After 2023, how did NeueHealth’s CEO earn a bonus of $1.90, much less $1.9 million? As our Readers know from our last episode of ‘Facing the Music of the New Reality’ [TTA 14 Feb, 24 Jan], Bright Health Group at the top of 2024 rebranded with the oh-so-chic name of its value-based care medical practice division, moving its HQ from poky, cold, failing Minneapolis to Doral, Florida. All its health plans, launched some years back in a blaze of flashes, either were sold (Medicare Advantage to Molina) or collapsed in a heap of losses. Aside from owing money to Texas ($85 million) on ACA plans, Neue owes mucho money to the Center for Medicare and Medicaid Services on Repayment Agreements, reportedly around $400 million, due on or before 14 March 2025. But in a masterful move, using the Molina money to keep the investors at bay, NeueHealth has managed to pay off JP Morgan for a credit line, dodge all the bill collectors–and award its CEO Mike Mikan a $1.9 million bonus, up from $1.69 million in 2022. Now, like some other of the C-suite, Mr. Mikan took most of his 2023 compensation of $9.9 million in stock-based pay, most of which is (glub glub) underwater. But one has to wonder about a board of directors, including major investor New Enterprise Associates, that would reward Mr. Mikan for steering Bright Health into a brick wall, even if it came out the other side as Neue. And Neue still needs funding to continue as a going concern this year (see page 12 (page 18 of PDF) of their March 10-K). AOL News, Ari Gottleib on LinkedIn, FierceHealthcare 4 April update Cash bonuses of $875,000 were paid to CFO Jay Matushak and Executive Vice President of Consumer Care Tomas Orozco.
Another surprise in their 10-K is on pages 115-116 of the document (PDF pages 121-122) of a ‘material weakness’ in their financial reporting that has existed since 2022, not remediated in 2023, but is planned to be remediated in 2024. “Our disclosure controls and procedures were not effective due to a material weakness in our internal control over financial reporting”.
Their Q4 and 2023 financials reported in March were also underwater, with net losses of $62.8 million for the quarter and $627.7 million for the year, with an adjusted EBITDA loss of $8.5 million. But for 2024, they present a bright (ahem) picture for NeueHealth’s two divisions: NeueCare (owned clinics and partnerships with affiliated providers) and NeueSolutions, a management services entity that organizes independent providers and physician groups into performance-based ACA Marketplace, Medicare, and Medicaid-based ACO models, including the advanced performance ACO REACH program. Projected revenue is $1 billion and adjusted EBITDA between $15 million and $25 million. NeueHealth release, FierceHealthcare
Perhaps investors New Enterprise Association ($1 billion in) and CalSTRS are letting their chips ride on what most could see as a losing number–what is the alternative? At the risk of repeating myself, they’ve managed to play multiple ends against the middle and tie masterful Gordian knots (pick your analogy) around CMS and their investors, hoping to stay alive until 2025 and better times. Or, as Ari Gottlieb speculates, NeueHealth may file a Chapter 11 before the CMS payments are due in March 2025. And then what?
This Editor also notes that former GE CEO Jeff Immelt is on Neue’s BOD and is a venture partner in NEA. The late ‘Neutron Jack’ Welch was once heard to regret naming Mr. Immelt as his successor, given that once-mighty GE is now split into three relatively small companies after maximum losses and management turmoil at legacy GE.
(5 March updates in red)
After a disastrous 2023, does Cano Health even have a future? The telenovela is not fin, but little has been heard from Cano since it entered Chapter 11 bankruptcy on 4 February. A 26 February story in local Florida news, the Sun-Sentinel, has a few updates:
- Cano’s goal is to exit Chapter 11 by the end of Q2 (June)
- Class A shareholders, who accepted a 1 to 100 reverse share split in December 2023, will be left with no value–including the ‘Cano 3’ of Barry Sternlicht, Elliot Cooperstone, and Lewis Gold who owned 35% of the shares.
- They have $150 million in operating cash until then
- In the reorganization, they have two tracks: continue as an independent company or sell
- The focus will be on core operations, including Florida Medicare Advantage
- They plan to close 80 locations. Their filing contains 72 ‘dark leases’ mainly in Florida. Cano has 95 medical centers operating in Florida so it is not clear whether the closures take into account the dark leases.
Cano is now operating in Florida only, having offloaded or closed operations in Texas, Nevada, California, New Mexico, Illinois, and Puerto Rico. According to the filing, they currently employ 3,000 people, including 2,800 full-time staffers including executives, clinical, and administrative staffers, including 300 doctors, nurses, and physician assistants. In addition, Cano has affiliate relationships with approximately 630 provider practices.
If you wonder what happened to Cano’s former CEO….founder and former CEO Marlow Hernandez, with two other Cano former executives, started a new company called Soran Health based in Hollywood/Miramar, Florida. It provides patient and medical management services including care delivery systems. Dr. Hernandez and the other former Cano executives were sued in January by Cano for allegedly breaching their non-compete agreements and taking proprietary information. While they have a website and a LinkedIn page, they are remarkably content-less, but listed by CMS as a group practice.
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