Carbon Health Technologies: Chapter 11 Bankruptcy Analysis

1. Executive Summary

On February 2, 2026, Carbon Health Technologies, Inc. and 28 affiliated debtors filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division (Case No. 26-90306), listing $100 million to $500 million in debt and securing $19.5 million in debtor-in-possession financing from Future Solutions Investments (PR Newswire). The pre-arranged restructuring will pursue a dual-track process—either a debt-for-equity recapitalization or a sale of assets—while maintaining clinic operations. Carbon Health's collapse is not an isolated failure but part of a broader sector-wide reckoning in tech-enabled primary care, where both CVS (Oak Street Health, $5.7B impairment) and Walgreens (VillageMD, $12.4B total impairment, now divesting entirely) have suffered catastrophic losses on identical thesis bets.

2. Company Overview

Founding & Headquarters: Carbon Health was founded in 2015 in San Francisco by Eren Bali (co-founder of Udemy), Tom Berry, Greg Burell, and physician Caesar Djavaherian. The company merged with Direct Urgent Care in 2018 to expand its clinic footprint (Wikipedia).

Business Model: Carbon Health operates a tech-enabled, omnichannel healthcare platform combining:

Walk-in urgent care and primary care clinics
Virtual/telehealth visits
A consumer-facing mobile app for scheduling, messaging, and medical records
In-house labs and X-rays at many locations
No membership fees; most insurance accepted

Technology Differentiator: The company built a proprietary, vertically integrated electronic health record (EHR) system called "Carby" rather than licensing third-party software. In June 2023, Carbon Health launched AI-powered "hands-free charting" across all clinics, integrating AWS Transcribe Medical with GPT-4 to reduce charting time from 16 minutes to under 4 minutes, with 88% provider acceptance of AI-generated documentation (BusinessWire, June 2023).

Leadership (as of February 2026):

CEO: Kerem Ozkay (appointed August 2024)
Executive Chair: Eren Bali (co-founder)

Operational Footprint: The bankruptcy filing lists 29 debtors across multiple states including California, Texas, Massachusetts, Wisconsin, New Jersey, Kansas, and Florida. Note: Specific current clinic counts and employee headcount are not disclosed in the bankruptcy filings; prior reported figures (e.g., operations across 14 states as of 2021) are stale and should not be considered current.

3. Funding & Valuation History

Total Capital Raised: Approximately $614–623 million across 17 funding rounds (Tracxn; CB Insights).

Key Funding Rounds:

Round	Date	Amount	Valuation	Lead Investor
Series D	July 2021	$350M	~$3.0–3.3B	Blackstone Horizon
Series D Extension	January 2023	$100M	Not disclosed	CVS Health Ventures
Debt Round	June 2024	Not disclosed	N/A	Not disclosed

(BusinessWire, July 2021)

Notable Investors: Blackstone Horizon, Dragoneer Investment Group, CVS Health Ventures, Brookfield Technology Partners, DCVC, Fifth Wall, Silver Lake Waterman.

Debt Structure: The company's Chapter 11 filing lists total debt in the $100 million to $500 million range (Bloomberg Law). The specific composition of secured vs. unsecured debt, and whether venture debt providers are involved, is not publicly disclosed.

Equity Investors' Position: At the $3B+ peak valuation, late-stage investors (particularly the July 2021 Series D participants) face substantial losses. Whether Blackstone or other major investors hold liquidation preferences that provide some downside protection is not publicly disclosed.

4. What Went Wrong

Market-Level Factors

Post-COVID Demand Normalization

The 2020-2021 telehealth and urgent care boom created a false signal. Venture capital flooded into the sector based on pandemic-era demand that proved unsustainable. When patient volumes normalized, companies that had raised capital at peak valuations found themselves overextended (Bloomberg Law).

Reimbursement Pressure

Low reimbursement rates, particularly from Medicare Advantage plans, created structural margin pressure across the tech-enabled primary care sector. AI-powered charting tools could reduce clinician documentation time but did not change the underlying reimbursement per visit.

Labor Cost Inflation

Physician and nurse practitioner shortages drove wages upward across the healthcare sector. Carbon Health and its competitors faced high labor costs precisely when they needed to demonstrate a path to profitability.

Capital Markets Tightening (2024-2025)

Venture funding and public market valuations cooled in late 2024 and 2025, and investor appetite for high-burn health tech diminished. For a company that had raised $350 million in 2021 at a $3 billion valuation, the capital markets closure meant no ability to raise additional growth equity to bridge to profitability.

Company-Specific Factors

Aggressive Expansion Outpaced Revenue

Carbon Health expanded to 14 states by 2021, but this rapid clinic rollout occurred without commensurate revenue scale. The company acknowledged it had "implemented cost-cutting and footprint-rationalization efforts over the prior year" before bankruptcy (PR Newswire).

Proprietary EHR: Differentiation or Distraction?

Carbon Health's decision to build its proprietary EHR ("Carby") rather than integrate Epic or Cerner was a strategic bet that did not pay off. While the technology was innovative—AI charting reduced documentation time from 16 minutes to under four minutes (BusinessWire)—building in-house EHR is a massive cost center, and the tech moat didn't translate to pricing power.

CVS Partnership Added Complexity Without Revenue Lift

Carbon Health pursued a 2023 CVS Health retail clinic pilot, but this partnership added complexity without meaningful revenue upside before liquidity constraints tightened. CVS Health Ventures was among Carbon Health's investors, but the strategic relationship did not translate into an acquisition.

Leadership Transition Signals Early Awareness

In August 2024, CEO Eren Bali transitioned to Executive Chair, with Kerem Ozkay taking over as CEO (Wikipedia). This leadership change—with Ozkay's emphasis on "financial discipline and operational efficiency"—suggests the company's financial distress was recognized internally well before the February 2026 filing. Bali simultaneously moved to become CTO of Udemy, indicating a pivot away from day-to-day management of a troubled enterprise.

5. Sector Context: The Retail Primary Care Collapse

Carbon Health is not an isolated failure. Its bankruptcy is the VC-backed casualty of a sector-wide collapse in the "tech-enabled primary care" thesis—a thesis that both CVS and Walgreens bet billions on and are now retreating from.

CVS Health / Oak Street Health

CVS acquired Oak Street Health in 2023 for $10.6 billion (Drug Store News). Less than two years later, CVS took a $5.7 billion goodwill impairment on Oak Street in Q3 2025 (Modern Healthcare, Oct 2025). The company announced it was closing 16 clinics and slowing expansion (Supermarket News, Oct 2025).

Reports indicated CVS had been seeking private equity partners to help fund Oak Street's growth—a sign of capital constraints. New CEO David Joyner has shifted toward cost-cutting rather than primary care expansion.

Walgreens / VillageMD

Walgreens invested $5.2 billion or more in VillageMD, but the fallout has been catastrophic. The company has taken $12.4 billion in total impairments (Supermarket News, March 2024). VillageMD defaulted on a $2.25 billion credit facility, and Walgreens is now divesting the business entirely, having hired Perella Weinberg and Evercore as advisors (Forbes, Feb 2025; Forbes, Sep 2025).

Sycamore Partners, Walgreens' new private equity owner, wants nothing to do with primary care.

The Pattern

Company	Acquirer/Investor	Investment	Impairment/Outcome
Oak Street Health	CVS	$10.6B (2023)	$5.7B impairment, 16 clinic closures
VillageMD	Walgreens	$5.2B+	$12.4B total impairment, divestiture
Carbon Health	VC-backed	$3B peak valuation	Chapter 11 bankruptcy

The common threads: post-pandemic demand normalization exposed unit economics that never worked at scale, reimbursement pressures squeezed margins, and labor cost inflation made profitability elusive. Both retail giants are underwater on their primary care bets. Carbon Health, without the deep pockets of a CVS or Walgreens parent, ran out of runway first.

6. Bankruptcy Mechanics

Carbon Health Technologies, Inc. and 28 affiliated debtors filed voluntary petitions under Chapter 11 on February 2, 2026, in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division (Case No. 26-90306) (PR Newswire; Kroll).

Case Type: Pre-arranged Chapter 11 with dual-track process (restructuring OR sale).

DIP Financing: Up to $19.5 million from Future Solutions Investments for ongoing operations, wages, benefits, and vendor payments.

Professional Advisors:

Financial Advisor: Alvarez & Marsal
Bankruptcy Counsel: Pachulski Stang Ziehl & Jones LLP
Claims Agent: Kroll Restructuring Administration

RSA: Restructuring support agreement with existing lenders; specific terms not disclosed.

Operational Continuity: Clinics operate "business as usual" during restructuring. Patient care, virtual visits, and medical records access remain uninterrupted (PR Newswire).

7. Potential Outcomes

Debt-for-Equity Restructuring

Existing lenders convert debt to equity; existing equity investors (Blackstone, Dragoneer, CVS Ventures, Brookfield) likely wiped out or severely diluted. DIP lender and pre-petition secured creditors emerge as primary owners.

363 Sale (Whole Company)

Potential buyer categories (analysis—no confirmed interest disclosed):

Healthcare PE: KKR, TPG, Welsh Carson, Warburg Pincus
Hospital systems: HCA, CommonSpirit, Tenet seeking outpatient expansion
Tech strategics: Buyer interested in EHR/AI platform rather than clinics

Note on CVS: Unlikely acquirer given Oak Street struggles. If CVS had interest, it would have acted at $3B valuation, not post-bankruptcy.

363 Sale (Piecemeal)

Clinics sold regionally to different buyers; technology platform carved out and sold separately. Plausible given clinic unit economics challenges vs. tech platform as defensible asset.

Expected Timeline

Feb 2026: First day motions, DIP approval
Mar-Apr 2026: Marketing process (Alvarez & Marsal)
Q2 2026: Bid deadline, auction if competitive
Q3 2026: Plan confirmation or 363 sale closing

8. Key Unknowns

Gap	Detail
Current operations	Clinic count and employee headcount not disclosed; 2021-2022 data (14 states, ~100 clinics) is stale
Debt composition	$100M-$500M range; secured vs. unsecured breakdown unknown
DIP lender identity	No public info on Future Solutions Investments (SPV? Distressed fund? Strategic?)
Revenue	No confirmed figures; company is private
RSA terms	Milestones, recovery thresholds, credit bid rights not disclosed

Carbon Health Bankruptcy