CareMax, Inc. (NASDAQ: CMAX) (“CareMax” or the “Company”), a leading technology-enabled provider of value-based care to seniors, and Steward Health Care System (“Steward”), the parent of one of the nation’s largest accountable care organizations (“ACOs”) with more than 6,600 providers and 43,000 healthcare professionals, today announced a definitive merger agreement pursuant to which CareMax will acquire the Medicare value-based care business of Steward for a combination of cash and stock.
Upon closing the transaction, CareMax will serve as the exclusive value-based management services organization (“MSO”) across Steward’s Medicare network. Steward’s value-based care network of approximately 170,000 patients includes 50,000 Medicare Advantage patients, 112,000 Medicare Shared Savings Program (“MSSP”) patients and 9,000 Direct Contracting (“DCE”) patients. In addition, Steward and its affiliated practices service approximately 387,000 Medicare Advantage Fee for Service patients and 482,000 Traditional Medicare Fee for Service beneficiaries. Following the transaction, CareMax’s network will expand to approximately 2,000 providers and reach over 200,000 senior value-based care patients across 30 markets.
CareMax’s focus on whole person health through a unique blend of targeted technology and comprehensive, high-touch care has resulted in improved clinical outcomes compared to peers and traditional Medicare benchmarks. CareMax has achieved a Five-Star quality rating, the highest possible rating, across its locations overall. Similarly, since the launch of its 2012 Medicare Pioneer ACO, Steward has consistently ranked as one of the top performing ACOs in the country. Most recently, Steward delivered top performance in the 2020 MSSP and was the largest MSSP ACO in the nation. In addition, Steward received a 100% quality rating and achieved the second highest total cost savings amongst the roughly 500 ACOs in the program.
CareMax will bring its industry leading, technology-enabled, value-based care platform, which is comprised of proprietary technology, payor relationships, best practices, practice transformation workflows, risk adjustment and quality coordination services to Steward’s expansive senior patient base. CareMax plans to offer convenient and sophisticated products as well as physical locations in Steward’s markets. These locations are anticipated to resemble CareMax’s current de novo model, which include primary care physicians, specialists in high demand, such as cardiologists, pulmonologists, radiologists and others, social services, activity centers and other services. Further, CareMax has a committed focus to addressing non-medical social determinants of health, which has proven to have a significant impact on health outcomes.
“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. We plan to deploy our current MSO 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,” said Carlos de Solo, Chief Executive Officer of CareMax.
“Steward was founded to provide top quality healthcare to communities that have historically been medically underserved. 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,” said Dr. Ralph de la Torre, Chief Executive Officer of Steward.
Among other strategic and financial benefits, the transaction is expected to:
- Create one of the largest independent senior-focused value-based care platforms in the U.S. across Medicare Advantage, DCE/ACO REACH and MSSP;
- Expand CareMax’s MSO model with the opportunity to unlock the large embedded addressable market across Steward’s one million Medicare patients and beneficiaries, and increase geographic reach to 24 new markets;
- Improve health outcomes and ultimately drive down medical expenses by leveraging CareMax’s experience as a leading operator of Medicare value-based care arrangements across its clinics and affiliate providers; and
- Contribute annual revenue of approximately $1.6 billion to $1.7 billion and annual Adjusted EBITDA of approximately $100 million to $115 million by 2025, with further long-term opportunities for growth and cost reduction across markets.
Note: Markets defined as Metropolitan Statistical Areas (MSAs).
Transaction Details
Under the terms of the merger agreement, CareMax will pay $25 million in cash and issue 23.5 million shares of CareMax’s Class A common stock to the equityholders of Steward at closing, subject to customary adjustments. In addition, CareMax will fund a Medicare receivable to Steward covering accounts receivable related to 2021 and the pre-close period of 2022.
Steward will have the potential to receive an earnout of additional shares of CareMax’s Class A common stock that, together with the original issuance of Class A common stock issued to Steward at the initial closing, would result in Steward’s equityholders owning a total of 41% of CareMax’s Class A common stock as of the initial closing, upon CareMax’s effective conversion of 100,000 Medicare lives to risk, value-based care arrangements with a Medical Expense Ratio of less than 85% for two consecutive quarters. The equityholders of Steward will also enter into an investor rights agreement that will provide for certain limitations on voting of their shares of CareMax’s Class A common stock, among other governance matters.
The transaction is expected to close late in the third quarter or early in the fourth quarter of 2022 and is subject to customary closing conditions, including approval by CareMax’s stockholders and receipt of regulatory approvals.
Upon the closing of the transaction, Dr. de la Torre will have the right to designate one member of CareMax’s Board of Directors. If the earnout is achieved, Dr. de la Torre will have the right to designate an additional member of CareMax’s Board of Directors at such time.
Deerfield Partners, L.P., a holder of approximately 20% of CareMax’s outstanding Class A common stock, has entered into an agreement to vote in favor of the transaction.