CareMax, Inc. (NASDAQ:CMAX) is a healthcare provider that offers a comprehensive range of medical services, including primary and preventative care, specialist services, diagnostic testing, chronic disease management, and dental and optometry services under global capitation contracts. The company operates 55 centers across Florida, New York, and Tennessee as of March 31, 2024.
Business Overview
In 2023, CareMax navigated several challenges, including rapid growth over the past couple of years and industry-wide headwinds. The company met its membership targets, ending the year with 111,500 Medicare Advantage members, and achieved its full-year revenue guidance. However, full-year adjusted EBITDA was unfavorably impacted by prior-year developments, increased flex card utilization, and higher-than-expected medical utilization.
Financials
For the full year 2023, CareMax reported revenue of $751.1 million and a net loss of $683.3 million. The company's annual operating cash flow was -$46.9 million, and its annual free cash flow was -$61.5 million. In the fourth quarter, the company's GAAP net income was impacted by a $369 million non-cash goodwill impairment.
Recent Developments
To address these challenges, CareMax has undertaken a comprehensive operational review and is implementing large-scale changes to optimize its cost structure, emphasize performance and profitability in its existing book of business, and explore strategic options across its lines of business to maximize the value of certain assets.
The company has streamlined its workforce, centralized functions under key operational leaders, and consolidated its center footprint in South Florida, resulting in approximately $20 million of annualized cash savings. CareMax has also worked to optimize various functional areas, including transportation, shared services, IT, and facilities, which may contribute additional savings in 2024.
From a clinical perspective, CareMax achieved an aggregate 5-star quality rating for the third consecutive year across all its centers, showcasing its commitment to high-quality care for its patients. The company believes its care management initiatives and changes in payers' benefit designs may contribute to a deceleration in medical expense growth in 2024 compared to 2023.
In its Medicare Advantage (MA) business, CareMax has successfully contracted with most of the leading regional health plans in their respective markets, introducing new opportunities for its affiliate providers to participate in savings. The company plans to take increased risk in most of its MA contracts in 2024, with full-risk lives now representing about 35% of its MSO MA population, up from 15% in 2023.
CareMax's government Accountable Care Organization (ACO) business, including the Medicare Shared Savings Program (MSSP) and ACO REACH, has also performed well, with medical expenditures continuing to develop favorably compared to national and regional trends. The company is optimistic that the investments it has made may lead to a similar or better savings rate in 2024.
The company's de novo centers, which are now serving over 6,000 Medicare patients under capitated at-risk and fee-for-service contracts, have laid the foundation for attractive margins and maturity. However, the reallocation of resources toward clinical performance at the core centers and MSO has delayed the de novos' breakeven compared to the original plan. CareMax is exploring strategic options to potentially monetize the value of these de novo centers.
In the company's MSO business, CareMax has accomplished its key one-year goals, including converting traditional fee-for-service contracts into value-based care agreements with a glide path to full risk, incorporating its tech-enabled workflows to manage complex populations at scale, and fostering physician engagement to maximize their potential earnings and improve patient outcomes. The MSO is now accountable for over $2 billion of annual health expenditures, and CareMax believes its operating plan can further drive the savings percentage rate to high single digits or better.
Outlook
Looking ahead, CareMax expects 2024 to be a transition year toward more balanced levels of reimbursements and expenditures. The company plans to work toward further optimizing its business to help preserve liquidity and position the company to achieve its longer-term goals. This may include strategic options to monetize the value of certain assets and right-size the capital structure of the company.
While the company has not provided precise guidance for 2024 due to the uncertain outcome of its strategic initiatives, CareMax believes headwinds in 2024 regional benchmarks for its core markets will abate or even flip to tailwinds in 2025. The company also expects its 2024 star ratings for its core plans to follow a net improvement compared to 2023, which should favorably impact revenues in 2025.
CareMax's management team is committed to taking the actions necessary to reposition the company for future success. The company is in active strategic discussions to maximize the value of certain assets, which may help generate further liquidity to bridge the company to the MSSP payment later this year and to 2025.
Conclusion
Overall, CareMax is navigating a challenging environment by optimizing its cost structure, emphasizing performance and profitability in its existing book of business, and exploring strategic options to maximize the value of its assets. The company's focus on high-quality care, value-based partnerships, and operational efficiency positions it to weather the current industry headwinds and emerge stronger in the long run.