Debt-ridden Maxicare Health Plans Inc., a major provider of health coverage serving 1 million Americans in a dozen states, filed today in Santa Ana for bankruptcy court protection and indicated that it will sell its HMO serving California.
The company, which operates under the names Maxicare, HealthCare USA and HealthAmerica, announced that it sought protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code.
Maxicare promised to keep serving its patients and to continue paying doctors and hospitals.
Included in the filing are the Los Angeles-based parent company and operations in Alabama, Arizona, California, Illinois, Indiana, Louisiana, North Carolina, Ohio, Pennsylvania, South Carolina, Texas and Washington.
Maxicare, saddled by debt and generally tight times in the HMO business, has been losing money for some time. In recent months it has sold a number of health plans in various states in an avowed effort to pare down to a solid “core” business.
However, in announcing the bankruptcy filing, Chairman Peter S. Ratican revealed Maxicare was negotiating sale of the HMO serving California, previously said to be part of the core.
In the first nine months of 1988, the company lost $250.5 million. Final 1988 results haven’t been reported.
The company, burdened with debt that included, in December, $150 million in bank loans and $295 million in bonds, has pinned its recovery hopes on paring down to a “core” of solid businesses. As of Dec. 6, Maxicare had cut membership from a high of 2.3 million to 1.4 million. Several plans in various states have been sold this year, and in its announcement today, the company put membership at 1 million.