Cano Health CEO exits after urging of company's largest shareholders
Chief Strategy Officer Mark Kent has been appointed interim CEO.
Photo: Morsa/Getty Images
Primary care provider Cano Health has announced that CEO Dr. Marlow Hernandez has agreed to step down immediately and remain on the Board of Directors. Chief Strategy Officer Mark Kent has been appointed interim CEO.
The board is launching a search to identify a permanent CEO and to refresh the board with additional new independent directors, Cano Health said.
The move is intended to advance execution of the company's strategy for stockholder value creation, Cano Health said in a statement.
WHY THIS MATTERS
The move was pushed by a group of three Cano stockholders who jointly own the largest stake in the company at 35%: Elliot Cooperstone, Lewis Gold and billionaire real estate investor Barry Sternlicht, according to Seeking Alpha. The three have been advocating for changes at the company, including asset sales, since early April, after they left the board.
In early June, they wrote a letter to stockholders urging a vote against two incumbent members of the board of directors who were up for reelection. This was followed by a proposal for the removal of Herandez from the board for cause at the June 15 annual meeting.
"The three of us served on Cano's Board of Directors until this spring, when it became clear to us that Chief Executive Officer Dr. Marlow Hernandez and his boardroom allies had tuned out our consistent calls for better corporate governance, enhanced disclosure practices, improved capital allocation and financial controls, and a refined strategy," the letter said. "We contend Dr. Hernandez and Cano's management-friendly directors demonstrated unconscionable levels of arrogance and intransigence by forming a 'Shadow Board' that excluded us."
Independent proxy advisory firms – Institutional Shareholder Services and Glass, Lewis & Co. - recommended Cano stockholders withhold support for the two director candidates: Dr. Alan Muney, chair of Cano's compensation committee, and Kim Rivera, chair of Cano's nominating and corporate governance committee, the report said.
"We are disappointed that ISS and Glass Lewis have given merit to highly disruptive public commentary perpetuated by the former director group--who are aggressively pursuing a narrow short-term agenda long on misleading attacks and short on any actionable ideas for long-term value creation," Cano Health said at the time to the proxy firm recommendations, according to the report.
Cano Health stock has plunged about 75% over the past year.
In Friday's statement, Cano Health said the board, working with Russell Reynolds' Board Advisory Group, will advance its ongoing efforts to refresh the board's membership over the next several months by adding new, independent directors with appropriate experience and backgrounds to enhance the board's capabilities and help optimize performance.
Cooperstone, Gold and Sternlicht, with certain of their affiliates called the "Group" released this followup statement on Tuesday: "While we are pleased our campaign for leadership change at Cano brought about the long-overdue resignation of Dr. Marlow Hernandez as CEO, it is only the first step towards unlocking significant value for all stakeholders. 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. 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."
THE LARGER TREND
Prior to joining Cano Health, Kent, a nurse by training, founded three startup healthcare companies that help provider practices operate within value-based arrangements: Care Management Resources, Total Health Medical Centers and Your Partners in Health. He has also held numerous senior executive roles, including having served as CEO of Women's Health Care Hospital in Evansville, Indiana, and as CEO and regional president of all Humana-owned, Florida-based primary care practices, which today are known as Conviva Care Centers.
Cano Health is a value-based primary care provider headquartered in Miami, Florida. It has more than 4,000 employees and operates primary care medical centers and supports affiliated providers in nine states and Puerto Rico.
Twitter: @SusanJMorse
Email the writer: SMorse@himss.org
