CareMax, a publicly traded value-based care provider, announced acquisition plans that will more than quintuple its current number of covered seniors and open the door to hundreds of thousands more.
The company announced Wednesday morning plans to acquire Steward Health Care System’s Medicare value-based care business for a combination of cash and stock valued at roughly $135 million.
The deal, which is expected to close during the late third or early fourth quarter of 2022, would see CareMax become the exclusive management services organization across Steward’s network of roughly 171,000 senior patients across 1,800 providers and eight states.
This would be a substantial expansion for the company, which currently covers roughly 34,000 senior lives across 200-plus providers and three states.
CareMax also told investors it sees opportunities to generate additional consistent cash flow by transitioning Steward’s 387,000 Medicare Advantage fee-for-service patients and 482,000 traditional Medicare fee-for-service beneficiaries into at-risk capacitated arrangements.
“We are excited to announce the acquisition of Steward’s Medicare value-based care business, which will enable us to significantly accelerate our growth by bringing CareMax’s best-in-class, proprietary value-based care model to the communities in which Steward’s value-based care business operates,” Carlos de Solo, CEO of CareMax, said in a statement. “We plan to deploy our current [management services organization] model, which we’ve been operating since 2011, to improve quality of care, health outcomes and wellbeing for seniors across eight states, while reducing overall healthcare costs.”
The deal will see CareMax pay $25 million in cash and 23.5 million of its Class A common stock shares, priced at $4.68 per share as of May 31. CareMax will also fund a Medicare receivable to Steward related to 2021 and preclose 2022, an estimated balance of roughly $72 million.
Steward will own 21% of CareMax’s common stock at close but could increase that ownership to 41% should CareMax convert 100,000 Medicare patients to risk, value-based care arrangements and maintain a medical expense ratio below 85% for two consecutive quarters.
CareMax said it expects the deal to be immediately accreditive to revenue and adjusted EBITDA, contributing roughly $1.6 billion to $1.7 billion in annual revenue as well as $100 million to $115 million in adjusted EBITDA by 2025.
Miami-based CareMax leans on its tech platform to provide comprehensive primary care, specialist care and social services, either in-person or virtually. It said it anticipates bringing this model to Steward’s markets and physical locations to improve outcomes and reduce medical expense ratios.
Dallas-based Steward Health Care System currently operates across nine states and is among the country’s largest accountable care organizations. Its integrated system spans 39 hospitals and 326 practice locations, with more than 6,600 providers and 43,000 employees delivering services to 12.3 million patients annually.
“Steward was founded to provide top-quality healthcare to communities that have historically been medically underserved,” Ralph de la Torre, M.D., CEO of Steward, said in a statement. “CareMax is a like-minded organization with a talented management team and the assets and expertise in place to move our mission forward. We believe that our physician-led, integrated health care system with a network of over one million Medicare beneficiaries coupled with CareMax’s proprietary, industry-leading clinical model will deliver the next generation of healthcare in this country.”