A Miami health company is in bankruptcy and plans to sell. What patients should know
Another South Florida health company has declared bankruptcy.
Miami-based CareMax, which provides healthcare to thousands of seniors at centers across the state, filed for Chapter 11 bankruptcy protection this week, with $693 million in debt and $390 million in assets. The case was filed Nov. 17 in U.S. Bankruptcy Court for the Northern District of Texas.
Founded in 2011 by Florida International University graduate Carlos de Solo, CareMax specializes in primary and preventive care for senior citizens and runs medical centers, pharmacies and specialist services across Florida. Its centers are a one-stop-shop for care, including dental, optometry, fitness programs and social services. The health company also has its own tech platform, called CareOptimize, to collect health-related data to help doctors make decisions when treating patients.
The publicly traded company said it has obtained $30.5 million in loans from creditors to keep the doors open during the bankruptcy process. The creditors have the right to claim certain assets of the company if it doesn’t repay the loans.
CareMax said it plans to sell a chunk of the company, including the core medical centers, to thin debt, and already has interested buyers for the centers and a portion of the business that provides administrative and non-clinical services to health providers. It isn’t clear yet what would be left of the company if the sales happen.
The cash-crunched company has at least 40 medical centers across Florida, catering mainly to older people who live in medically underserved communities and have “significant social barriers to accessing care.” While most patients have managed Medicare Advantage plans, the company also provides care to thousands of people with Medicaid and private insurance.
Nearly all of the centers are in Miami-Dade and Broward counties, along with several in Central Florida.
The company rapidly expanded across Florida and into other states, including New York, Texas, and Tennessee, after it was acquired in 2021 by a New York-based public investment firm and merged with health company IMC, which also owned and operated centers across Miami-Dade, Broward and Orange counties.
Quarterly reports filed with the U.S. Securities and Exchange Commission show that the number of CareMax centers ballooned following its acquisition. The new CareMax went from operating 21 centers in 2021 to 62 centers by the end of 2022, while also managing affiliated providers across 10 states, filings show.
By the end of 2023, financial challenges began pushing the cash-crunched company to downsize in an effort to stay financially afloat. The company closed many of its centers but is still operating centers across South and Central Florida.
CareMax founder and CEO Carlos de Solo said in a statement that the company’s restructuring is “the best opportunity to protect the long-term value of the CareMax assets and ensure our patients, providers, and health plans can continue to rely on the comprehensive, coordinated care we provide.”
The company’s centers are expected to remain open for business and the “Chapter 11 filing is not expected to interfere with our ability to provide health care services to our patients and providers,” CareMax’s Chief Restructuring Officer Paul Rundell told the Miami Herald in an email.
Who could buy CareMax centers in Florida?
CareMax said it began searching in June for a possible buyer for some or all of its centers, which serve about 49,000 patients a year, among the 260,000 total patients its business serves. While the 1,100 employee-company has received several offers for the centers, the “best offers require the sale to be conducted through a Chapter 11 bankruptcy process,” according to Rundell’s court declaration.
The company said it already has reached “an agreement in principle” with a potential buyer for the centers. CareMax said it will disclose details to the court of the proposed sale, and the name of the potential buyer, on or around Nov. 24 if an agreement is finalized. Other interested buyers have until Dec. 28 to submit bids. But any future bids will need to be higher or better than the undisclosed potential buyer’s offer. That’s because the potential buyer’s offer would be the “stalking horse” bid, which essentially sets the floor price for its operations. If the company receives more than one qualified bid, an auction will be held in January, with the court expected to conduct a sale hearing in early 2025.
Why did CareMax file for bankruptcy?
Like other health companies that have recently filed for bankruptcy, CareMax said its finances were affected by rising costs associated with the COVID-19 pandemic, inflation, and lagging reimbursement rates.
CareMax also faced “a series of both systemic and unique challenges” over the last two years, juggling expansion with rising operating and labor costs, increased interest rates, and increasing debt service payments, according to Rundell’s declaration. CareMax’s “complex business relationship” with Steward Health Care System also “negatively impacted the company’s operations and financial state,” he said.
Steward Health Care System, once considered to be the largest physician-owned health network in the country with hospitals in South Florida and elsewhere, filed for Chapter 11 bankruptcy earlier this year. To thin debt, the health giant sold its hospitals and physician group. It also got court approval to exit a variety of contracts, including lease agreements with its hospital landlord as well as several contracts with CareMax.
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‘Complex business relationship’ with Steward Health
In 2022, CareMax acquired Steward’s “Medicare value-based care business” from a company partly owned by Steward Health’s hospital landlord, Medical Properties Trust, and by Steward Health founder Dr. Ralph de la Torre, who until recently was also Steward’s CEO. The $135 million purchase, largely made in CareMax common stock, gave de la Torre about 15% of the company and a seat on CareMax’s Board of Directors, according to court documents.
As part of this deal, CareMax became the exclusive Medicare managed service organization to Steward’s physician network and physician group, known together as Stewardship. CareMax provided administrative and non-clinical services to about 2,000 Steward-affiliated providers nationwide that participated in Medicare programs and care for over 170,000 patients.
Because Stewardship was entangled with CareMax’s management services, the two health companies initially joined forces to try and sell the assets together, according to Rundell. In February, Steward changed its mind and terminated the joint sale agreement, just months before it filed for Chapter 11 bankruptcy and asked the court to reject its contracts with CareMax.
Steward’s decision to end the business relationship “posed an existential threat” to CareMax, and made it challenging to find an interested buyer, Rundell said. A deal was eventually made in court among Steward, CareMax and the company that bought Steward’s physician group to ensure continuity of patient care.
CareMax, in a news release this week announcing its Chapter 11 financial reshuffling plans, said it has agreed to sell a portion of its management services organization to an affiliate of the company that bought Steward’s network and physician group. In October, Steward finalized the $245 million sale of Stewardship to Revere Medical, formerly known as Rural Health Group, owned by New York-private equity firm Kinderhook Industries.
CareMax, in court documents, said the sale agreement “will allow for the seamless transition of services.”
Other health companies file for bankruptcy
CareMax is the latest health company with a Florida footprint to recently declare bankruptcy:
▪ Wellpath Holdings, a Nashville-based health company that runs psychiatric hospitals and mental health services for the state of Florida earlier this month filed for bankruptcy protection under Chapter 11. The company is considered one of the largest healthcare providers for prisons and jails across the country.
▪ MCR Health, a Bradenton-based nonprofit that specializes in healthcare for low-income communities, with centers and pharmacies across Manatee, Sarasota and DeSoto counties earlier this month filed for bankruptcy under Chapter 11.
▪ Steward Health Care, which operated more than a dozen hospitals across the country, including in South Florida, filed for Chapter 11 bankruptcy earlier this year and recently finalized hospital sales.
▪ Miami-based Cano Health, which has more than 70 medical centers in Florida, emerged from Chapter 11 bankruptcy this year, with plans to roll out a series of improvements.
This story was originally published November 21, 2024 at 1:49 PM.
