Cano Health files for Bankruptcy:
A precautionary tale of financial failure in Healthcare
PCG a leading AI Healthcare company has a mission of not just improving healthcare but reducing healthcare costs, fraud, waste, and abuse. It is our mission to report on how regulations, operations, investments, and technologies either aid in the reduction of healthcare costs or hinder them. Today we look at the recent bankruptcy filing of Cano Health as a precautionary tale of poor financial leadership in Healthcare.
Who is Cano Health?
Per their mission statement, Cano Health is a patient-centered, service and results-oriented Health Plan that manages a wide array of health insurance options, one of them Medicare Advantage members.
How many Members does Cano Health manage?
Cano Health has plus/minus 310,000 members through multiple states; Flordia, Texas, Nevada, California, New Mexico, and Illinois.
How many Employees does Cano Health have in Florida?
Cano Health's base of operations is in Flordia. Cano Health employs over 1,000 employees in primarily the Broward, Plam Beach, and Miaimi-Dade counties. These employees work within their centers and administrative offices.
C-Suite Shuffling
In March 2023, the Board of Directors called for then CEO Marlow Hernandez to be removed due to its probable bankruptcy in the coming months, Hernandez stepped down in June 2023. Mark Kent was appointed Interim CEO shortly thereafter.
On September 29, 2023, Eladio Gil assumed the position of CFO for Cano Health as previous CFO Brian Koppy resigned to pursue other ventures outside of Cano Health.
On August 5, 2022, Bob Camerlinck was named the COO of Cano Health. He previously served as the President of their Health Partners Medical Centers and affiliates.
Financial Turmoil and Mismanagement
Cano Health was once valued at $4.4 Billion! However, with improper budgeting and massive growth and expansion, it incurred debt requiring the company to go public to seek investors and shareholders. You see not all companies go public to embrace growth and gain additional funding, some companies go public to seek that funding to pay off the debt they knowingly approved without any internal capital to pay off.
In late 2023, the New York Stock Exchange warned Cano Health it was about to be delisted due to a recent 30-day trading period valued at less than $50 million.
As it filed for Chapter 11 on Sunday (2/4/2024) it stated it had $1.3 Billion in debt, but stated its assets and liability to be between $1 billion to $10 billion.
Selling to Pay Off Debt
There’s only one way to fight catastrophic loss, to sell truly. Sell your shares, sell your clinics, sell your people, sell your members. One or all had to be considered, and they’re doing all of it to rebuild the name of Cano Health.
Cano Health sold Humana $67 million in clinical centers in their Texas and Nevada territories. They laid off 700 employees in August (about 17% of their workforce). The aim of reducing payroll costs, leases, and more was to reduce an immediate $290 million annualized cost.
It’s now stating that $1 Billion in debt is being transitioned to new debt under new investors and internal management. That’s a euphemism for saying, “We found people to buy our debt and they now own Cano Health majority shares and control.” One of these “large investors” is Humana whom we think is likely to continually buy more deb and control in Cano to expand their Humana-based centers and market share in battle against Optum’s similar business M&A strategy.
Key Takeaways
If you’re not growing in today’s healthcare market, you’re dying. But growth without a clear plan for paying out debt is a recipe for financial failure. Expanding your clinics beyond a single region, to other states, and especially when you take Medicare Advantage is not just foolish but can be seen as fraudulent. If you are offering care and now 100s of thousands of patients must go through a restructuring of care, employees laid off or reorganized, you impact not just the bottom line (profitability), you impact patient care and lives.
Sources:
Cindy Krischer Goodman: South Flordia Sun Sentinel
Frank Diamond - Fierce Healthcare
