CareMax files for bankruptcy after being dragged out by stewards

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CareMax has been losing money for several years, according to a statement filed in the U.S. Bankruptcy Court for the Northern District of Texas by Paul Rundell, CareMax's chief restructuring officer.

The company posted a net loss of $37.8 million in 2022, but its net loss had ballooned to $683.3 million at the end of 2023.

As of the petition date, CareMax had $11 million in cash on hand, well below sufficient reserves to fund day-to-day operations, and total funded debt was approximately $422.6 million, Lundell said. It was.

CareMax's financial woes were due to several factors, Randell said, including high labor costs, delayed reimbursements and inflation. But he said Steward Healthcare's bankruptcy filing this spring ultimately posed an “existential threat” to the health of the business.

CareMax, which employs 1,100 people and serves approximately 260,000 patients annually across 46 clinical centers, partnered with Steward in 2022. Acquires provider's Medicare value-based care business Approximately $135 million.

Following the acquisition, Steward's former CEO Ralph de la Torre acquired a 15% stake in CareMax, making the company the exclusive Medicare managed services organization for Steward's physician network, Stewardship Health. .

De la Torre resigned From the steward's post in September contempt of parliament and international scrutiny of him. Maltese business customs. But de la Torre is still sitting CareMax Board of Directorsaccording to the company's website.

steward's financial and operational difficulties; This posed a direct challenge to CareMax's profitability, according to court filings. CareMax sought a buyer for its MSO business in January, ramping up efforts to sell it after Stewards rejected a deal with CareMax during bankruptcy proceedings in June.

Revere Medical, owned by private equity firm Kinderhook Industries, plans to acquire CareMax's MSO business for $10 million in cash in addition to future payments. Mr. Kinderhook expects the following from this agreement: will close in the first quarter of next yearpending bankruptcy court and regulatory approval.

Mr. Revere has ties to CareMax's business, having signed a deal last month to buy Stewardship Health, a physician network that Steward sold in bankruptcy.

CareMax is also looking for a buyer for its core business, which provides medical services to elderly patients. CareMax said it was close to reaching an agreement with an unidentified buyer, but details were not disclosed.

In recent years, unsustainable rental agreements have been a drag on the clinic's profits, according to court filings. Like Steward, CareMax also leases a large real estate portfolio. CareMax pays about $2.2 million a month in rent and must pay about $254.1 million more by 2043.

The company wants to exit certain markets and lower rents to about $1 million.

The filing is the latest example of a private equity-related medical bankruptcy. More than 20% of health care companies that filed for federal bankruptcy protection last year had private equity owners, according to a study by the private equity stakeholder project, a watchdog group.

Companies backed by private equity typically carry large amounts of debt, making them more vulnerable to market forces, Eileen O'Grady said. PESP's healthcare director told Healthcare Dive this spring.

Lawmakers are beginning to draw attention to the potentially harmful relationship between private equity and health care companies. Several states, including Pennsylvania and Massachusetts, are calling for greater transparency around corporate financing during merger and acquisition processes, allowing regulators to protect transactions involving for-profit entities such as PE firms and real estate investment trusts. We are moving forward with a bill aimed at this.