More New Reality: NeueHealth (Bright Health) CEO’s $1.9M bonus (updated), 2023 financials–and does Cano Health have a future?

April 5, 2024 | by

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.

Mid-week update: Cano Health CEO finally booted, interim named; further information on Oracle Cerner layoffs

June 21, 2023 | by

Cano Health CEO Marlow Hernandez stepping down, but remains on Cano’s board of directors. It looks like Florida-based value-based primary care provider Cano Health is finally starting to clean up its act. The fallout from the long-delayed shareholder meeting taking place last Thursday (15 June) was that the Cano 3 (resigned directors Barry Sternlicht, Elliot Cooperstone, and Lewis Gold), finally got their way with ousting Hernandez. Mark Kent, who was named chief strategy officer in April, will be taking over as interim CEO while the board performs an external search. No time frame was specified.

Hernandez’s departure was not a surprise since Cano had a miserable Q1, with a $60.6 million net loss versus 2022’s barely-there $100,000. Their adjusted EBITDA was only $5 million, compared to $29.2 million in Q1 2022 [TTA 12 May]. Their new chairman of the board, Sol Trujillo, also has a background in turnarounds.

The Cano 3 own about 35% of the shares and one, Barry Sternlicht, invested at least $50 million in the cracked SPAC’s PIPE. They started to push for change back in April. Today (20 June), they issued a statement approving of Mark Kent’s interim appointment though they were not able to prevent the reelection of directors Alan Muney and Kim Rivera as they urged shareholders to do in a 15 June public statement. 

Despite the ouster, the Cano 3 still have plenty of disagreements with how the company is run, nailing these to the door in their 20 June statement responding to what they called an “Offensive Friday Afternoon “News Dump” Regarding its Leadership Transition”:

  • Per his employment agreement, Hernandez is required to step down as a board director now that he is no longer CEO. “Dr. Hernandez’s employment agreement plainly states that ‘the Executive shall be deemed to have resigned from all officer and board member positions that the Executive holds with the Company or any of its respective subsidiaries and affiliates upon the termination of the Executive’s employment for any reason.” They also cite a “history of insider dealings and fiduciary delinquency.”
  • They demand that directors Angel Morales, Dr. Alan Muney, Kim Rivera, and Solomon Trujillo resign immediately as “Dr. Hernandez’s enablers for far too long”. The board permitted the reelection of directors Muney and Rivera despite 82% of shareholders withholding their votes, citing Cano’s post-meeting statement. 
  • Shareholders now must entrust the selection of a new CEO to a board that is not reflective of the majority of shareholders who have lost over 90% of their share value, and not collaborating with the Cano 3 on reforming the board and a new direction of the company. “In fact, it rejected our Group’s two highly qualified director candidates and a proposal to collaborate on a credible refresh of the Board. We are left to question whether Dr. Hernandez and his boardroom allies are continuing to box us out because they are hiding something nefarious. If not, we urge the Board to immediately align with us on a path forward that includes the addition of our candidates – Guy Sansone and Joe Berardo, Jr. – and other essential changes to leadership and strategy.” Both Sansone and Berardo are very senior executives with long, successful records in leading healthcare services and startups.

(Cano Health shares closed at $1.42 today, a decent bump from their valley last week.) To be continued….  Healthcare Dive

Last Friday, TTA was one of the first to cover the Oracle Cerner layoffs (along with HIStalk) affecting the Cerner Federal teams. This week’s coverage elsewhere confirmed that the layoffs were a minimum of 500 to possibly 1,200, plus rescinded job offers and reduced open positions as this Editor saw from employees posting on the Reddit group. They–in particular, The Register (below), confirmed where this Editor would not go in cause-and-effect–that the layoffs were largely due to VA holding further implementations after multiple failures in the five VA systems where it was implemented between 2020 and 2022. The layoffs were also due to the Department of Defense (DoD) Military Health System (MHS) implementation as largely completed, although not glitch-free. It’s a clear cleanout of what Oracle perceives as a problem. 

Oracle did not respond to these publications’ requests for comments.

The new contract’s focus is to fix these five and implement a sixth (James Lovell in Chicago) which is joint with MHS by 2024. This has to be accomplished before implementation starts in the 160 remaining centers plus satellite medical clinics (CBOCs). VA has much leverage in the five one-year terms and the monetary penalty structure [TTA 18 May]. The pressure to perform for an awakened VA–and Congress–is going to be intense on those remaining, and whomever is shifted over from Oracle. This Editor also noted speculation that Oracle Cerner may start to wash its hands of the just-renewed VA EHR implementation by outsourcing most of it.  The Register, Becker’s, Healthcare Dive   TTA’s coverage of the Cerner/VA implementation here.