Diving into CareMax's acquisition of Steward's VBC business
CareMax, a Medicare Advantage primary care company that SPAC’d in 2020, announced a fascinating acquisition of Steward’s value-based care business this week. Steward is a Dallas based provider organization that was previously owned by PE group Cerberus, but a group of physicians purchased it back from Cerberus in 2020. Steward currently has ~6,600 providers across nine states.
If CareMax and Steward are successful in converting Steward’s MA FFS lives to MA global cap, this has the potential to be a massive home run for both sides, and it’s understandable while CareMax was willing to give Steward up to 41% of the business in such a scenario. We’ll dig more into the deal below, with a few key takeaways for us.
A couple takeaways that make this a particularly interesting deal:
I think one of the things that really separates us, Judd from a lot of other -- from a lot of other competitors is that we've been very successful at executing on the MSO strategy over the last 11 years. And we've also been very successful on the de novo strategy over the last 11 years. So that allows us to really work within those 2 lines as we think about the future. So really, we made that pivot as valuations were becoming increasingly more expensive on the acquisition side. The de novo side is far more accretive in the long run, but it also does create -- we recognize that what it does do, if you're starting a de novo at zero, it does create a significant amount of cash burn for a period of time. And what we've solved for here is the ability to do both the MSO and then the de novo structure without having to have the cash burn or that time to maturity because we've effectively solved for the membership component of this.
it allows us to think about our future centers as seeded de novos. So with respect to how we're going to be opening up centers, we're going to make sure that we're doing it in areas now that are either complemented by Steward or Anthem, so that we never have to open up a center again that doesn't have a certain amount of membership, and that's going to be just instrumental and really just shortening that duration, potentially starting up our seeded de novos at breakeven rather than waiting the full amount of time.