In a stunning reversal for a company once valued at over $3.3 billion, hybrid primary care provider Carbon Health has officially filed for Chapter 11 bankruptcy relief, signaling deep financial distress despite raising more than $600 million throughout its operational history. The filing, submitted in the United States Bankruptcy Court for the Southern District of Texas, paints a grim picture, with both its estimated assets and liabilities falling within the $100 million to $500 million range. Compounding the complexity of the situation is an extensive list of creditors that surpasses 100,000 entities. This development marks a significant turning point for the San Francisco-based company, which rose to prominence during the pandemic by offering a blend of in-person and virtual care, a model that initially seemed poised to revolutionize the healthcare industry. Now, the company faces the monumental task of reorganizing its finances and operations to navigate a path toward a sustainable future under the strict supervision of the court.
A Strategy for Restructuring and Continuity
The primary objective of the Chapter 11 filing is to facilitate a strategic financial restructuring designed to create a more stable and viable future for the organization. Carbon Health has already reached a restructuring agreement with its existing lenders, which it believes will establish a “clear path to recapitalization and new ownership.” To execute this, the company is embarking on a dual-track, court-supervised process. This sophisticated strategy allows Carbon Health to simultaneously develop a Chapter 11 reorganization plan, which is centered on a debt-for-equity exchange with its lenders, while also actively engaging in a marketing and sale process for either all or parts of its assets. According to company executives, this two-pronged approach is meticulously designed to “maximize value while preserving flexibility” as the complex proceedings continue to unfold, offering multiple avenues to secure the company’s long-term survival and mission.
To ensure that its core mission of patient care is not compromised during this turbulent period, Carbon Health has secured a commitment for up to $19.5 million in debtor-in-possession (DIP) financing from Future Solutions Investments. This critical infusion of capital is earmarked to support the company’s day-to-day operations without interruption. The funds will be used to cover essential expenses, including the payment of employees, providers, and suppliers, with the paramount goal of guaranteeing the seamless delivery of patient care across its network. CEO Kerem Ozkay characterized these measures as “decisive actions” intended to fortify the company’s financial foundation and better position it to advance its mission of making high-quality healthcare accessible. He also expressed gratitude for the support from lenders, anticipating that their backing would facilitate an efficient and minimally disruptive restructuring process for all stakeholders involved.
The Meteoric Rise and Inevitable Fall
This bankruptcy marks a dramatic fall from grace for a company that experienced unprecedented growth, largely fueled by the unique demands of the COVID-19 pandemic. Founded in 2015, Carbon Health’s hybrid model, which combined traditional brick-and-mortar clinics with convenient virtual services, became exceptionally popular during the global health crisis. This surge in demand attracted significant investor interest, leading to a $128 million funding round in 2020, followed by a colossal $350 million Series D round in July 2021. The latter investment catapulted the company’s valuation to an impressive $3.3 billion. Emboldened by this success, executives unveiled an ambitious plan to expand to 1,500 clinics by 2025, aiming to become the largest primary care provider in the United States. This period of hyper-growth also included several strategic acquisitions, such as the virtual diabetes management startup Steady Health and the remote patient monitoring company Alertive Healthcare, further broadening its service offerings.
However, the post-pandemic landscape introduced a host of significant challenges that the rapidly expanding company struggled to navigate. As public health concerns shifted and capital markets for healthcare companies began to tighten, Carbon Health found its balance sheet under increasing pressure. In response, the company initiated a series of aggressive cost-reduction measures well before the bankruptcy filing. In June 2022, it announced a cut of 8% of its global workforce. This was followed by a more substantial reduction in January 2023, when over 200 additional employees were laid off. Concurrent with this second round of layoffs, the company undertook a major corporate restructuring. This involved shuttering several key initiatives, including its public health, remote patient monitoring, hardware, and chronic care programs, in a strategic pivot to refocus on its “core primary care and urgent care service” and streamline its operations for a leaner future.
Charting a Path Forward
CEO Kerem Ozkay has positioned the Chapter 11 filing not as a failure, but as the logical culmination of the company’s intensive efforts to streamline the business over the past year. “Over the past year, we’ve made meaningful progress by focusing our footprint, simplifying operations, and strengthening financial discipline,” he stated, framing the bankruptcy as a strategic tool rather than an endpoint. He elaborated that leveraging the Chapter 11 process to “right-size our capital structure” is the final and necessary step to correct the financial imbalances created during its period of rapid, venture-fueled growth. The ultimate goal, according to Ozkay, is for the company to “emerge as a more resilient organization with the flexibility needed to support sustainable growth,” unburdened by its previous capital structure and better equipped to operate effectively in the current economic climate.
Throughout this process, the company’s leadership team maintained that all operations would continue without interruption. Ozkay provided firm assurances to patients and other stakeholders that it would be “business as usual” at the company’s 96 clinics, which are spread across 7 states. He emphasized that patients would experience no disruption to their care, and both new and existing patients could continue to schedule appointments and receive urgent and primary care services as they always have. Furthermore, full and secure access to all medical records was guaranteed to be maintained throughout the proceedings. To guide the company through this complex legal and financial journey, Carbon Health had retained the expertise of Alvarez & Marsal as its financial advisor and Pachulski Stang Ziehl & Jones LLP as its specialized bankruptcy counsel, ensuring professional oversight as it embarked on its path to reorganization.
