Cano Health's fall from grace
Troubled primary care provider Cano may have a difficult restructuring road, given reimbursement headwinds in Medicare Advantage.
Why it matters: CMS payment pressures could mean turbulence for other investor-backed primary care companies laden with debt.
Catch up quick: The Miami-based company filed for Chapter 11 bankruptcy late Sunday. The next day, Nasdaq said it would start the process to delist Cano.
- Cano is working with investment bank Houlihan Lokey, as well as financial adviser AlixPartners and lawyer Weil, Gotshal & Manges, on its restructuring.
What's happening: Cano has seen a steady erosion of its stock since its $4.4 billion SPAC deal with Jaws Acquisition Corp. in 2021.
- In the last few years, Cano has executed a spate of acquisitions that weren't properly integrated, the source says.
- Cano has been breaking up its business since last year, and its stock is trading at 65 cents a share as of this morning.
Zoom in: Per CEO Mark Kent in his first day declaration, Cano pursued an "aggressive" acquisition strategy that failed to realize "material synergies" while experiencing sustained operational efficiencies.
- Kent cited regulatory and industry headwinds, as well as increased Medicare Advantage competition.
- New Medicare Advantage payment rules from CMS, designed to rein in overpayments to MA plans, is expected to significantly impact revenues and margins.
- "Private equity has disappeared from this space for now," an industry banker says.
What we're watching: TA Associates, Sun Capital and Arsenal have Medicare Advantaged-focused primary care portfolio companies — all acquired during a sunnier time for such investments.
- Sun Capital bought Miami Beach Medical Group for a reported $500 million-plus in 2020.
- TA Associates snapped up InHealth MD Alliance in 2019, and Arsenal acquired Best Value Healthcare in 2020, for undisclosed prices.