December 7, 2022

CareMax, a tech-enabled, value-based care company for seniors, acquired the Medicare value-based care business of Steward Health Care System for a combination of $25 million in cash and 23.5 million shares of stock.  

CareMax will serve as the management services organization over Steward’s value-based Medicare network of 171,000 patients, which includes 50,000 patients on Medicare Advantage, 112,000 in the Medicare Shared Savings Program and 9,000 in the Direct Contracting model. The network includes 1,800 providers within these three programs. 

The transaction extends CareMax’s reach to 200,000 seniors across 11 states being cared for by approximately 2,000 providers. Steward’s value-based care network includes patients in Arizona, Arkansas, Florida, Louisiana, Massachusetts, Ohio, Pennsylvania and Texas. 

The publicly traded, Miami-based CareMax uses a value-based care analytics platform to provide comprehensive care to seniors. The company provides virtual and in-person care in 42 medical centers, primarily in Florida. The company reported revenue of $136.9 million in Q1 2022, but suffered a net loss of $16.8 million.  

CareMax said the acquisition will add revenue of approximately $1.6 billion to $1.7 billion annually with adjusted earnings before interest, taxes, depreciation and amortization of approximately $100 million to $115 million by 2025. 

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Dallas-based Steward is one of the largest physician-owned private for-profit healthcare networks in the country. It built its Medicare Shared Savings Program accountable care organization into one of the highest-rated programs, according to data from the Centers for Medicare and Medicaid Services. In 2020, Steward’s ACO was ranked No. 1 in membership and quality, and second in overall shared savings.

At closing of the deal, Steward will own 21% of CareMax’s stock per terms of the agreement. Along with adding Steward’s value-based patients, CareMax has the opportunity to convert partial-risk Medicare and traditional fee-for-service Medicare patients into at-risk capitated arrangements. If CareMax converts 100,000 Medicare patient lives to risk, value-based care arrangements with a medical expense ratio of less than 85% for two consecutive quarters, Steward’s stock share in CareMax is bumped up to 41%.

Under the deal, Steward CEO Dr. Ralph de la Torre can add one someone to CareMax’s Board of Directors. If the conversion goal is reached, he will have the right to designate an additional member to the board. de la Torre will remain CEO of Steward, which operates 39 hospitals and 326 practice locations. It also owns a physician-led multispecialty medical group with more than 1,700 providers. 

The transaction is expected to close late in the third quarter or early in the fourth quarter of 2022. 

This story first appeared in Digital Health Business & Technology.
 

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