Axios Pro: Health Tech Deals

November 14, 2022

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1 big thing: CareMax wants to be VBC's MVP

Illustration: Megan Robinson/Axios

Closure of CareMax's acquisition of Steward Health Care System’s Medicare value-based care (VBC) business positions it as a formidable player in VBC.

Why it matters: In a profit-centric environment, the deal significantly accelerates publicly traded CareMax’s growth and “brings down the J-curve to profitability,” CareMax CEO Carlos de Solo tells Claire.

Driving the news: The transaction, announced in June, closed Friday.

  • The deal adds about 170,000 senior VBC patients, bumping CareMax’s geographic footprint from four to 10 states, with 54 locations.
  • CareMax paid $25 million in cash along with 23.5 million shares for the business.

What they’re saying: Upon closing the transaction, CareMax becomes "one of the largest independent value-based care organizations out there, with a total possibility of managing 1 million members,” according to De Solo.

  • “This acquisition is going to propel them past every competitor in the market,” says Steward Health CEO Ralph de la Torre.

What’s next: CareMax is heads-down on integration but may come up for air to pursue tuck-in buys of physician groups, De Solo says.

  • Moving forward, CareMax and Steward will create an integrated care delivery network, with CareMax entering into a preferred provider agreement with Steward specialists and facilities.

Between the lines: Steward is an entrenched presence in VBC, with one of the largest accountable care organizations in the country.

  • “What was really attractive about Steward is that they were really leading the way from a hospital system standpoint and thinking into the future about managing value-based care,” De Solo says. “Most hospitals are still focused on readmissions or bringing in patients.”

State of play: Primary care has been in the crosshairs of major strategics like Amazon, Walgreens and CVS in recent months — particularly as choppy public markets make for a less welcoming home for those businesses.

  • For retail and pharmacy strategics, primary care represents “an old business redefined” and easily vertically integrated into existing offerings, De Solo says.
  • “With pharmacy, with retail, with over-the-counter — even providing better care with groceries,” he says. “So much goes into healthy living. We’re providing health care, not sick care.”

The other side: Despite the significant bump in patient population with the Steward deal, CareMax still may not be scaled enough to attract, say, CVS, one health care banker says.

Yes, but: Don’t count out private equity, he says.

  • Sponsors are taking a close look at the myriad publicly traded primary care companies whose valuations have recently taken a knock, he adds.
  • See Agilon, which got a scathing analysis from Citron Research this summer, and Cano, which has attracted activist pressure.

👀 What we’re watching: We’ve been wondering about CVS’ next chess move after its Signify deal, but what about Humana?

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