Cano Health is pursuing a process to sell the Company
The Company plans to exit operations in California, New Mexico and Illinois by the fall of 2023, and Puerto Rico by January 1, 2024
MIAMI, Aug. 10, 2023 /PRNewswire/ — Cano Health, Inc. (“Cano Health” or the “Company”) (NYSE: CANO), a leading value-based primary care provider and population health company, today announced financial results for the second quarter ended June 30, 2023.
Second Quarter 2023 Financial Results
- Total membership of 381,066 including 205,696 Medicare capitated members, an increase of 35% and 25% year-over-year, respectively
- Total revenue of $766.7 million, compared to $689.4 million in the prior year, an increase of 11% year-over-year
- Net loss of $(270.7) million, compared to a net loss of $(14.6) million in the prior year, primarily driven by a higher operating loss, due to lower-than-expected Medicare Risk Adjustment (“MRA”) revenue, higher third-party medical costs, a change in the reserve for other assets related to MSP Recovery Class A common stock, a change in fair value of warrant liabilities, and higher interest expense
- Adjusted EBITDA1 of $(149.7) million, compared to $9.9 million in the prior year
In the second quarter of 2023, capitated revenue of $743.3 million increased 13% year-over-year. Capitated revenue per member per month, or PMPM, was (19)% primarily driven by lower-than-expected Medicare Risk Adjustment (“MRA”) revenue. The medical cost ratio, or MCR2, was 103.5% in the second quarter of 2023 compared to 82.6% in the second quarter of 2022, primarily driven by the reduction in MRA revenue, and higher third-party medical costs due to higher utilization and higher costs associated with supplemental health plan benefits (e.g., over-the-counter flex cards and healthy food cards).
During the second quarter of 2023, the MRA revenue was approximately $58 million lower than previously estimated in the Company’s guidance, driven by lower MRA payments received and expected to be received in 2023. Approximately $44 million of lower-than-expected MRA revenue was related to out-of-period items, which are not expected to reoccur. In addition, during the quarter third-party medical costs included approximately $44 million of unfavorable prior period development, primarily driven by higher medical utilization and health plans’ supplemental benefits.
The higher utilization of the health plans’ supplemental benefits occurred across nearly all our health plan partners. In the first quarter of 2023 Cano Health realized $13 million of third-party medical costs related to these benefits, and realized $51 million in the second quarter of 2023, of which $18 million was unfavorable prior period development from the first quarter (included in the total $44 million of unfavorable prior period development mentioned previously).
Adjusted EBITDA of $(149.7) million in the second quarter of 2023 was $(159.6) million lower than the second quarter of 2022, primarily driven by the higher third-party medical costs and lower MRA revenue, as explained above.
“Cano Health is evaluating strategic interest in the Company to ensure we continue caring for our patients, while maximizing value for our stakeholders,” said Mark Kent, Cano Health’s Interim Chief Executive Officer. “Our mission and vision remain the same, however, the strategy and tactics needed to realize the profitability inherent therein requires a refreshed approach with a solid operating foundation. Cano Health took critical strategic steps during the second quarter of 2023 that are intended to accelerate our strategy to enhance operational efficiency and execute on the plan to improve the management of our medical costs.”
“During the quarter, we accelerated actions to exit operations in California, New Mexico, Illinois, and Puerto Rico, as the Company positions itself to focus on and optimize its core Medicare Advantage and ACO REACH assets in its core geographies. In addition, we are consolidating our operations in Texas and Nevada by reducing the number of medical centers in each state. In our core Florida market we have rigorously reprioritized projects and initiatives to enhance the speed and quality of care for our members by improving patient engagement, restructuring contractual arrangements with payor and specialty networks, and terminating underperforming affiliate partnerships. These strategic and operational steps are critical to improving our financial performance, generating greater efficiency, and improving health outcomes for our members to ensure the organization’s long-term success.”
Update on Strategic Actions
Today, Cano Health announced that it is pursuing a comprehensive process to identify and evaluate interest in a sale of the Company,…
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