Cano Health’s Board Drama Comes As Primary Care Firms Try To Attract Buyers

Primary care provider Cano Health has been forced to respond to the resignation of three board members including one who criticized the company’s management and operating performance.

Cano Health’s stock tumbled Friday to below $1 per share after billionaire board member Barry Sternlicht resigned and ripped the company’s management team and chief executive Dr. Marlow Hernandez. In a letter to CEO Hernandez and board members, Sternlicht said the “management team has expended” more than $1 billion in cash in the last two years “and the Company has not enjoyed any demonstrable improvement in its core profitability.”

The resignation of trustees at Cano Health and internal boardroom drama surrounding them comes at a time such companies are hot acquisition targets. Amazon, CVS Health and Walgreens have already spent billions of dollars investing in and buying up some of Cano Health’s rival primary care companies.

In the last year, Cano Health itself has reportedly been an acquisition target of CVS and other larger healthcare providers or health insurers.

Based in Miami, Cano Health operates 141 primary care medical centers in the U.S. “and supports affiliated providers in nine states and Puerto Rico,” the company says. Cano Health, which has more than 4,000 employees, lost more than $426 million last year and had $2.7 billion in net revenue, the company’s recent earnings report shows.

“I remain extremely troubled by the poor operating decisions and performance, by what I consider the opacity and obfuscation of information furnished to the Board, and by the inability to forecast the Company’s financial performance over which Marlow and his management team have presided,” Sternlicht said in his statement. ”These factors have caused the Company’s stock price to be decimated, dropping over 90% from its debut, and the Company is now saddled with a crippling debt burden.”

But Cano Health management said Sternlicht and two other board members are focused “solely on the short term” and that company management disagrees with their assessment of Hernandez’s management of the company.

“Our Board and management team have devoted considerable time and resources to analyzing the Company’s performance, operations, financial strength, and potential against the backdrop of the challenges the Company and the sector have faced,” Cano said in a statement issued Friday. “While we fully recognize the recent disappointing share price performance, our work has supported our strong confidence in the Company’s mission and fundamentals, our commitment to driving operational and financial improvements, and our belief in the Company’s continuing prospects for long-term shareholder value creation.”

Furthermore, Cano said executives were particularly concerned Sternlicht shared “his individual perspective on confidential board deliberations and communications, which is misleading to shareholders and undermines the board’s ability to engage in the vigorous exchange of diverse views that is necessary for good governance.”

“Cano Health’s Board and management will continue to work closely together, with intensity, to improve operational execution, enhance cost discipline, and achieve positive free cash flow,” Cano Health said. “Cano Health has established a strong performance track record—providing patients improved access to care, lowering hospital admissions, and significantly reducing medical costs. This is where our focus will remain.”