Just days after issuing executive bonuses for hitting performance measures, NeueHealth increased its loan commitment on its amended credit facility by $30 million.
NeueHealth will have access to $20 million immediately and the final $10 million after 180 days.
The company, then known as Bright Health, released a similarly worded announcement in August when it first entered into an agreement with investment partner and majority shareholder New Enterprise Associates in August for $60 million. That agreement was to support capital requirements to close the sale of its Medicare Advantage business to Molina Healthcare.
Despite the influx of cash, a loan increase in October from the California State Teachers Retirement System (CalSTRS) pension fund for $6.4 million, and virtually no mention of needing capital during its most recent earnings call, NeueHealth said in its recent 10-K filing that it need would need capital to continue operations.
Less than two weeks later, NEA agreed to invest once again, as healthcare strategist Ari Gottlieb predicted it would. NEA now owns more than 60% of NeueHealth, a 10% increase, he said.
"I'm surprised they didn't go to a payday lender," Gottlieb chirped. "They'd have gotten better terms."
It's anyone's guess why NeueHealth settled for wanting $30 million or what the funds will be used for. The company said in its most recent news release the money would be put toward "general corporate purposes."
NeueHealth also announced it would issue penny warrants of 1.11 million shares of the company's stock, up to a total of more than 2.76 million shares since it first entered the credit agreement.
Utilizing a New York Stock Exchange exception typically reserved for companies in dire trouble, the company's audit committee on the board of directors waived the requirement requiring shareholder approval, warning it would "jeopardize" the financial viability of NeueHealth to wait. Identical language was used by the company in August.
Gottlieb wondered why the cash is needed so urgently and how cash is getting depleted so rapidly.
A new clause (PDF) was also hidden within Wednesday's 8-K Securities and Exchange Commission filing that was not present within the company's filing in August. It allows NEA to appoint one of its own members to the NeueHealth board, increasing the board's size to 11 members.
Responding to a request for comment regarding the willingness of NEA and CalSTRS to continuously invest in NeueHealth, a Centers for Medicare & Medicaid Services spokesperson said this week it "does not take a position" on corporate governance matters, instead deferring to state insolvency processes and corporate law.
"CMS uses all debt collection processes available to the federal government to enforce the collection of these debts," said the spokesperson in an email. "Under HHS risk adjustment’s budget-neutral framework, the amount of payments paid out to issuers in a state market risk pool cannot exceed the total amount of charges collected."