Employers Scramble to Find New Health-Care Providers : Maxicare’s Shutdown of Unit Causes Concern

Times Staff Writer

Employers affiliated with the failed General Med health maintenance organization in Orange began scrambling Wednesday to arrange other forms of health insurance for 55,000 Southern Californians whose coverage will expire at the end of the month.

Meanwhile, affected employers and industry observers said the closing of the 15-clinic HMO has further undermined confidence in General Med’s parent company, financially troubled Maxicare Health Plans of Los Angeles.

Maxicare, which is in the process of restructuring its operations to satisfy lenders, announced Tuesday that it would close its General Med operations on March 31. Over the past three months, the number of General Med clinics has been slashed to 15 from 30. The remaining clinics will be closed by the end of the month, and its approximately 500 employees will be terminated.

In Orange County, the HMO serves about 12,000 members through medical clinics located in Anaheim, Santa Ana, Brea and Mission Viejo and a surgical center in Anaheim. General Med has nearly 190 Orange County employees, including 75 at its corporate headquarters in Orange.


Many large California employers, including Beckman Instruments, Fluor, Lockheed and Los Angeles County, have contracts to provide medical services for their employees through General Med’s clinics.

Need Other Plans

General Med is operated by a Maxicare subsidiary called Family Health Services, or FHS. It is not related to FHP, a health maintenance organization based in Fountain Valley.

More than 375 employer groups located in Orange, Los Angeles, San Bernardino, Riverside and San Diego counties learned Wednesday that they will have to provide their employees with alternative medical plans by the end of the month.


Several affected companies said they would let General Med members choose among other medical insurance plans offered as part of their benefit programs. They said they planned to add other HMOs to their insurance menus to replace General Med.

Although it is owned by Maxicare, General Med is a separate HMO. The company said the General Med closing will have no effect on the 285,000 Southern California residents who are members of the Maxicare health-care program.

Employers stressed that their General Med enrollees will not be left without medical coverage. Nonetheless, most will be inconvenienced by having to change doctors after they join another insurance plan. Maxicare said it will be responsible for reimbursing the cost of any ongoing hospitalization at the time the General Med coverage ends.

And the closing will have a major impact on indigent patients. General Med has a contract to provide indigent medical care that is reimbursed by MediCal. When the plan terminates, 11,000 MediCal recipients who are General Med enrollees will have to find another health maintenance organization that has a MediCal contract or consult one of a dwindling number of private doctors who will accept MediCal reimbursement.

Doctors Dropped Out

Several General Med participants reacted to the closing with a mixture of confusion and concern.

“I am very concerned,” said Kari Gonzalez, 24, of Placentia. “I’ve got two sick kids here. One has a kidney problem, and the other one has pneumonia. They are going to need help when this place shuts down.”

Gonzalez and her children, Matthew, 3, and Kadi, 4, were visiting the General Med clinic in Anaheim. She said she was not sure if her husband’s company offered other health plans that they could join.


“I hope they do,” she said. “Obviously, we really don’t have any choice.”

Despite Maxicare’s assurances that General Med’s obligations will be honored, some employers said that, in recent months, some physicians and hospitals that have not been paid by the financially strapped HMO have been trying to bill patients directly.

By state law, a provider of services under contract with a health maintenance organization has no legal right to bill a patient for contracted services. The law is enforced by the state Department of Corporations.

“The members are not responsible for those bills and should send them to us,” said Tobi Nyberg, Maxicare’s vice president of corporate communications. She said the company will be sending letters to all its enrollees telling them that the company will deal with the reimbursement problem.

Claudia Ferguson, manager of benefit programs and human resource systems at Beckman Instruments in Fullerton, said the company had been having so many service problems with General Med that last week it announced a special “open enrollment” so that General Med participants would have a chance to switch to other plans.

Since about October, she said, Beckman employees who subscribed to General Med had been upset by the closing of General Med clinics as the HMO tried to cut its overhead through consolidations. Also, she said, independent physicians and pharmacies began dropping out of General Med and would no longer accept General Med patients.

Chris Chase, benefits manager for the city of Anaheim, was bristling about what he considered inadequate notice given of the General Med closing. “I think that they should have given us more than three weeks to figure out what we are going to do with the people in the plan,” he said.

Chase said the city currently does not offer Maxicare as an option, “and we do not intend to offer it, either.”


Maxicare said the reason for the short notice was that the company had been trying to find a buyer for the General Med system and had decided to close the operation only as a last resort when it became financially imperative.

Lee Grover, who heads the Orange office of Mercer Meidenger Hansen, an employee benefits consulting firm, said “a lot of people would be skeptical” about transfering from General Med to Maxicare because of their common ownership and similar financial problems.

“I can tell you that none of our clients at this point is going to start offering Maxicare as an option,” he said.

Other HMOs, however, stand to pick up business. Terry Hartshorn, president and chief executive at PacifiCare, an HMO based in Cypress, said his marketing department reported that “the phones had been ringing off the hook” Wednesday with calls from companies wanting to add PacifiCare as a new medical benefit option.

Times staff writer Jeff Mitchell contributed to this story.