NeueHealth, the care management company formerly known as Bright Health, is set to be acquired by venture capital partner New Enterprise Associates later this month.
NEA will purchase the company for $1.3 billion. NeueHealth shareholders will receive $7.33 per share in cash. NEA and 12 NeueHealth investors will exchange their stock for equity.
“We are pleased to announce this transaction as we believe it places NeueHealth in a strong position for continued growth while maximizing value for all of NeueHealth’s public stockholders,” said Mike Mikan, president and CEO of NeueHealth, in a statement. “NEA has been a longstanding strategic partner, and we look forward to continuing to work together to build on NeueHealth’s success as a leader in value-based care.”
As of Jan. 2, the company’ stock is worth $7.36, up from $4.31 on Dec. 23. NeueHealth’s stock price was approaching $80 in January 2023.
In an email shared with employees, Mikan said the business will not change as a private company. NEA's intentions for NeueHealth's Florida clinics and ACO REACH business long-term are unclear.
The transaction was unanimously approved by a special committee. NeueHealth’s leadership team is expected to remain in place.
Despite the steep reported price tag, the true cost of the deal is more hidden and far less kind to NeueHealth once put in the proper context, said healthcare strategist Ari Gottlieb, who has tracked the company extensively.
“[It] sounds like a lot until you learn the business had $1.4 billion of debt and the actual cash outlay to the 36% of shares held by public shareholders is $21 million,” he said in a LinkedIn post.
Florida-based healthcare clinics company CareMax filed for bankruptcy at the end of last year and appears set to be sold for $100 million at an auction later this month, reported the South Florida Business Journal. This makes the $1.3 billion valuation propped up in the NeueHealth's announcement absurd, said Gottlieb, because are they suggesting the business is 13 times more valuable than CareMax's?
"The company raised close to a billion dollars in its initial public offering. Those outside investors are now getting $21 million," said Gottlieb in an interview with Fierce Healthcare, noting the stock was once nearly $1,400 per share. "So if you were an investor, believed in the story and you bought it at the initial public offering ... you're getting seven bucks now. And the biggest losers are going to be NEA's investors."
NEA already owned approximately 60% of the company.
“We believe NeueHealth has built a differentiated model of care that is uniquely positioned to drive value for consumers, providers, and payors and we have confidence in the NeueHealth team and their ability to continue to lead the company,” said Mohamad Makhzoumi, co-CEO of NEA, in a news release. “We have had a strong partnership with NeueHealth since 2016 and share the company’s commitment to making high-quality healthcare accessible and affordable for all Americans.”
To say NeueHealth has struggled in recent years is an understatement. At the tail end of 2023, then-Bright Health sold its Medicare Advantage business to Molina Healthcare for less than expected and owed the federal government nearly $300 million.
The company also increased its loan commitments from the California State Teachers Retirement System and NEA. It then received $150 million from Hercules Capital in June.
NeueHealth is required to pay $380 million in risk adjustment payments and was nearly delisted from the New York Stock Exchange.
The ACO REACH Model gave NeueHealth additional challenges when a key partner, Babylon Health, went bankrupt and sold its assets to eMed Healthcare, said Tyler Giesting, director of healthcare mergers and acquisitions at West Monroe, a global consulting firm.
“These conditions present a tough backdrop as NeueHealth strives to build a more stable, scalable, and financially viable business,” said Giesting in a statement shared with Fierce Healthcare. “Notably, others in the value-based primary care space, such as Cano Health, have also opted to leave the public markets in favor of the flexibility and runway provided by going private. Given these dynamics, the decision to go private is not surprising.”
Cano Health sold its primary care clinics to Humana in Texas and Nevada before filing for bankruptcy.
Giesting said NeueHealth’s value-based care approach could succeed under NEA’s control “with the right technology foundation and clinical approach.”
Last quarter, NeueHealth posted a net loss of $40 million and a negative earnings per share of $8.51. Its membership base is currently 509,000.
Editor's note: This story has been updated following an interview with Gottlieb.