Battered, downsized and now operating under U.S. Bankruptcy Court supervision, Cano Health Inc. of Miami is facing two choices as it starts the task of cleaning up its finances: Position itself to succeed as an independent company, or sell out to an opportunistic suitor.
The primary care company that serves senior citizens filed for court protection earlier this month as cash ran low and profitability seemed fleeting. In advance of going to court, it entered into an arrangement with top creditors to obtain $150 million in operating cash to navigate the reorganization process. Management has set a goal of exiting Chapter 11 at the end of the second quarter.
By the end of the bankruptcy, the stock held by existing shareholders will be worth nothing.
Besides achieving a standard goal of cutting its debts, the company is on a parallel track to prepare itself to be sold, according to a court affidavit filed Feb. 4 by CEO Mark Kent.
Where Cano stands now
The company employs more than 3,000 people, including 2,800 full-time executives and clinical and administrative staffers, as well as 300 doctors, nurses and physician assistants. As of the bankruptcy filing, those professionals were employed “across 95 medical centers” while the company “maintained affiliate relationships with approximately 630 affiliate provider practices,” according to the court petition.
Its operations are confined to Florida after offloading locations in Puerto Rico and several states including Texas, New Mexico, California, Nevada and Illinois.
Few of the expansion ventures bore fruit, instead draining cash and contributing to losses, according to Kent, the CEO. “Unfortunately, few, if any, of the anticipated benefits of these acquisitions ever materialized,” he said.
“These guys probably do have good ideas about how to do it,” said Dr. Howard Forman, a professor of radiology and public health policy at Yale University. “They seem to have not executed properly. Cano was just acquiring like mad. It takes time to consolidate and integrate and harmonize your practice when you are acquiring disparate practices in disparate states in disparate regulatory environments.”
At the time it went public as a New York Stock Exchange company in November 2020, Cano described itself as “one of the fastest growing providers of value-based care to the Medicare Advantage population in the nation.”
But now, Cano has closed or intends to close 80 locations and is seeking court approval to “reject” or cancel those leases. A list of 72 so-called “dark leases” appears in the court file, reflecting locations that are now vacant. Most are in Florida.

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Cano Health, which treats seniors in Florida is looking to revamp its finances through a Chapter 11 bankruptcy reorganization with a goal of remaining independent or selling to another healthcare company.
The company is continuing to review its businesses so it can concentrate on so-called core operations, including Florida Medicare Advantage.
Also under consideration, according to the bankruptcy court filing: The divesting of most Medicaid operations in Florida.
“While the Debtors have successfully maintained high-quality patient care, they recently have faced serious financial challenges,” Kent said in his affidavit. ”The Debtors previously pursued an aggressive strategy to generate top line growth through a series of strategic acquisitions. Unfortunately, the Debtors failed to realize material synergies in connection with these acquisitions and experienced significant operational inefficiencies and added expenses.”
But overall, the petition says, Cano’s “mission is simple: to improve patient health by delivering superior primary care medical services while forging life-long bonds with our members.”
Sales option
It remains to be seen how attractive Cano will look as a buyout candidate when it exits Chapter 11, which is the time the petition says a decision will be made on whether to put the company in play.
Industrywide, merger and acquisition talks among the biggest firms have been active, as companies try to figure out how to control rising costs while identifying geographic areas that carry the biggest economic upside.
Humana, the nation’s second largest Medical Advantage insurer that reported sizable fourth-quarter losses on its Advantage program, recently called off a proposed merger with Cigna. The latter elected to sell its Medicare Advantage and other plans to a firm called Healthcare Services Corp..
Prior to its Chapter 11 filing, Cano Health was the object of suitors expressing interest.
In October 2022, Cano discussed a buyout with CVS Health. Humana also expressed interest, according to the Wall Street Journal. But no deals materialized.
Care companies operating in Florida, California, and other growth states are good candidates for acquisitions, analysts say.
“Florida is a good place to keep a base,” said Nathan Ray, head of healthcare mergers and acquisitions at WestMonroe of Chicago, a business and technology consulting firm. ”The strongest primary care Medicare Advantage platforms were founded or incubated there. (Cano) would probably be a valuable acquisition for some of the groups or some of the payors.”
Challenges of going alone
As for the future of operating as an independent company, the word “headwinds” pops up frequently when analysts take measure of the future of Medicare Advantage.
“Medicare Advantage has always had its ups and downs (back when it was Medicare Plus Choice and prior to that),” Forman said. “This is seemingly a ‘down’ period after a lengthy ‘up’ period.”
“Many of the biggest players are either privately held or wholly owned by large entities,” he added. “But there is a lot of evidence that Medicare Advantage is weighing on many parts of the market.”
It was, after all, a combination of high interest rates, “the overhang of COVID both in terms of costs and revenues,” and Medicare Advantage being “less lucrative” that combined to exacerbate Cano’s financial troubles, Forman said.
More broadly, he added, “I think the primary care space has faced more challenges.”
“What we see in medicine right now is there has been such a transformation since COVID,” Forman said. The upshot has included early retirements and “burnout” among doctors, rising expenses to operate hospitals and primary care canters, and “less pricing power when doctors are demanding more for their services.”
“Put all of those things together and it’s not hard to see a company like this imploding,” he said.
It did not help that as Cano grew, the founder, Hernandez, and his management team became embroiled in a bruising public battle with the powerful shareholders who backed the company’s going public.
The shareholders, led by billionaire investor Barry Sternlicht, owned roughly a third of the company’s stock after the deal that raised $1.49 billion for the company. Sternlicht, who himself invested $50 million of his own money, resigned from the board in protest of Hernandez’s management moves, and led a campaign for the the CEO to step aside. Among their complaints: a rapid cash burn and a plunge in shareholder value that exceeded 90%.
“I believed in Cano’s mission of providing high quality health care to the largely underserved and was impressed by the personal story, the passion and conviction of its CEO, Marlow Hernandez,” he wrote in a March 2023 resignation letter. “I personally invested $50 million of the $800 million … we raised from blue chip investors/shareholders like Fidelity, Third Point, Maverick, BlackRock and Owl Creek who shared my passion and enthusiasm for the firm. In total, we handed the company in excess of $1.4 billion in June 2021, less than two years ago. Fast forward to today, this management team has expended nearly all this cash and the Company has not enjoyed any demonstrable improvement in its core profitability.”
Sternlicht could not be reached for comment on the company’s bankruptcy filing.
Cano, which once rose to the heights of a company that employed 4,000 people while serving 280,000 members in nine states and Puerto Rico, says the Chapter 11 process will help it cope with all of the above.
But the regional competition is stiff, noted Dr. Steven Ullmann, of the University of Miami. And there are a number of other hurdles in the way of profitability.
“In South Florida we have so many Medicare Advantage choices,” UIlmann said in an interview last week. “They are all competing with one another to draw patients to their program.”
And as an aging local population expands in Florida, there will be more pressure applied to healthcare providers on the cost side.

“If I am a person utilizing services a lot as I get older and older, then every time a person goes and utilizes services, there are administrative costs associated with that,” he said.
In addition, the federal government is “not as generous” in making payment adjustments for high-risk populations. The competitiveness in the industry is also generating higher marketing costs.
“There is more to come,” Ullmann added. “Because Medicare becomes insolvent in 2031, which is seven years from now. With that we can anticipate more scrutiny and greater cutbacks in how Medicare programs are paid.”
Unfinished business
After Cano’s founder and the company parted ways last year, Hernandez and two other former Cano executives formed a new business called Soran Health based in Hollywood. It wasn’t long before the two sides ended up in court.
In mid-January, Cano sued Hernandez, the other former executives and Soran Health — alleging they took confidential information from Cano that didn’t belong to him. The suit claims the men allegedly breaching their non-compete and confidentiality agreements with Cano by taking proprietary business information.
Speaking in an email on behalf of both men and their new company, Miami attorney Victor Velarde of the firm Fowler White Burnett said his clients deny the allegations.
“We believe the evidence will establish that Cano Health’s claims are meritless, that Soran Health does not compete with Cano Health, and that Cano Health has breached its agreements with my clients,” Velarde said. “My clients have responded to Cano Health’s complaint and filed a multi-count counterclaim.”
Timeline: Rise and fall
2009: Cano Health is founded by South Florida physician Dr. Marlow Hernandez.
November 2020: Company announces it is going public on the New York Stock Exchange in merger with Special Purpose Acquisition Company. Cano says it has more than 103,000 members in a network of 564 primary care physicians in 14 markets in Florida, Texas, Nevada and Puerto Rico.
October 2022: CVS Health backs out of reported talks to acquire Cano as company seeks takeover partner.
March 2023: Major shareholder Barry Sternlicht resigns from the board, after citing company’s poor financial performance and differences with management.
June 2023: Under continued pressure by major shareholders led by Sternlicht, Dr. Hernandez resigns as CEO and is replaced by 20-year healthcare veteran Mark Kent.
August 2023: Company lays off 17% of workforce.
Feb. 4, 2024: Cano files to reorganize under Chapter 11 of the U.S. Bankruptcy Code.
Midsummer 2024: Expected exit from Chapter 11 proceeding.