By Brazil Stock Guide — Hapvida (B3: HAPV3) has accelerated a broad operational reorganization aimed at restoring margins, strengthening cash generation and reducing leverage, even if that means giving up members in the short term.
Measures presented by management during the company’s second-quarter earnings call indicate that Hapvida is prepared to confront problems accumulated over the past several years. The plan includes reviewing loss-making contracts, closing or resizing units, renegotiating supplier agreements, adopting a new approach to litigation and potentially selling assets in regions considered nonstrategic.
“This is not about promises, but concrete actions that are already under way and should deliver results,” said CEO Luccas Adib, who took office in May.
The changes follow another difficult quarter. Net revenue rose 3.9% to R$7.97 billion, but adjusted EBITDA fell 44.3% to R$504 million. The cash medical-loss ratio increased to 75.2%, below the industry average, while adjusted net income dropped to R$12.5 million.
The figures illustrate the scale of the challenge, but they also explain why management decided to accelerate its efforts to put the business in order. Growth alone is no longer the main benchmark for commercial decisions. The priority now is to ensure that every contract, distribution channel and region contributes positively to EBITDA and cash flow.
“Sustainability, rather than growth for growth’s sake, will be the main driver of the company’s commercial management,” Adib said while describing Hapvida’s new strategic direction.
Hapvida is prepared to lose contracts
The most visible measure is a review of approximately 947,000 members, equivalent to 11% of Hapvida’s healthcare-plan membership. The group includes contracts with negative contribution margins and customers with high delinquency rates.
Because these members pay an average premium equivalent to roughly half the companywide average, their share of revenue is considerably smaller than their weight in the membership base.
In July, approximately 50,000 members were removed as part of the review, while about 10,000 remained after their contracts were renewed on terms considered economically sustainable.
“Those who remain will do so on economically sound terms,” Chief Financial Officer and Finance Vice President Lucas Garrido said.
The review will take place over the next 12 months, broadly following contract-renewal dates, with somewhat greater activity expected in December.
Hapvida acknowledges that the termination of contracts may initially have a negative effect. Revenue recognition stops immediately, while some medical claims can take between one and two months to flow through the income statement, the company explained.
After that transitional period, however, the changes are expected to contribute positively to margins and cash flow. Hapvida’s contract-profitability analysis already excludes fixed costs, meaning the members under review generate a negative contribution even before administrative overhead is allocated.
The review is concentrated mainly in the corporate segment, where competition is more intense and contracts generally carry lower premiums. According to management, some clients accepted steep double-digit price increases because they were still paying rates below those prevailing in their regions.
The objective is therefore not simply to shrink the membership base. Hapvida intends to retain contracts whose customers accept sustainable terms and discontinue those that would continue to destroy value.
Healthcare network will also be reduced
The commercial reorganization will be accompanied by a review of Hapvida’s owned healthcare network. The company has already rationalized hundreds of idle beds and plans to reduce its footprint by more than 30 units, including closures of existing facilities and revisions to planned openings.
Some of those measures are already being implemented and are expected to be completed within approximately 60 days. Hapvida said the decisions are based on utilization, occupancy rates and the availability of nearby facilities, without compromising services for members.
In regions where the company’s owned network has high occupancy, shedding loss-making contracts could ease operational pressure and improve service for the customers who remain.
Hapvida is also reassessing the balance between care delivered through its owned network and services provided by accredited third parties. In closed-network plans, the company has identified opportunities to bring consultations, diagnostic tests and basic specialties in-house rather than directing members to outside providers.
For higher-premium products, the priority will be to build a more efficient accredited network through price negotiations, volume steering and bundled procedures.
Over the past 60 days, Hapvida has bundled approximately 40% of its surgical costs in São Paulo. The model will now be expanded to Rio de Janeiro and cities in the interior of São Paulo state.
R$4 billion in purchases under review
Procurement is another important focus. With support from a specialist consultancy, Hapvida is reviewing contracts covering more than R$4 billion in annual purchases.
The work includes standardizing processes, renegotiating prices and reviewing payment terms. Management expects the standardization of supplier payments to generate a meaningful working-capital benefit as early as the third quarter.
Hapvida has also begun preparing a zero-based budget for 2027, under which every cost and expense line will have to be justified again. At the same time, its shared-services center is being digitized and automated to reduce administrative structures during 2026.
To combat fraud and waste, the company has reorganized its risk division and begun using artificial intelligence, data analysis and statistical tools to identify unusual behavior.
Hapvida said it has already recovered amounts related to irregularities and filed dozens of lawsuits and criminal complaints against clinics and healthcare professionals, although it has not yet disclosed the financial impact of those initiatives.
Litigation strategy is being overhauled
Healthcare litigation remains the most immediate problem. Civil contingency expenses reached R$324 million in the quarter, while judicial deposits also increased.
Adib acknowledged that the previous operating model had failed to keep pace with the scale of the challenge. Hapvida routinely pursued disputes through the final stages of appeal without adequately distinguishing cases in which it had a stronger legal position from those in which an early settlement would have been more economically rational.
The legal department has been reorganized, specialist law firms have been retained and new case-management tools are being integrated into the company’s systems. Authorization rules are also being reviewed for procedures that generate the highest volume of lawsuits.
Hapvida said it had already seen a reduction in litigation during July, although the backlog of older cases is still expected to affect the third quarter. The new legal structures should be operating more fully by the end of the period.
“Starting in the fourth quarter, you should see different results,” Adib said.
Asset sales could accelerate deleveraging
Net debt ended June at R$5.4 billion, compared with R$5.2 billion at the end of 2025. Covenant leverage rose to 1.61 times EBITDA over the previous 12 months, still one of the lowest levels in the industry.
Although Hapvida sees no near-term liquidity pressure, management considers deleveraging a priority. The company has completed valuations of assets located in nonstrategic regions and has begun taking the next steps toward potential divestitures.
Hapvida did not identify the assets that could be sold or provide estimates for timing or proceeds. According to management, the absence of immediate financial pressure allows the company to negotiate better terms and avoid selling assets at unattractive prices.
At the same time, Hapvida maintained its forecast of approximately R$700 million in capital expenditure for 2026, prioritizing maintenance, adjustments to the existing network and technology projects.
Recovery will take time
The reorganization also includes repositioning NotreDame as a premium brand in São Paulo and Rio de Janeiro. Hapvida has created separate processes for customer service, authorizations, call centers, accredited providers and the digital experience offered to PPO-plan members, a segment that had been losing customers since the combination of Hapvida and NotreDame Intermédica.
The first signs of commercial improvement have emerged in metropolitan São Paulo, where the retail channels have recorded positive net additions for five consecutive months. Rio de Janeiro has also posted positive net additions for the past two months, according to Hapvida. The strategy will gradually be expanded to the interior of São Paulo state, Minas Gerais, southern Brazil and other regions.
Taken together, the initiatives directly address the main concerns raised by analysts following the results: loss-making contracts, medical costs, corporate expenses, litigation, idle capacity, membership losses and rising debt.
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