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CareMax Inc., a Miami-based medical services company, filed for Chapter 11 bankruptcy protection in Texas on Sunday, listing $422.6 million in funded debt and announcing plans to sell key assets during the restructuring process.

CareMax Seeks Asset Sales Amid Financial Struggles

In its bankruptcy filing, CareMax disclosed it has $693 million in total liabilities against $390 million in assets. The company has struck a deal to sell part of its management services business to an affiliate of Revere Medical. Additionally, a third party has emerged as a "stalking horse" bidder for CareMax’s operating clinic business, setting a minimum offer to encourage competitive bids.

CareMax Files For Chapter 11 Bankruptcy : Chapter 11 Backed by Senior Lenders

CareMax has secured the support of its senior lenders, who have agreed to provide $30.5 million in debtor-in-possession (DIP) financing to ensure the company can continue operations throughout the bankruptcy proceedings. If a final agreement with the stalking horse bidder is not reached, these secured investors are prepared to submit a credit bid for the clinic business, the company said.

Rising Costs and Debt-Fueled Expansion Led to Bankruptcy

Founded in 2011, CareMax operates 46 medical centers, employing approximately 1,100 staff who primarily serve elderly patients. The company's rapid expansion was partly fueled by its 2021 public debut through a merger with a special purpose acquisition company (SPAC) sponsored by an affiliate of Deerfield Management Company LP. Following this, CareMax made a series of acquisitions, including a $135 million deal to purchase Steward Health Care’s Medicare value-based care business.

However, these acquisitions came at a steep cost, adding to CareMax's debt burden. The company's Chief Restructuring Officer, Paul Rundell, noted in his first-day declaration that inflationary pressures on equipment and labor costs, coupled with stagnant reimbursement rates, severely impacted CareMax’s financial health.

Impact of Steward Health Care's Bankruptcy

Compounding its financial difficulties, CareMax was also affected by the Chapter 11 bankruptcy filing of Steward Health Care earlier this year. Steward sought to terminate contracts with CareMax, but the two parties recently reached an agreement to maintain patient care continuity.

CareMax reported a net loss of $683 million for the fiscal year ending December 31, 2023. The company’s liquidity issues worsened when it missed a quarterly cash interest payment on its debt earlier this year, which contributed to its decision to seek Chapter 11 protection.

Looking Forward: Potential Sale and Restructuring

CareMax’s Chapter 11 filing aims to stabilize its financial position through asset sales and debt restructuring. "While operating as market leaders, the company faced significant market-driven headwinds that have caused financial challenges and, taken together, culminated in the company's current strained liquidity position and the need to commence these Chapter 11 cases," Rundell said.

The company remains optimistic about finding buyers for its assets and is focused on ensuring a smooth transition for patients and employees.

CareMax Files For Chapter 11 Bankruptcy : Legal Representation

CareMax is being advised in its bankruptcy case by attorneys Thomas R. Califano, Juliana L. Hoffman, Stephen E. Hessler, Anthony R. Grossi, and Jason L. Hufendick of Sidley Austin LLP.