First Reaction to Maxicare Move Is Uncertainty

Times Staff Writer

Like some mysterious ailment, the decision Thursday by Maxicare to seek bankruptcy court protection left hospitals, doctors and pharmacists--along with employers and their employee subscribers to Maxicare health plans--with a queasy feeling of uncertainty.

Only one part of the prognosis seemed clear. For now, most hospitals and physicians will continue to provide treatment to patients with Maxicare health coverage, and they won’t be asking them for other forms of payment.

“It’s business as usual,” said Mark D. Moser, administrator of the Bay Shores Medical Group in Torrance, voicing the refrain repeated by hospital and medical group administrators throughout the Southland.

“I want them to have a chance to reorganize,” explained Moser, whose group counts about 10,000 Maxicare enrollees among its 62,000 patients. “We’re trying as much as we can to minimize the impact, because our reputation is on the line in this thing too.”


Health providers said their foremost concern was their obligations to patients. But few were prepared to say they would stand by indefinitely if Maxicare fails to make good on its debts.

“You can’t provide care for very long and not get paid for it,” said Michael J. P. Clark, a senior vice president at Glendale Memorial Hospital. “It’s a real potential business problem for our hospital and any hospital.”

Clark said Maxicare had told the hospital Wednesday that it planned to pay only half of the $45,000 it owes Glendale Memorial for March.

The situation could brighten quickly, however. Maxicare said Thursday that it expected to make an announcement within a week concerning the sale of its California health maintenance organization. Health providers said a sale could assure uninterrupted care for Maxicare subscribers.

Some Are Wary

For the time being, though, one large health plan--Sharp Rees-Stealy Medical Group in San Diego, with about 3,000 Maxicare members--was making no promises. “Sharp will deal with patients on a case-by-case basis,” said Cindy Cohegan, a spokeswoman for Sharp HealthCare, the group’s parent company.

Smaller-scale health-care providers were especially wary of making a commitment to continued acceptance of Maxicare patients’ business.

Paul Watari, manager of John’s Woodruff Pharmacy in Long Beach, said he would be forced to stop filling Maxicare members’ prescriptions unless he could get a guarantee that the health plan would pay all its bills.


“I’m going to call and see what I can learn,” he said. “I may have to quit giving service to Maxicare, because I’m going to lose money.”

Patients who had heard about the Chapter 11 filing could only guess what it all meant.

“This is my first experience with Maxicare,” said Kristina A. Drucker of Irvine as she walked into the offices of the Bristol Park Medical Group in Fountain Valley. “It’s not a great day.”

Employers were not much help Thursday to workers with questions about the status of their health coverage. Benefits administrators were meeting with lawyers, and most companies simply did not know what to tell their employees and retirees.


Will Get Coverage

That, at least, was what workers were hearing when they called benefits offices at Lockheed, Hughes Aircraft, Douglas Aircraft, the Los Angeles Times and other employers with thousands of Maxicare subscribers.

“The first thing we’re trying to do is assure all the employees that no matter what is happening to Maxicare, they’re still going to be covered in some way,” said Dave Eastman, a spokesman in Long Beach for Douglas, where 4,600 California employees and retirees have Maxicare health coverage.

Lockheed, with about 4,000 Maxicare subscribers, would not go that far, however.


“What we’ll do in the next day or two is get something out to employees recognizing the problem, but the first time around, we probably won’t be able to tell them what the options are,” said Earl Mink, group insurance manager for Lockheed at its corporate headquarters in Calabasas.

About 12,000 Medi-Cal recipients in Southern California receive their medical care through Maxicare, but the state’s contract with the health plan already was scheduled to terminate at the end of the month, according to Alan Stolmack, a section chief for the California Department of Health Services.

Stolmack said it is illegal for medical providers to demand cash payment from Medi-Cal recipients and that medical providers would be breaching their contracts with Maxicare if they refused to provide service to Medi-Cal patients.

Some May Drop Plan


Many employers spent Thursday trying to figure out whether bankruptcy laws allow them to cancel their contracts with Maxicare and invite employees to switch to other health plans--and, for that matter, whether other plans would accept new enrollees at midyear.

Some gave serious consideration to dropping Maxicare.

“I’m not sure if Maxicare is going to pull itself out of this, and if they don’t, we can’t leave our employees in that position,” said Michael Fults, manufacturing manager of JDF Enterprises, a contract electronic assembly shop in Anaheim. Half of Fults’ 25 employees are covered by Maxicare, though the firm also offers other health plans.

One benefits consultant said it was likely that employers would arrange new open enrollment periods to allow workers to switch to other health plans.


“We’ve had a flurry of calls from health-care companies anxious to let us know that their services are available,” said Mike Turpin, an assistant vice president at Johnson & Higgins, an employee benefits consulting firm in Costa Mesa.

Maxicare’s financial ailments have been public knowledge for a long time, so employers and medical providers alike were not completely unprepared for the bankruptcy filing.

Robert C. Shaw, president and chief executive of the Robert F. Kennedy Medical Center in Hawthorne, was feeling particularly clairvoyant Thursday. He had canceled the hospital’s contract with Maxicare on Monday.

“It was just sort of an intuitive sense, combined with the fact it seemed like the prudent thing to do at the time,” Shaw said.


Collects Checks

Kennedy will continue to serve Maxicare patients “for now,” Shaw said. But by canceling the contract, the hospital--which says it is owed $1.2 million by Maxicare--believes that it has improved its standing among the health plan’s creditors in bankruptcy court, he explained.

Shaw has been so dubious of Maxicare’s finances that for the past six months, he has sent employees in person to the health plan’s Century Boulevard office to pick up the hospital’s monthly checks.

With Maxicare members making up 10% of Kennedy’s patients, he said, “it’s a very important part of our cash flow operations.”


Contributing to this story were Times staff writers Maria LaGanga and John Charles Tighe in Orange County and Chris Kraul in San Diego.

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