Dispute Lost, Maxicare Will Open Own Clinics
Maxicare Health Plans on Friday said that for the first time it will open clinics and provide direct medical care after it lost a $15-million dispute with a medical group that now provides care for 105,000 Maxicare members in Southern California.
The Los Angeles-based company--the nation’s largest publicly traded health maintenance organization--said it is now hiring staff for clinics that will open July 7 in Glendale, Northridge, Torrance, Lawndale, Inglewood and Culver City. Until now, Maxicare has provided medical care for members through contracts with medical groups.
The centers will serve the Maxicare members who now go to clinics operated by the Hawthorne Community Medical Group, which won a $15-million arbitration award against Maxicare on Feb. 15. Maxicare says it will appeal the decision.
Denies Allegation
The Hawthorne group sees Maxicare’s decision as retaliation for the judgment. Warren I. Wolfe, the legal counsel for the medical group, said Maxicare had earlier threatened to cut off the relationship if a lawsuit was filed. “Apparently, Maxicare has made good on its pledge,” Wolfe said.
Maxicare denied the allegation. “It’s a business disagreement,” said Maxicare spokeswoman Tobi Nyberg. “We were unable to maintain a satisfactory business relationship.”
The dispute centers on the reimbursement of patient bills. The Hawthorne group, which has eight clinics in Los Angeles County, claims that it was underpaid by Maxicare for services provided to members of the health-care plan between 1981 and 1987.
The $15-million award to the Hawthorne group was made by an arbitration panel. The $15 million includes legal fees, according to the Hawthorne group. In addition, the panel settled an additional dispute between the two parties and awarded Maxicare $1.2 million. Wolfe said the Hawthorne group would not challenge the decision.
Expects to Keep Patients
Wolfe said the Hawthorne Community Medical Group will to continue to operate as usual. Although Maxicare provides the bulk of the medical group’s 140,000 patients, the firm receives most of its revenue from other health maintenance organizations, he said.
Wolfe also said the medical group expected many Maxicare patients to change health plans in order to continue receiving treatment at Hawthorne clinics.
Ironically, both Maxicare and the Hawthorne Community Medical Group were founded as sister companies by the same physicians in 1971. Maxicare, then known as Hawthorne Community Medical Plan, was founded to provide health coverage for Hawthorne Community Medical Group patients.
Maxicare was subsequently purchased by an insurance company that sold the company in a stock offering. Maxicare has announced that it expects to post a loss for 1987, but to return to profitability this year.
