Maxicare Adds 13 Hospitals in Southland

Times Staff Writer

In a major expansion that will enable it to serve an additional 100,000 members, Maxicare Health Plans said Thursday that it has added 13 Southland hospitals to its list of providers.

The arrangement will increase by 1,300 the number of doctors and specialists under contract to Hawthorne-based Maxicare--the nation’s largest investor-owned health maintenance organization--and will supplement the 82 physicians groups that Maxicare already has in Southern California.

“What it does is give us a more complete delivery system . . . that is more responsive to patients’ needs,” Maxicare Chairman Fred W. Wasserman said. “The patients’ selection of specialists will be much more diverse.”

More important, under the terms of the unusual contract, the 13 hospitals will share with doctors the burden of controlling treatment costs. The treating physician and the hospital involved will split 78% of the average $69 monthly premium a patient pays to Maxicare, while Maxicare will retain the remaining 22%.


Ordinarily, Maxicare reimburses the hospital for the actual cost of patient care.

Such an arrangement would give Maxicare, which serves about 600,000 members nationwide, a financial edge few other HMOs have. It also would benefit the hospitals, which have been under pressure by the federal government and private insurers to cut health-care costs. They have seen their average occupancy rates drop to 68% in mid-1984 from 76% in 1980.

Panel Monitors Costs

“I think this is going to be the wave of the future,” said Randall Huyser, a health-care analyst for Montgomery Securities in San Francisco. “Over the longer term, Maxicare will be able to lower their administrative expenses because they won’t have to spend as much time policing (hospital) costs.”


Hospital services consumed about $26.6 million of Maxicare’s $294.9 million in expenses for the 12 months ended Dec. 31, 1984, according to the company’s annual report. Those costs are now monitored by a panel of physicians and managers.

Adds Bama B. Rucker, an analyst for the San Francisco investment house of Hambrecht & Quist: “What is attractive from my viewpoint is it’s virtually a risk-free contract for Maxicare. I see both sides benefiting.”

Dubbed Project Window while it was in the planning stages, the expansion was made possible by the impending August expiration of Maxicare’s exclusive physicians’ contract with the Hawthorne Community Medical Group, which serves about 50% of Maxicare members in Southern California.

Under the terms of that contract, the Hawthorne group has the right of first refusal in providing physicians services in any market in which Maxicare wishes to expand.


Hospitals that will provide medical services under the new agreement are Daniel Freeman Memorial Hospital in Inglewood; Daniel Freeman Marina Hospital in Marina del Rey; Glendale Adventist Medical Center; Holy Cross Hospital, Mission Hills; Hospital of the Good Samaritan, Los Angeles; Huntington Memorial Hospital, Pasadena; Long Beach Community Hospital; Northridge Hospital; St. John’s Hospital & Health Center, Santa Monica; Doctors Hospital of Santa Ana; Valley Presbyterian, Van Nuys; West Park Hospital, Canoga Park, and White Memorial Medical Center, Los Angeles.