A number of months after Molina Healthcare and Shiny Well being Group entered right into a definitive settlement for Molina to purchase Shiny Well being’s Medicare Benefit enterprise, the businesses have agreed to a decrease buy worth, in keeping with a December 13 submitting with the Securities and Alternate Fee. Initially set at $600 million, the acquisition worth has been lowered to $500 million. 

The amended worth spells hassle for Shiny Well being as it really works to repay its money owed, mentioned Ari Gottlieb, principal of A2 Technique Corp. It owes JPMorgan $308 million and the federal authorities $380 million in threat adjustment funds, in keeping with Gottlieb.

“I feel we’re getting nearer and nearer to Shiny going darkish with this information,” Gottlieb mentioned in an interview. “Their path is simply more and more slender.”

Of the $500 million, $100 million is being put in an escrow account, through which a 3rd social gathering holds onto funds till sure obligations are met. The funds will likely be supplied if there’s a profitable consolidation of Shiny Well being’s two MA plans (Model New Day and Central Well being Plan), or if Model New Day is ready to obtain a minimum of three stars for its Half D plans from the Facilities for Medicare and Medicaid Providers.

Molina introduced the acquisition worth modification on Monday and said that “web of sure tax advantages,” the acquisition worth is $425 million, down from $510 million. The $425 million account for 23% of the anticipated 2023 premium income of $1.8 billion, in keeping with Molina.

The modification wasn’t stunning given Shiny Well being’s monetary troubles, Gottlieb mentioned. To place it merely, Molina selected to barter down “as a result of they may and Shiny is in no place to barter,” he mentioned.

“It might have been negligent for Molina to not negotiate down,” Gottlieb added.

Shiny Well being reported a web loss of $1.4 billion in 2022, up from a $1.2 billion loss in 2021. By promoting Model New Day and Central Well being Plan, the corporate is successfully getting out of insurance coverage altogether. It stopped providing particular person and household plans in October. When Shiny Well being introduced its plan to promote its MA enterprise, the corporate mentioned it could give attention to its client care supply enterprise.

Promoting its MA enterprise was Shiny Well being’s solely possibility, Gottlieb beforehand informed MedCity Information.

“They have been about to go bankrupt,” he mentioned. “It’s a reasonably straightforward reply, they desperately want capital. … Probably the most viable method for them to get capital is by promoting the one precise asset they’ve. So it’s a fireplace sale.”

Photograph: Baris-Ozer, Getty Photographs