By OPEN MINDS Circle
Cano Health, Inc., a value-based primary care provider organization and population health company, is in the process of trying to sell the company. It plans to exit operations in California, New Mexico, and Illinois by the fall of 2023, and Puerto Rico by January 1, 2024. During the third quarter of 2023, Cano Health expects to reduce its workforce by approximately 700 employees, or 17% of its workforce. Approximately 40% of the workforce reductions will be attributable to exiting operations in certain markets, with the remainder attributable to consolidation efforts and other administrative operations.
In its second quarter earnings report released in August 2023, the company reported a net loss of $270.0 million, compared to a net loss of $14.6 million in the prior year. The loss was attributed to lower-than-expected Medicare Risk Adjustment (MRA) revenue, higher third-party medical costs, a change in the reserve for other assets related to MSP Recovery Class A common stock, a change in fair value of warrant liabilities, and higher interest expense. Despite the loss, the company reported the following positive trends:
- Total membership of 381,066 including 205,696 Medicare capitated members, an increase of 35% and 25% year-over-year, respectively.
- Total revenue of $766.7 million, compared to $689.4 million in the prior year, an increase of 11% year-over-year. Capitated revenue of $743.3 million increased 13% year-over-year.
However, capitated revenue per member per month was 19% lower driven by lower-than-expected MRA revenue, and the medical cost ratio (MCR) was 103.5%, compared to 82.6% in the second quarter of 2022. The higher MCR was due to higher utilization and higher costs associated with supplemental health plan benefits (e.g., over-the-counter flex cards and healthy food cards).
“Cano Health is evaluating strategic interest in the Company to ensure we continue caring for our patients, while maximizing value for our stakeholders,” said Mark Kent, Cano Health’s Interim Chief Executive Officer. “Our mission and vision remain the same, however, the strategy and tactics needed to realize the profitability inherent therein requires a refreshed approach with a solid operating foundation. Cano Health took critical strategic steps during the second quarter of 2023 that are intended to accelerate our strategy to enhance operational efficiency and execute on the plan to improve the management of our medical costs.”
“During the quarter, we accelerated actions to exit operations in California, New Mexico, Illinois, and Puerto Rico, as the Company positions itself to focus on and optimize its core Medicare Advantage and ACO REACH assets in its core geographies. In addition, we are consolidating our operations in Texas and Nevada by reducing the number of medical centers in each state. In our core Florida market we have rigorously reprioritized projects and initiatives to enhance the speed and quality of care for our members by improving consumer engagement, restructuring contractual arrangements with payor and specialty networks, and terminating underperforming affiliate partnerships. These strategic and operational steps are critical to improving our financial performance, generating greater efficiency, and improving health outcomes for our members to ensure the organization’s long-term success.”
Cano Health operates value-based primary care centers and supports affiliated medical practices that specialize in primary care for seniors in Florida, Texas, Nevada, and Puerto Rico, with additional markets in development. As part of its care coordination strategy, Cano Health provides sophisticated, high-touch population health management programs including telehealth, prescription home delivery, wellness programs, transition of care, and high-risk and complex care management.
Contact information: Cano Corporate Headquarters, 9725 Northwest 117 Avenue, Suite 200, Miami, Florida, 33178; Website: https://canohealth.com/locations/