Western Health Plans Is Negotiating for Capital

Financially ailing Western Health Plans, which faces a capital deficiency that threatens its ability to remain in business, is negotiating with “at least a dozen” potential investors, Vice Chairman Jack Savidge said Wednesday.

Western, which operates the Greater San Diego Health Plan, is talking to “investment institutions, insurance firms and consortia that have shown an interest in financial participation” with Western, Savidge said.

In addition to unrelated groups, Western is talking to “customers, members and our doctors” about possible investments to keep Western’s capital from falling below regulatory minimums.

Western is continuing discussions with a San Diego-based hospital consortium that in November offered $21 million for Western’s assets, Savidge said. Western rejected that offer in November. A consortium spokeswoman was not available for comment Wednesday, and Savidge declined to say whether the consortium has since made a new offer.

The California Department of Corporations has placed Western on an “accelerated reporting schedule,” according to Savidge, and is receiving weekly status reports from Western managers.

Western on Wednesday said it had dropped Ernst & Whinney, which audited its 1988 books, and replaced the firm with Coopers & Lybrand. Ernst & Whinney was dropped after “some differences of opinion . . . all of which had been resolved in accordance with the recommendations of Ernst & Whinney,” Savidge said.

Western also has hired David E. Vogel & Associates, a health-care consulting firm that will help with evaluating and revising Western’s operating strategies, Savidge said.

Western has not yet hired a chief executive officer to replace Robert Erra, who resigned in December.

In December, filings with the federal Securities and Exchange Commission, Western acknowledged “substantial doubt about (its) ability to continue as a going concern . . . (because of) recurring losses from operations.”

Western has reported $21.5 million in red ink during the past three years.