on it for nearly half a decade.
  2. When issues go south, bankers and executives cry for bailouts and regulation to stack the deck. That is unsuitable, and it shouldn’t occur.
  3. Folks shouldn’t be censored. We welcome the democratization of knowledge and publishing. Hindenburg launched 4 years in the past with a workers of 1, flat broke, on the verge of eviction, and dealing with lawsuits from highly effective companies. We did it with nothing greater than a web site and a Twitter account devoted to exposing fraud.

However whereas we agree with the beliefs being supported by Chamath, we’re additionally skeptics by nature. And we had been intrigued to see a billionaire taking media calls from his mansion, making tons of of tens of millions of {dollars} promoting SPACs to retail buyers, all while positioning himself because the de facto chief of the common Joe.

Coincidentally, we started taking a look at Clover Well being nicely earlier than the present market chaos. The identify first crossed our radar in October 2020, when Chamath started a media tour explaining his reasoning for taking the corporate public by way of SPAC.

Since then, whereas Chamath has seemingly taken each alternative accessible to current himself as a beacon of rigorous due diligence and Wall Road know-how, our 4-month investigation led us to conclude that Clover Well being’s tradition is rooted in deception and has taken each alternative to push or break the principles to mislead its clients, buyers, and Medicare.

Clover is Below Lively Investigation by the Division of Justice, An Existential Threat That Has Not Been Disclosed to Buyers

Key amongst our findings was discovering that Clover Well being is beneath energetic investigation by the Division of Justice (DOJ). We obtained a duplicate of a DOJ Civil Investigative Demand (much like a subpoena) despatched to a former worker, which lists 12 particular areas of investigation.

The previous worker instructed us they had been issued a Civil Investigative Demand by the Jap District of Pennsylvania in late October final yr, simply weeks after Chamath’s announcement to take Clover public, and months forward of the final word go-public transaction.


This Civil Investigative Demand and the corresponding investigation haven’t been disclosed to buyers, regardless of the existential threat a Division of Justice investigation poses for an organization that derives virtually all its income from Medicare, a authorities payor. [Pg. 46]

Chamath is positioned to profit no matter whether or not it really works out for common buyers. His firm invested $25,000 in change for an eventual 20,500,000 in “founders shares” for selling Clover. [Pgs. 4-5] These shares are valued at virtually $290 million primarily based on in the present day’s inventory value.

Chamath additionally invested $100 million at $10 per share via a associated entity, placing his general value foundation nicely under others.[1] [Pg. 6, Pg. 8]

We urge Chamath to reply the next questions:

  1. Do you know in regards to the energetic DOJ investigation and in regards to the underlying points being investigated while you took the corporate public? If sure, why wasn’t it clearly disclosed?
  2. Should you didn’t know, why are buyers paying $290 million when your one job is due-diligence?

We expect Chamath has accomplished a masterful job advertising himself, capitalizing on the current chaos with GameStop and WallStreetBets to align himself with “on a regular basis” buyers – however his public persona strikes us because the sugar that helps the poison go down.

Background: Fundamentals on the Enterprise And Clover’s Pitch to Buyers

Clover Well being was based in New Jersey in 2012, then started promoting Medicare Benefit within the state beginning in 2013. [Pg. 273] The corporate has round 57,000 members, with about 98% of its income coming from New Jersey as of 2019. Over half of its plans are bought to low-income or minority seniors. [Pgs. 47, 38] The corporate is likely one of the quickest rising Medicare Benefit insurers within the nation. [Pg. 10]

Clover’s board members embrace former first daughter Chelsea Clinton, whereas its buyers, together with Sequoia and Alphabet’s GV, are a who’s who of enterprise capital elite.

Chamath announced on October 6th 2020 that he can be taking the corporate public, describing Clover as “the holy grail of what healthcare ought to do” and proclaiming that his crew, together with a few of the most revered buyers on the planet, have validated the corporate.

Clover’s proprietary software program product, Clover Assistant, is the important thing that Chamath and Clover administration have inspired buyers to wager on. The corporate claims its disruptive software program creates “a virtuous cycle” of happier, better-informed medical doctors, more healthy sufferers, and in the end big winnings for Clover and its buyers. [Pg. 9]

Clover has generated constant losses thus far. As of September 30, 2020, the corporate had an collected deficit of ($901.6) million. [Pg. 39]

Through the first 9 months of 2020, Clover generated an working lack of $25 million on income of $501 million, in contrast with an working lack of $123 million on $344 million in income for a similar interval in 2019. [Pg. 29] The corporate has attributed the development partially to lowered medical bills for members in 2020 as COVID-19 brought on many to defer routine medical remedy. [Pg. 3] Clover hopes to develop into worthwhile in 2023.

Half I: Misleading Gross sales Practices

Chamath: Greatest-In-Class Know-how Is Why Clover “Persistently and Repeatedly Grabs 50% of Each New Out there Member Each 12 months”

Our Analysis: A lot of Clover’s Gross sales Appear to be Fueled by Deceptive Advertising To The Aged And A Main Undisclosed Associated Occasion Deal With Clover’s Head of Gross sales

A few of These Preparations Are Already the Topic of a DOJ Investigation

The very first web page of Clover’s prospectus lays out all of the explanation why its software program product, Clover Assistant, ends in “sturdy, industry-leading natural membership development”. [Pg. 1-2]

Through the October 6, 2020, investor name to advertise the merger of Clover together with his SPAC, Chamath strengthened that Clover’s expertise is what’s driving membership development:

“Similar to many different best-in-class software program and expertise corporations, what you see here’s a attribute that we name land and increase, or unfavorable churn. It’s a enterprise that when it’s in market constantly and repeatedly grabs 50% of each new accessible member yearly. So the enterprise very predictably can compound 25% to 30% for a few years.” [Pg. 3]

Primarily based on conversations with former staff and a evaluation of company and insurance coverage filings, we discovered that Clover’s membership development appears to be like to be pushed not by expertise, however reasonably by misleading gross sales practices, together with:

  1. An entirely owned Clover subsidiary that misleadingly markets itself as offering “unbiased” and “unbiased” recommendation to seniors on the lookout for Medicare; and
  2. Giant, undisclosed related-party transactions with a brokerage entity managed by Clover’s Head of Gross sales.

As one former worker instructed us:

“The expertise wasn’t any totally different. The plan design actually wasn’t any totally different except for it undercut the competitors. However the first couple of years in community, it wasn’t even that nice. They didn’t have all of the hospitals in community. So, it needed to have come from the gross sales technique for his or her success to have grown organically the way in which it did.”

Not surprisingly, the DOJ subpoena lists quite a few points associated to Clover’s member recruitment practices.


As famous above, this has not been disclosed to buyers. The corporate’s prospectus consists of an eye-glazing disclaimer suggesting that it is and could possibly be beneath investigation by nearly anybody at any given time with out offering specifics:

“Occasionally, we’re and could also be topic to common and particular governmental market conduct and different audits, investigations and opinions by, and we obtain and will obtain subpoenas and different requests for data from, varied federal and state companies, regulatory authorities, attorneys common, committees, subcommittees and members of the U.S. Congress and different state, federal and worldwide governmental authorities.” [Pg. 57]

In 2016, Clover Was Fined For Deceptive Advertising Practices by the Facilities for Medicare & Medicaid Companies (CMS)

The DOJ investigation is just not the first-time the federal government has investigated Clover. A number of years after its 2013 launch, Clover was fined $106,095 by CMS for deceptive advertising practices.

Particularly, Clover was alleged to have falsely led seniors to consider that Clover lined sure providers that it didn’t. This might end in denial of service or out-of-pocket bills for providers the seniors thought had been included.

CMS issued the advantageous after repeatedly warning Clover and after Clover’s failure to amend its deceptive statements, in line with the CMS release:


Former Staff: The $106,095 Positive Was So Small That it Simply Emboldened CEO Garipalli To Hold Pushing the Envelope

Based on a former worker we interviewed, the small measurement of the advantageous merely emboldened Clover CEO Vivek Garipalli:

“The issue was, once I bought there the thought course of was ‘nicely the penalty was so small we’re not frightened about it.’…To me any penalty from the federal government or CMS is sort of a big no no since you’re on their radar. And the one factor you by no means wish to be with healthcare is on the CMS radar as a result of that’s the primary payor within the nation. Nobody pays greater than CMS, so don’t chew the hand that feeds and put your self in unhealthy spot like that might get you banned from that market shortly.”

Our analysis signifies that Clover has pushed the envelope.

Clover Has a Thinly Disclosed Subsidiary Known as Search Insurance coverage Companies, Inc.

Search Makes No Point out of Clover on Its Web site But Misleadingly Advertises to Seniors That it Affords “Unbiased” and “Unbiased” Info to Assist Them Choose Medicare Plans.

It seems that deceptive advertising practices proceed to today.

Search Insurance coverage Companies, Inc. is a subsidiary of Clover, per Clover’s SEC filing exhibit itemizing its subsidiaries.


And Search Insurance coverage Companies, Inc. is listed because the proprietor and operator of a web site known as, which advises seniors on which Medicare insurance policy to decide on.

On condition that the acknowledged function of Search’s web site is to assist seniors decide Medicare insurance policy, we’d count on it to reveal that it’s truly owned by insurance coverage firm Clover, posing a significant battle of curiosity.

But Clover wasn’t talked about wherever on Seek’s website, per our evaluation. Quite the opposite, Search misleads its aged viewers by saying the precise reverse.

On one a part of its web site, superimposed over a picture of a senior citizen, Search explains the way it presents completely unbiased recommendation:

Search additional markets itself as offering “unbiased recommendation that places your well-being above all else”.

(Supply: Search Insurance coverage “About” web page)

Search additionally insists that it doesn’t care which insurance coverage firm plan seniors find yourself choosing:

Search’s web site even has a blog submit explaining how different brokers usually have a bias to steer purchasers towards a plan that finest serves their very own monetary pursuits. The submit is titled “SeekMedicare is totally different” and repeatedly declares Search’s neutrality:

Search Medicare Web site: “We Don’t Work for Insurance coverage Firms. We Work For You”

Actuality: Search Is Actually Owned By Clover Well being, An Insurance coverage Firm

On one a part of Search’s web site, it explicitly claims that it doesn’t work for an insurance coverage firm in any respect:

(Supply: Search Insurance coverage “About” Web page.)
(Notice: Search Insurance coverage works for, and is actually owned by, insurance coverage firm Clover Well being)

Search’s web site doesn’t listing its government crew. However in case there’s any doubt that Search is an extension of Clover’s gross sales operation, Florida company information present that Search’s Chief Sales Officer is Hiram Bermudez, who concurrently serves as Clover’s Head of Gross sales, per his LinkedIn profile.

Search’s web site doesn’t listing an handle, however New Jersey corporate documents present its handle matches Clover’s New Jersey office address: 30 Montgomery Road, Jersey Metropolis, NJ, 15th Ground.

Search’s Actions with Clover Are Below Investigation by the DOJ

Given the above, we weren’t shocked to see Clover’s relationship with Search flip up on the Division of Justice CID which particularly requested data regarding “An internet platform referred to as ‘Search Medicare’.”


It can be crucial that seniors concentrate on advertising conflicts as a result of not all Medicare Benefit plans are created equal. CMS assigns plans star scores of 1 – 5, with the next variety of stars indicating the next high quality of care and customer support.

According to CMS, 81% of Medicare Benefit sufferers had been enrolled in a plan that might have a 4-star ranking or above by 2020.

Utilizing CMS’s online tool for evaluating Medicare Benefit plans, we reviewed plans accessible in Hoboken, NJ, and had been proven 35 choices, together with a number of Clover Well being plans. All of Clover’s plans had 3-star scores, making them the bottom rated plans accessible in that area.

We expect Clover is deceptive seniors to steer them towards plans the place it has an apparent battle of curiosity, with out disclosing that battle.

Clover: Our Gross sales Are Fueled By Nice Software program

Former Worker: Clover’s Gross sales Are Fueled By An Undisclosed Relationship Between Clover And An Exterior Insurance coverage Brokerage Agency Managed by Clover’s Head of Gross sales

The shortage of disclosure goes past Clover’s “Search” subsidiary. As talked about above, Clover’s Head of Gross sales is a person named Hiram Bermudez, per his LinkedIn profile.


A number of former staff, a neighborhood competitor, and an unbiased dealer instructed us that Bermudez oversaw the corporate’s aggressive growth throughout New Jersey. One former worker estimated that Bermudez was liable for at the very least 70% of the gross sales within the state, representing ~68% of Clover’s complete gross sales.

Bermudez’s LinkedIn profile exhibits that previous to becoming a member of Clover in 2012, he labored at brokerage agency B&H Assurance, the place he held the title of VP of Gross sales Operations. The profile signifies he left the position in 2012 upon becoming a member of Clover.


The latest New Jersey corporate records, dated November 20th, 2020, point out that Bermudez is just not solely nonetheless energetic with B&H, however is listed as the only agent of the agency, in addition to considered one of two principals.

B&H, which stands for Bermudez & Henson, operates what is named a Field Marketing Organization, or an “FMO”. FMOs act as a intermediary between insurance coverage corporations and brokers, negotiating gross sales offers with the insurance coverage corporations {that a} community of brokers can then supply and promote to clients.

As one former worker defined, Bermudez by no means left B&H, and as an alternative was introduced on particularly to make use of his brokerage enterprise to develop Clover’s gross sales.

“He was introduced into Clover since early on, like day one, and since he had such a big floor power of gross sales brokers he was key and instrumental in getting Clover began.”

“He’s bought each ft in these waters; one is he’s head of gross sales at Clover and the opposite one is he owns and manages this large gross sales market basis within the Northeast beneath his FMO.”

A evaluation of the B&H website exhibits that it’s companions with Clover, but we see zero disclosure that its key principal holds a concurrent senior position on the insurance coverage firm. One may count on this to be the kind of battle of curiosity that seniors buying Medicare would have an interest to know.


Bermudez represents in his LinkedIn profile that his tasks at Clover embrace negotiating “aggressive contracts with FMO’s”. On condition that Bermudez is a principal at a key FMO utilized by Clover, how aggressive can these negotiations be? Does he play hardball with himself?

Usually, corporations are required to report related-party transactions to make potential buyers conscious of fabric conflicts of curiosity.

Regardless of B&H clearly doing enterprise with Clover, we noticed no point out of the apparently vital related-party transactions in Clover’s SEC filings, together with in its go-public prospectus.

Former Worker: Clover’s Head of Gross sales, Hiram Bermudez, Took Steps to Conceal the Relationship Between Clover and His Exterior Brokerage Agency

“He Needed to Get His Identify Off of It…His Spouse is Listed As a Co-Companion” “He’d Eliminated His Identify on It For ‘Compliance Causes’”

Once we spoke to a former worker about B&H’s relationship with Clover, we had been instructed that Bermudez had taken steps to hide the connection within the run-up to the go-public transaction resulting from “compliance causes”:

“He simply needed to hand his enterprise over to a companion, then he’d eliminated his identify on it for compliance causes.”

“His spouse is listed because the co-partner together with his enterprise companion. He needed to get his identify off of it, however you understand like there’s gonna be a verify from Clover going to that enterprise yearly. It’s gonna be a big quantity—he makes good cash at Clover. He makes the vast majority of cash from the gross sales that his enterprise makes from Clover.”

We reviewed information from the Nationwide Affiliation of Insurance coverage Commissioners (“NAIC”). On the NAIC page for B&H Assurance, the entity listed its formal relationships (i.e., appointments) with most main insurance coverage corporations in New Jersey, 17 in all.

Clover was noticeably absent from the listing (regardless of clearly showing as a companion on the B&H website, as proven above.)

(NAIC information displaying B&H insurance coverage “appointments” or relationships with insurance coverage corporations.)
17 1
(Continued from above: NAIC information displaying full listing of 17 B&H insurance coverage “appointments” or relationships with insurance coverage corporations. Clover is noticeably absent from the list.)

Digging one layer deeper, the NAIC records present that B&H listed a single affiliate relationship, with a lady named Yesenia Rivera.


Based on a background verify report, Yesenia Rivera is the maiden identify of a lady who usually goes by Yesenia Bermudez—Hiram Bermudez’s spouse.

Insurance coverage Filings Affirm Clover’s Contract With The Brokerage Agency Was Quietly Moved Into Bermudez’s Spouse’s Identify Within the Weeks After the Go-Public Announcement

On Bermudez’s spouse’s NAIC profile, we see that she has a proper relationship with just one insurance coverage firm: Clover Well being.


Briefly, Clover’s Head of Gross sales seems to function a big, separate insurance coverage brokerage agency that does vital undisclosed enterprise with Clover, via his spouse’s identify. Clover then claims within the very first pages of its go-public prospectus to be producing its enterprise organically resulting from its wonderful software program. [Pg. 1-2]

Per an interview with a former worker that described the connection with Bermudez’s FMO:

“You don’t must be Sherlock Holmes to determine it out.”

An worker at a significant competitor, who has expertise with each Bermudez and the New Jersey market, opined that Bermudez is “one step away from going to jail, and that’s the way in which they run their enterprise.”

Clover Handed Out Reward Playing cards to Medical doctors and Nurses to Generate Affected person Leads, a Apply Prohibited by CMS, Based on Former a Worker

Along with soliciting potential members via brokers and web sites with undisclosed conflicts, Clover additionally skirted rules by recruiting members via physicians’ practices, in line with a former worker.

Clover distributed reward playing cards “everywhere in the freaking map” to encourage suppliers to direct their sufferers towards Clover’s plans, the previous worker stated. “Dunkin Donuts, Panera, Amazon.”

Reward playing cards had been used as a result of they had been untraceable, the previous worker added.

Such funds would seem to violate CMS’s rules relating to advertising of Medicare Benefit plans. These guidelines place restrictions on suppliers recruiting members into an insurer’s plan primarily based on monetary or some other pursuits of the supplier: [Pg. 15]


The official clarification for these reward playing cards was all the things besides recruitment, in line with the previous worker. The presents had been justified as being for “morale,” a “thanks,” “motivation,” and “friendship.”

This subject is cited particularly within the DOJ subpoena as nicely:


Clover Paid Employees in Doctor’s Workplaces, Referred to as Clover Ambassadors, For Referrals to Promote Clover’s Plans to Seniors.

“It’s a Confidential Program,” a Former Worker Defined, and One That’s Being Checked out by the DOJ (As soon as Once more Unbeknownst to Buyers)

Clover additionally paid physicians’ entrance desk workers for affected person referrals, in line with a former worker.

These people had been known as “Clover Ambassadors,” in line with the previous worker, who added: “It’s a confidential program,” that means ambassadors weren’t speculated to let sufferers know they had been working for Clover.

“The receptionist would discover {that a} affected person checking in was enrolled in, say, United Healthcare, and would point out to the affected person that there was one other plan which may meet their wants higher – ‘Would you like extra data? No drawback. I’ll have them offer you a name.’”

The federal government is wanting into these actions as nicely:


Half II: Undisclosed Overbilling Threat (“Upcoding”)

Clover operates as a Medicare Benefit insurer, deriving virtually all its income from the federal government. [Pg. 46, Pg. 9]

In contrast to conventional Medicare, which operates a “pay for service” mannequin, Medicare Benefit pays insurers a per-member-per-month fee with a view to handle every member’s care. Then, the insurer participates in a few of the positive factors or the losses related to the price of care. The objective of this system is to incentivize insurers to proactively discover methods to decrease the price of care.

The Medicare Benefit program has a key nuance that opens the door for fraud. CMS acknowledges that sicker sufferers are more likely to value extra to insure, so CMS will increase its funds to insurers if a affected person’s “threat evaluation” rating is increased. Given this dynamic, it’s within the insurer’s finest curiosity to make its sufferers look as sick as doable, thereby incomes increased reimbursement.

Insurers can recreation the system by inflating diagnoses or failing to take away outdated, irrelevant diagnoses. That is generally thought-about “risk adjustment fraud”, a type of upcoding.

Primarily based on our analysis, Clover and its software program product appear particularly designed in a approach that exposes the corporate to this very threat.

Chamath On CNBC Prior To Going Public: “They Create Transparency…They Don’t Encourage Medical doctors to Upcode or Do All Sorts of Issues In Order to Get Paid”

Former Worker: Clover is Below Investigation by the Division of Justice Over Upcoding

A authorities investigation into upcoding could be an existential subject for corporations which can be reliant on authorities payor applications like Medicare.

On condition that virtually all of Clover’s income is derived from Medicare Benefit premiums, buyers may rightfully be frightened that the dangers related to such an investigation may threaten its relationship with the federal government. [Pg. 46]

Potential buyers in Clover, nonetheless, had been comforted by Chamath, the pinnacle of Clover’s SPAC sponsor, in a CNBC interview in October 2020 with Andrew Ross Sorkin, in the course of the run-up to Clover’s go-public transaction.

(Supply: Chamath speaking Clover on CNBC, October 2020)

Within the interview, Chamath provided (unprompted) that Clover wasn’t engaged within the untoward apply of “upcoding”, or inputting inaccurate medical data to extend reimbursement from authorities payors equivalent to Medicare:

“They create transparency. They don’t play video games. They don’t inspire medical doctors to upcode or do every kind of issues with a view to receives a commission.”

– Chamath Palihapitiya (1:07-mark)

However upcoding occurs to be a key subject that has drawn the eye of the Division of Justice, in line with a former worker we interviewed, who offered a duplicate of the Civil Investigative Demand.

The previous worker stated they had been questioned about “this instrument (Clover Assistant) and its apply of selling increased degree coding by the doctor in order that approach the insurance coverage can invoice CMS.”

Clover: The Clover Assistant is Primarily a Software to Enhance Affected person Care

A number of Former Staff: Clover’s Software program is Primarily a Software to Assist the Firm Enhance Coding Reimbursement

Our analysis signifies as soon as once more that the DOJ probe is probably going onto one thing.

Whereas Clover claims its software program instrument, Clover Assistant, is geared toward serving to medical doctors enhance affected person care, former staff instructed us that it was in the beginning a coding instrument. Based on one former worker:

“The core function of the platform is it will increase income by figuring out power situations that folks have and CMS pays that…That’s the core enterprise proposition.”

They additional defined the way it works:

“What it’s doing is saying we’ve got your claims and in your claims in some unspecified time in the future some physician recognized your hypertension. The physician that’s sitting in entrance of you proper now, we wish them to say that you’ve hypertension. The physician can say ‘sure’ or ‘no’ primarily based on their findings. However it’s a kind of a nudge to the physician to establish these potential power situations you could have.”

Per one other former worker we interviewed:

Should you make this affected person look actually, actually sick, you’re going to get more cash from the federal government…I believe the federal government might say it’s not unhealthy if a affected person actually is that sick. It will get dicey when you could have a program that you’re paying medical doctors straight up loopy amount of cash to log in to and do that for you.”

As we’ll element later, Clover pays suppliers $200 per go to to make use of the Clover Assistant. One former worker defined how the fee is basically an funding for Clover, given the potential to extend prognosis codes and earn increased reimbursement:

“In case you are paying medical doctors $200 for a click on however you’ll be able to enhance the severity of sufferers that you just’ve recognized, it’s price it since you are drawing down 1000’s of {dollars} (from Medicare) for a few clicks. To me that’s why they’ve this.”

Does Clover Encourage Upcoding? The Clover Assistant “Recaptures” Outdated, Typically Irrelevant Diagnoses, Then Makes it Troublesome to Take away Them, Based on Medical doctors

Clover’s drive to seize each doable prognosis has, predictably, led to messy outcomes.

Notice that capturing related prior diagnoses is a wonderfully acceptable apply. However in line with medical doctors we interviewed, Clover Assistant retains outdated and sometimes irrelevant diagnoses, in the end resulting in wasted Medicare {dollars}.

Per one physician who works at a NJ practices that has dozens of medical doctors utilizing the Clover Assistant:

“[Clover] is like continually throwing these codes again in our face for all the things that’s ever come up when they’re irrelevant now.”

The physician distinguished Clover from Athena, the digital medical report (EMR) system utilized by the apply for its sufferers, which additionally prompts medical doctors to think about confirming diagnoses primarily based on data gathered on the affected person. The physician described Clover as being a lot much less exact:

“They’ve all these ridiculous diagnoses in there that make no sense…Each single time I am going in additional than half the prognosis aren’t proper…Whereas with Athena, I might say you understand 4%-5% of the time the prognosis aren’t proper.”

One other physician estimated that Clover Assistant’s affected person information had been inaccurate between 10% and 25% of the time, including:

“Let’s say someone got here in with diabetes. They misplaced a bunch of weight. They train. They don’t have diabetes anymore. That diabetes remains to be on the report.”

We requested why a few of these cleared up/cured legacy points proceed to point out up as prognosis. The medical doctors defined that the software program limits their skill to take away an inapplicable prognosis and expressed some confusion why such an apparent function hadn’t already been carried out:

One physician instructed us:

“Your sufferers don’t essentially match into considered one of their packing containers, however you need to click on a field to get to the subsequent display screen.”

The physician added:

“I can’t click on previous the display screen. However possibly this (prognosis) is not relevant for this affected person… If there was only a spot to say that is not relevant, then I believe the software program can be improved instantaneously. And it’s a straightforward factor.

One other physician we spoke with described how the Clover Assistant didn’t enable her to take away a present COVID prognosis for a affected person who had recovered from the virus however was taking a long-term course of medicine to stop blood clots, which the affected person had skilled when unwell with COVID.  The system had been incapable of specifying the distinction between a earlier and present prognosis.

“The menus are so unspecific that from what I checked, they might suppose that he at the moment has energetic COVID which he doesn’t have.”

It’s unclear whether or not the problem medical doctors had been having with eradicating outdated irrelevant diagnoses was a part of a method to extend threat evaluation scores, clunky growth, or each. From the angle of CMS, the excellence might not matter. Illegitimate will increase in a affected person’s threat rating can lead to penalties and regulatory sanctions. [Pg. 37]

Clover’s CEO’s Prior Enterprise Entered right into a ~$1,000,000 Settlement With New Jersey’s Medicaid Fraud Division Following an Investigation Into Upcoding

This isn’t the primary time Clover’s management has been within the highlight over upcoding.

Previous to founding Clover, CEO Vivek Garipalli operated a collection of New Jersey Hospitals beneath a enterprise known as CarePoint.

In February 2019, CarePoint disclosed to the New Jersey Medicaid Fraud Division 3 classes of billing claims that apparently lacked enough documentation, from claims made between 2015 and 2017.

CarePoint then settled with the regulator, agreeing to pay virtually $1 million, representing the overall of the overpayments from Medicaid. [1, 2] (In Half IV we go into in depth element on CarePoint and its historical past of regulatory points.)

Half III: Clover’s Software program—A Hole Pretense For a ‘Unicorn’ A number of

Clover Claims Its Software program “Delights” Physicians

Actuality: Clover Has to Pay Medical doctors $200 Per Go to to Use the Software program

Clover claims it operates a “software program centered technique”, pushed by its Clover Assistant. Its prospectus declares that “physicians love the Clover Assistant”, “the Clover Assistant is a physicians ‘finest buddy’” and that it “delights” them. [Pgs. 236-237]

Typically, software program that delights clients is bought to them, leading to income for the software program firm. In different situations, equivalent to with corporations like Google and Fb, the purpose is to supply pleasant software program without spending a dime within the hopes of quickly rising consumer adoption, which then varieties a basis to generate income.

Opposite to those market-tested approaches, Clover as an alternative pays medical doctors $200 per go to to make use of its software program, leading to Clover paying twice the common Medicare reimbursement fee for the standard go to. [Pg. 57, Pg. 252]

A former Clover worker we spoke with threw chilly water on the concept that Clover’s software program was helpful, however steered that medical doctors had been delighted to receives a commission twice as a lot as traditional:

The medical doctors aren’t amazed by the software program… They like the very fact they’re getting paid further. It’s important to pay them to do extra clicks. It’s important to pay them so as to add clicks to their each day routine.”

“Healthcare is so stuffed with medical determination help instruments and so stuffed with tech. The medical doctors aren’t being helped that a lot.”

One competitor expressed their blunt opinion on Clover’s software program:

“It’s a extremely fascinating idea that they’ve. They’ve this vaporware that doesn’t exist, proper? They’ve 15, 20 programmers in an workplace in San Francisco. United Healthcare has 20,000 everywhere in the Philippines and India. And there’s no secret sauce, however in some way Clover and their 20 programmers have found out the key sauce.”

The competitor had beforehand met with Clover’s Head of Gross sales, Hiram Bermudez, and shared a narrative:

“…I keep in mind being in a gathering with Hiram and he’s telling me about their expertise. I stated, ‘Hiram I used to be within the IT enterprise for years. What are you speaking about? You don’t have anything. And he begins laughing, proper? He stated, ‘Yeah, nevertheless it’s an ideal story, proper?’”

Former Staff and Medical doctors Informed Us The Software program Is Burdensome and Fundamental

One Physician Known as Clover Assistant “Embarrassingly Rudimentary”

We spoke with former employees and medical doctors who use the software program with a view to get their views.

The software program is a comparatively fast “verify the field” sort software which is hardly appropriate with creating an efficient remedy plan, one former worker defined.

The primary subject medical doctors complained about with Clover Assistant was its lack of ability to attach with physicians’ Electrical Medical Report (EMR) programs, a former worker instructed us:

“Most of their time went into constructing Clover Assistant and never into bridging it into EMR programs…Administration talked about integrating the Clover Assistant with EMR programs, nevertheless it was years away”.

One of many firm’s former senior staff, whom we interviewed, dismissed the concept that Clover would ever make a significant effort to combine with present EMR programs:

“EMR integrations are a complete joke. That’s not even doable and even one thing we’d wish to do due to the performance when you get in there. They (physicians) don’t even use it anyhow to drive their visits more often than not.”

A apply with a number of Clover Most popular medical doctors in New Jersey instructed us that this lack of integration meant suppliers needed to run via two software program applications with each Clover affected person.

“For sufferers which have this particular insurance coverage, Clover Well being, there’s an extra piece of software program that Clover Well being presents the workplace and asks us to register with in order that once we see their sufferers which have Clover Medical health insurance, we do that further step of labor with their software program, the Clover Well being assistant.”

When requested why they do the additional work, they stated candidly:

The explanation why we’re doing this further work is as a result of they current it as an extra billing alternative for the workplace.”

Whereas the system provided some suggestions relating to affected person care and prompts relating to earlier diagnoses, these aren’t distinctive options, in line with the physician, who stated their apply makes use of Athena as its EMR, which additionally prompts medical doctors to think about previous diagnoses.

One other physician instructed us that preventative care-style medical information have been round for years with software program like eClinicalWorks.

One other physician we interviewed at a big New Jersey apply that makes use of Clover Assistant instructed us medical doctors had been annoyed with the software program however had been obligated to make use of it to generate extra income for the apply.

Clover touts how the software program was “developed by physicians for physicians”, however the physician known as the Clover Assistant “an embarrassingly rudimentary digital medical report” and stated the query prompts seem to have been written by somebody with no medical background. [Pg. 238]

And a former senior worker, who spoke to us, went additional saying Clover Assistant was by no means envisaged primarily to be used by the doctor:

“The instrument is absolutely made for the medical assistant doing many of the documentation and the physician is principally simply signing off on it.”

Clover Claims It Has Constructed A “Broad Base of Engaged Physicians” Who Use The Clover Assistant For 92% Of Their Visits

Actuality: The Majority of Medical doctors in Clover’s Community Don’t Use the Clover Assistant, We Had been Informed

Clover tells buyers it has “constructed a broad base of engaged physicians” and that “onboarded PCPs (major care physicians) used the CA (Clover Assistant) for 92% of eligible visits in 2019.” [Pg. 14]

This 92% determine seems to be a intelligent flip of phrase. Clover by no means defines “onboarded” in its prospectus. [Pg. 247] Within the area, Clover designates some medical doctors as “Clover Most popular”, or “a major care doctor who has been acknowledged for his or her dedication to utilizing the Clover Assistant instrument.” Two former staff defined that solely “Clover Most popular” medical doctors had been utilizing the Clover Assistant.

However the proportion of “Clover Most popular” medical doctors is sort of low. For instance, in line with Clover’s personal database, solely ~45% of all in-network medical doctors in a key New Jersey market, Passaic County, are outlined as “Clover Most popular”.

In one other key market, Morris County, New Jersey, solely ~25% of all in-network medical doctors are “Clover Most popular” suppliers.

A former worker defined that Clover was capable of enroll about 70% to 80% of all the first care medical doctors in New Jersey into its community, however that didn’t translate right into a excessive share of Clover Assistant customers:

“That they had a superb portion of medical doctors within the state however not an ideal portion of medical doctors had been utilizing it in the event that they enrolled.”

The acceptance fee drops dramatically exterior of New Jersey, in line with our evaluation of Clover’s database.

  • In El Paso, Texas, for instance, the Clover listing lists 110 medical doctors in Clover’s community and solely 8 which can be recognized as Clover Most popular medical doctors.
  • For Tennessee, we discovered 220 major care medical doctors in Clover’s community however none who recognized as Clover Most popular suppliers.
  • Arizona has 206 in-network suppliers however we discovered no Clover Most popular medical doctors.

It appears Clover is utilizing claims a couple of small subset of its community, “onboarded PCPs,” to present the impression of widespread acceptance of the Clover Assistant.

We emailed the corporate asking for clarification on this “onboarded” metric and haven’t heard again as of this writing.

We Reached Out to Medical doctors Recognized By Clover For Their “Dedication” to The Clover Assistant

They Indicated Erratic Use and Frustration; “Sick And Drained Of But One other Web site”, “Ridiculous Diagnoses”, “Not One thing That Helps Medical doctors Take Care of Sufferers”

In mid-January 2021, we phoned 22 doctor’s practices, of varied specialties and disciplines, in varied components of New Jersey listed in Clover’s 2019 Provider Directory to inquire whether or not or not they used Clover’s software program.

On condition that Clover claims its software program has disrupted the healthcare market, we figured the practices would be capable to present their suggestions on the revolutionary shift.

Whereas all workplaces confirmed to us that they accepted Clover’s insurance coverage, 14 workplaces (64%) instructed us they didn’t use the software program in workplace, 4 instructed us they didn’t know whether or not or not they used the software program and solely 4 confirmed they did use the software program.

We additionally spoke with two medical doctors on the Summit Medical Group, which seems to be the biggest Clover Most popular supplier within the firm’s community. (Out of roughly 900 medical doctors utilizing the Clover Assistant in northern New Jersey, the corporate’s largest market, 100 work at Summit Medical Group, in line with our evaluation of the company’s directory.)

Each medical doctors expressed frustration with the Clover Assistant. The primary physician bluntly labeled Clover “a waste of time”, including:

“I do know that every one the medical doctors in my workplace, principally, they simply really feel aggravated by it. We simply attempt to verify it and get it closed as shortly as doable in order that we receives a commission and transfer on to precise affected person care.”

The second physician responded when requested in regards to the Clover Assistant:

Sick and uninterested in yet one more web site, one other log in, one other system we’re liable for updating for some large knowledge; one other care consideration to reply to. We not have time to care for our sufferers. Somebody thinks this technique will – what? It isn’t one thing that helps household medical doctors care for their sufferers.”

Clover Has Seen Its Membership Develop, However In Sporadic Vogue: Hardly Proof of Speedy Software program Adoption

Notice that the corporate solely launched its first software program product 2.5 years in the past, in July 2018. [Pg. 247]

Historic knowledge exhibits that Clover’s membership has grown, however its quarterly development fee has been lumpy and sporadic since its software program launch – hardly indicative of the constant “hockey-stick” development hoped for by software-driven corporations.

(Supply: firm SEC filings and Hindenburg Analysis estimates primarily based on NAIC filings)

Clover’s Chief Know-how Officer Left 6 Months Earlier than the First Launch of Clover’s Software program Product, Doubtless Not a Signal That Issues Had been Going Nice

Clover Has Skilled Different Important Govt Turnover: 3 CFOs, 3 COOs, and a couple of Basic Counsels Over the Final 4 Years

Usually, when an organization is on the cusp of releasing a groundbreaking piece of software program that can change the world, the Chief Know-how Officer will stick round to reap the fruits of their labor.

However Kris Gale, who was Clover’s unique CTO from Jul. 2014 – Jan. 2018, left the place simply 6 months earlier than the discharge of Clover Assistant. Gale later served as an advisor till February 2019, per his LinkedIn. At present, Andrew Toy serves in the CTO role.

Normally, government stability generally is a signal of a wholesome group. At Clover, we’ve got seen in depth government turnover within the firm’s temporary historical past.

CFO Turnover: 3 CFOs during the last 3 years

  1.  Les Granow Jul. 2016 to Mar. 2018
  2.  Pritam Baxi Mar. 2018 to Jan. 2020
  3.  Joseph Wagner – Jan. 2020 to current

COO Turnover – 3 COOs during the last 4 years[2]

  1. Wilson Keenan – Jul. 2016 to Aug. 2017
  2. Varsha Rao – Sep. 2017 to Dec. 2018
  3. Jamie Reynoso – July 2020 to current

Basic Counsel Turnover – 2 GCs previously 3 years

  1. Brady Priest – June 2016 – Sept. 2018. Since Sept. 2018, Priest’s LinkedIn says he has been an advisor to the corporate and that in July 2020 he grew to become CEO of Search Medicare.
  2. Gia Lee – Jan. 2019 to current

Half IV: How Clover CEO Vivek Garipalli Created Clover With Cash ‘Siphoned’ From The Healthcare System

Prior To Founding Clover, CEO Vivek Garipalli Owned A Group Of New Jersey Hospitals By His Holding Firm CarePoint Well being

Within the lead as much as Clover’s go-public transaction, Chamath Palihapitiya described Clover CEO Vivek Garipalli as “an absolute confirmed moneymaker.” On this part we look at simply how Garipalli made his cash.

Garipalli had beforehand based CarePoint Health, an entity that purchased three distressed hospitals in northern New Jersey. CarePoint began with its 2007 acquisition of Bayonne Medical Middle, later buying Hoboken College Medical Middle and Christ Hospital in Jersey Metropolis.

Actually, Clover was shaped out of CarePoint as a provider-sponsored insurance coverage plan, initially named CarePoint Investments. [Pg. 4]

Below Garipalli’s Oversight, One CarePoint Hospital Charged The Highest Costs For Emergency Room Therapy In The Nation

In New Jersey, insurance companies should pay for emergency room visits, even when a hospital is out-of-network. This created an apparent loophole whereby hospitals may keep away from establishing community relationships with insurers, then cost increased costs.

Given the implications for sustainable affected person care, most hospitals selected to not exploit the loophole, and apparently none exploited it to the extent that Garipalli did.

A 2013 New York Instances article discovered that Garipalli’s Bayonne Medical Middle charged the best charges for emergency visits out of each hospital within the nation.


Per the article:

’Their mannequin is to cost exorbitant charges, significantly for emergency room providers, and if the insurance coverage corporations don’t pay them, they threaten to go after the member for the stability of billing,’ stated Carl King, head of nationwide networks for Aetna”.

One Instance: Garipalli’s Hospital Charged a Trainer $9,000 For A Bandaged Finger And a Tetanus Shot

One other article described how one affected person was billed $9,000 to have a minimize on his finger bandaged on the Bayonne ER. The affected person defined:

’I bought a Band-Support and a tetanus shot. How may or not it’s $9,000? That is loopy,’ Hanusz-Rajkowski stated. ‘If I severed a limb, I’d carry it to the subsequent emergency room within the subsequent metropolis earlier than I am going again to this place.’”


In one other instance, Bayonne charged $17,000 for 5-6 stitches for a person who minimize his hand.

In 2015, Coming Below Growing Regulatory Scrutiny, Garipalli Made a Secret $1 Million Donation to the Jersey Metropolis Mayor By a Shell Entity

Garipalli Was Revealed because the Donor Solely After a Non-Revenue Sued to Expose the Information

As scrutiny picked up on Garipalli’s hospital community, he made a big donation to the mayor of Jersey Metropolis, the place CarePoint (and now Clover) function.

On December 23, 2015, unnamed house owners shaped a Delaware entity known as DE First Holdings, LLC. The following day, the entity donated $1 million to a Tremendous PAC supporting the mayor of Jersey Metropolis, in line with litigation records.

A non-profit group centered on authorities transparency later sued the Federal Election Fee to power disclosure of the information. Using a shell entity to masks a political donation is a violation of marketing campaign finance legislation, in line with the complaint.

The information had been eventually released, revealing that Garipalli had shaped the entity in an obvious effort to cover the donation. Native media laced into the mayor over the “shady” deal:




It was not the primary time Garipalli needed to reply questions on undue political affect.

In 2011, across the time Garipalli tried to shut the unique offers to buy the CarePoint hospitals, a neighborhood assemblyman was revealed to have accepted maxed-out donations from Garipalli’s dad and mom. The assemblyman finally donated the cash to charity after local media identified the battle of curiosity.

In 2019, New Jersey Regulators Detailed How Garipalli Siphoned Over $157 Million From His Worth-Gouging Hospital Community By a Collection of Shell Entities

Garipalli’s hospitals earned large income via its value gouging mannequin, however an investigation later revealed that Garipalli siphoned the cash out of the hospital programs via a collection of shell entities.

In March 2019, the New Jersey Fee of Investigations launched an in depth report explaining how Garipalli and his associates used a byzantine community of LLCs to extract over $157 million from CarePoint’s hospitals.

The community of entities was so advanced that it masked from the Division of Well being (DoH) the existence of a $60 million mortgage, limiting the DoH’s skill to guage the potential dangers it posed to the viability of the hospitals. [Pg. 21]

The report adopted an earlier 2014 report by Healthcare lobbying group HPAE, which raised questions on why Bayonne’s “providers and workers have been minimize, contracts with insurance coverage corporations cancelled, and the hospital buildings and property bought to an actual property funding belief in an opaque and unregulated sale-leaseback association.”

By 2020, After the Cash Was Extracted, CarePoint’s Hospitals Collapsed Financially. Legislators Then Demanded an Investigation into Clover Well being and Different Associated Entities.

Clover Has Not Disclosed Whether or not It or Garipalli Are the Topic of Any Particular Investigations

In February 2020, all 9 state legislators from Hudson County, New Jersey, wrote the governor demanding an investigation into CarePoint, Clover Well being, and affiliated entities over the siphoned funds, which had left the hospitals in dire monetary situation:

“The close to chapter of the CarePoint hospitals is straight associated to the choice by possession to withdraw unreasonably massive sums from their operations for private revenue on the detriment to providers and the well being care accessible to Hudson County residents.”

The letter detailed how considered one of CarePoint’s hospitals was on the verge of chapter and one other was weeks away from insolvency, and requested aggressive motion from the governor, together with passage of laws to stop comparable abuses sooner or later.

Garipalli And Others Earned the Title of “Vampire” In A Latest Native Newspaper Editorial Opining on The Enterprise Mannequin and Sale Means of The Distressed Hospitals

The Jersey Journal had this tackle Garipalli’s greater than 10-year historical past overseeing the three hospitals in a June 2020 editorial, which argued that greed and self-dealing had been holding up a sale of the hospitals after years of questionable dealings:

“It’s excessive time for all of the dickering to return to an finish, for the vampires to cease their feeding, and for the healthcare mission of those three hospitals to be put on the high of the listing for brand spanking new house owners.”

The hospitals had been prepped on the market, which predictably resulted in layoff notices being despatched to 2,700 hospital staff together with 45 layoffs at CarePoint.


The state’s investigation into CarePoint’s funds and use of shell corporations that hid debt and enabled the siphoning of $157 million prompted the passage of 3 state laws aimed monitoring the suitability of any administration charges, together with improved transparency.


The hospitals are nonetheless within the strategy of being liquidated and bought to new house owners, per current media reports.

Regardless of the Chaos, Garipalli Appeared To Come Out A Winner, Promptly Buying An $11 Million Mansion within the Hamptons

CarePoint didn’t go away plenty of winners in its wake.

Sufferers who had been charged $9,000 for a bandage or $17,000 for a stitched finger didn’t come out forward. The healthcare system and taxpayers that shouldered many of the prices didn’t come out forward. The CarePoint hospitals which can be being bought in a messy liquidation, and the laid off employees definitely didn’t come out forward.

However Vivek Garipalli appeared to return out nice. He purchased an $11 million beachfront mansion within the Hamptons in 2011, which was not too long ago assessed at over $34 million.


Some buyers, like Chamath, might interpret Garipalli’s path as being that of a “moneymaker”. However buyers in Clover who suppose they’re investing in a disruptive expertise firm might wish to perceive how Garipalli’s cash has been made, and whether or not the fashion of vulture capitalism is one that’s more likely to result in reward for shareholders aside from himself.

Clover’s Prospectus Notes That Garipalli is “The Son of Two Medical doctors”

It Did not Point out That Garipalli’s Father Pled Responsible to Prison Fraud Prices Over Allegations of Embezzling Funds from a Hospital That Was a Beneficiary of Medicare

Clover’s prospectus famous that Garipalli is “the son of two medical doctors”, presumably giving him added perception into the medical system. [Pg. 244]

The prospectus failed to say that a type of medical doctors, Garipalli’s father, pled responsible to criminal fraud charges in New Jersey over allegations of embezzling funds from a hospital that was a beneficiary of Medicare.




We don’t consider the sins of a father are essentially relevant to the son, however we discover the context could also be related, significantly given the proof we’ve got uncovered about Clover.

We Have 18 Questions For Clover’s Administration That We Suppose Buyers Deserve the Solutions To

  1. Did Chamath and/or Clover know in regards to the ongoing DOJ investigation? In that case, why was it hid from buyers?
  2. Is Clover conscious of some other regulatory investigations into the corporate or Vivek Garipalli and his associated corporations? In that case, what are the small print?
  3. Has Clover acquired any subpoenas or civil investigative calls for from regulators? In that case, what number of and from which regulators?
  4. Why does Clover’s subsidiary, “Search Insurance coverage” function a web site known as “” claiming to supply “unbiased” and “unbiased” recommendation on choosing Medicare plans with out disclosing that it’s owned by a Medicare plan supplier, representing a blatant battle of curiosity?
  5. Clover’s subsidiary, Search Insurance coverage, claims on its web site “We don’t work for insurance coverage corporations. We be just right for you” regardless of actually being owned by Clover, an insurance coverage firm. What’s your response?
  6. How a lot has Clover paid B&H Assurance, the undisclosed exterior brokerage agency run by Hiram Bermudez (its Head of Gross sales) since inception?
  7. What portion of Clover’s enterprise has been referred by B&H Assurance since inception? What number of members?
  8. Former staff instructed us that the connection between Clover and B&H Assurance was transferred into the identify of Hiram Bermudez’s spouse “for compliance functions”. NAIC filings verify it was transferred into his spouse’s (maiden) identify weeks after the go-public announcement. What’s the clarification for this?
  9. Will Clover produce the settlement displaying the switch of the connection into Hiram Bermudez’s spouse’s identify? Who signed off on the settlement and which senior members of administration knew in regards to the deal?
  10. Is Clover conscious that disclosure of great transactions with key senior staff is one thing buyers wish to learn about, to allow them to be made conscious of potential materials conflicts of curiosity?
  11. Was Chamath conscious that the DOJ was wanting into problems with potential upcoding when he talked about, unprompted, on CNBC “they don’t inspire medical doctors to upcode or do every kind of issues with a view to receives a commission”?
  12. Clover reported that “onboarded” physicians used Clover Assistant for 92% of member visits in 2019, however by no means outlined “onboarded”. We discovered that lower than half of Clover’s in-network medical doctors are thought-about “Clover Most popular”. What’s the definition of an “onboarded” doctor? What share of Clover’s in-network medical doctors truly use the Clover Assistant?
  13. If Clover’s software program is so “pleasant” to make use of, why does Clover must pay medical doctors further ($200 per go to) simply to make use of it?
  14. A number of medical doctors defined that it was troublesome to take away prior diagnoses from the Clover Assistant. Is Clover conscious of this? And may Clover assure that in future variations of the software program medical doctors will be capable to take away prior diagnoses, in order to make sure accuracy and price effectivity?
  15. A former worker defined that Clover handed out reward playing cards to medical doctors and nurses to generate affected person leads, a apply prohibited by CMS. These reward playing cards had been justified as being for all the things however recruitment, together with “morale,” a “thanks,” “motivation,” and “friendship.” How do you reply?
  16. Does CEO Vivek Garipalli deny that his CarePoint hospitals at one level charged the best emergency room costs in your complete nation?
  17. Why did CEO Vivek Garipalli make a secret $1 million donation to the Mayor of Jersey Metropolis?
  18. Why has Clover had such in depth government turnover, with 3 CFOs, 3 COOs, and a couple of Basic Counsels within the final 4 years?

Conclusion: Do Brief Sellers Play A Function In A Wholesome Market?

Regardless of almost 4 months of due diligence we carried out and financed for this report, we’ve got no place in Clover.

Why? As a result of whereas brief promoting is at all times excessive threat, these are unprecedented occasions; many individuals are indignant and proper now we consider it is very important display the position brief sellers play in a wholesome, functioning market.

Often, the gripe with brief sellers is the enterprise mannequin (i.e.: being profitable when a inventory goes down). We’re taking that off the desk for this one report so the investing public can extra clearly see the work for what it’s; deep-dive investigative analysis.

Important, adversarial analysis is required as a result of Wall Road is a finely tuned machine, constructed to promote securities to the general public, no matter high quality. Briefly, the company world is rife with fraud, and buyers have little safety:

  • Firms like to tout their accomplishments, however they don’t put out press releases asserting that executives are stealing, placing harmful merchandise in the marketplace, or bribing politicians (until they get caught).
  • Funding banks virtually completely subject glowing “purchase” scores on shares, hoping to show round and promote those self same securities to the general public, an inherent battle of curiosity.
  • Auditors. Many new buyers (wrongly) assume auditors are their safety towards fraud, regardless of the management of audit companies publicly acknowledging that it’s not their job. When auditors do stumble onto fraud, they typically quietly resign with out saying something, reasonably than illuminating the investing public to the problems. Auditors are paid by the businesses they audit—did you actually suppose they be just right for you?
  • Regulators. Many new buyers assume regulators are like police, responding instantly. In actuality, regulatory investigations often take 3-5 years and customarily start solely after publicity of a fraud and after victims have already misplaced cash. Regulators can function an efficient deterrent, however not often as safety.
  • Investigative journalists play an essential position, however conventional monetary journalism has been slowly dissipating because of the altering media enterprise mannequin. Notably, enterprise journalists like Dan McCrum, Roddy Boyd, and Jon Carreyrou function examples who’ve made distinctive contributions during the last decade.

Given the dynamics above, brief sellers, like us, have stepped additional into the position. This mannequin has existed for hundreds of years, and it’s the rationale why brief sellers have been instrumental in exposing most main market frauds in current historical past, together with Enron (2001), Tyco (2002), systemic mortgage fraud (2008), Lehman Brothers (2008), Valeant Prescription drugs (2015), MiMedx (2017), Luckin’ Espresso (2020), Wirecard (2020), and Nikola (2020).

We spend months researching malfeasance and when it comes time to publish, we align our analysis with our capital and wager towards wrongdoing. Simply as “lengthy” buyers go on TV or publish their explanation why they suppose their investments ought to enhance in worth, we share our detailed explanation why we predict our “brief” investments ought to lower in worth. Our proceeds assist fund future investigations and analysis.

Generally this all will get misplaced within the noise as a result of brief promoting is commonly related to “controversy”.

Each report we publish is “controversial” as a result of we threaten the pursuits of highly effective companies and people. This report is not any totally different—we count on the corporate and Chamath to subject a scathing response. (We anticipate he might say one thing like “that is the system pushing again on me for talking the reality”– it’s what a populist would say.) It received’t be the primary time we’ve upset billionaires and it received’t be the final.

Some folks can be indignant with us. Others will help us, for a wide range of good and unhealthy causes. We welcome all of it as a result of we predict a free and open change of concepts creates a extra vibrant market and a extra vibrant democracy.

Authorized Disclaimer

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[1] Chamath additionally controls 284,891 Class B shares bought for an unknown value via an earlier personal enterprise spherical, per the prospectus possession desk. [Pg. 8]

[2] Notice there’s a hole from December 2018 to July 2020. It’s unclear whether or not Clover had one other COO throughout that point or whether or not a distinct member of the manager crew briefly took on these tasks.

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Huynh Nguyen

My name is Huynh and I am a full-time online marketer.

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