Dive Brief:
- Cano Health CEO Marlow Hernandez has stepped down following a campaign from former board members to remove the chief executive, the value-based primary care provider announced last week after its annual shareholder meeting.
- Mark Kent, who joined the company as chief strategy officer this spring, will serve as interim CEO while Cano looks for an external successor. Hernandez will stay on the company’s board of directors.
- The leadership change comes after three former board members, who jointly own the largest stake in the company, accused the Florida-based chain of poor corporate governance and advocated a number of changes, including ousting Hernandez.
Dive Insight:
In March, three Cano board members — Barry Sternlicht, Elliot Cooperstone and Lewis Gold — resigned in protest, saying the company had burned through the funds it had raised when it went public, leaving it with a “crippling debt burden.”
The investors, who hold about 35% of Cano’s shares, later alleged other specific concerns, like conflicts of interest, related-party transactions and insider loans, repeating their calls to replace Hernandez. The former board members also urged the chain to reopen the window for director nominations, and called on shareholders to vote against reelecting “management-friendly” directors Alan Muney and Kim Rivera.
Muney and Rivera were re-elected to Cano’s board of directors during the primary care chain’s shareholder meeting last week. However, the majority of the shareholders votes cast withheld support, according to a Tuesday statement from Sternlicht, Cooperstone and Gold, which also cheered Hernandez’s exit and expressed support for Kent as interim CEO.
“We have viewed Mark Kent, who is a high-integrity leader with relevant healthcare experience, as an ideal replacement for Dr. Hernandez since he joined the Company earlier this year,” Sternlicht, Cooperstone and Gold said. “But Mr. Kent and his management team need a credible, confidence-inspiring Board behind them to initiate a lasting turnaround at Cano. The current Board, half of which is composed of two WITHHOLD directors and the beleaguered ex-CEO, is simply not equipped to effectively oversee Cano at this critical juncture.”
Cano said the shakeup in executive leadership is aimed at accelerating the company’s strategy for “stockholder value creation.” The Miami-based chain also said it planned to change up the board in the next few months.
“At this critical inflection point in Cano Health's trajectory, we have concluded together that we need to identify the right individual to take Cano Health to the next level — a proven operator who, as CEO, can accelerate execution of the Company's value creation plan to drive sustainable profitable growth for our stockholders,” Solomon Trujillo, chairman of the board, said in a statement.
Cano has grown since its founding in 2009 to operate more than 170 centers in 9 states. The company went public in 2021 through a $4.4 billion merger with a special purpose acquisition company, but has struggled financially since.
In May, Cano said it would divest some non-core assets to improve cash flow. It posted a $60.6 million net loss in the first quarter compared with a loss of $100,000 in the prior-year period, though revenue increased 23%.
