Sternlicht-Backed Cano Said to Near Deal for University Health

(Bloomberg) -- Cano Health Inc., a medical provider backed by billionaire Barry Sternlicht, is nearing a deal to buy Miami-based University Health Care for $600 million, according to people familiar with the matter.

The transaction includes $540 million in cash and $60 million in equity, said the people, who asked not to be identified because the information is private. An agreement could be announced as soon as this week, they said.

Representatives for Cano Health and University Health declined to comment.

Cano Health is among several upstarts focused on providing primary care or insurance to U.S. seniors in the Medicare program. Those that have gone public in the past year include Oak Street Health Inc., which operates Medicare clinics, and Clover Health Investments Corp., which sells private Medicare health plans.

The deal boosts Cano’s market share in Florida, which is among states with the highest enrollments in Medicare Advantage in the country. It’s also capitalizing on a booming market for private Medicare Advantage plans, which often seek to contract with primary care doctors to manage members’ health needs -- a business that health-care giants like UnitedHealth Group Inc. and Humana Corp. have long dominated.

As the cost and complexity of operating medical businesses has increased, doctors are trading small practices they own for larger organizations. Fewer than half of U.S. doctors now work in private practice, according to a survey by the American Medical Association.

Large hospital systems have been acquiring medical practices. So have some insurers and their affiliates, like UnitedHealth’s Optum unit, with more than 50,000 physicians. Companies like Cano are creating business models for physician clinics to manage larger populations of patients without necessarily joining hospital systems or insurers.

Companies with similar models include 1Life Healthcare, also known as One Medical, which this month announced plans to buy Iora Health in an all-stock deal valued at $2.1 billion. P3 Health Partners, another such company, said last month that it planned to go public through a merger with Foresight Acquisition Corp. in a deal that valued the combined entity at $2.3 billion.

Cano listed on the New York Stock Exchange this month through a merger with a special purpose acquisition company, or SPAC, sponsored by Sternlicht, chairman of Starwood Capital Group Management.

The health-care industry has been moving toward so-called value-based care in which doctors’ payments are linked to the long-term health of their patients rather than fees for each test or procedure.

Like others, Cano collects monthly payments from its health plan patients and is then responsible for their medical costs, essentially taking on the risk from the insurer.

Cano has more than 500 physicians in Florida, Texas, Nevada and Puerto Rico. The company reported about $830 million in revenue in 2020, with revenue in the first quarter of $280 million more than double that for the same period a year ago. The company reported a net loss of $10.5 million in the first quarter.

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