MAXICARE: A SLOW SPIN TO BANKRUPTCY
1980--Maxicare, founded in 1973, becomes a for-profit company, expanding over the next several years into 26 states and serving more than 2 million members.
1985--The health care industry enters a period of soaring costs. Conventional health insurers cut rates to compete with health maintenance organizations, while HMOs add costly new plans to increase membership.
July, 1986--Maxicare buys two financially troubled HMOs, paying $400 million for HealthAmerica Corp. and $67 million for HealthCare USA. Maxicare posts a loss every quarter since making these acquisitions.
February, 1988--Hawthorne Community Medical Group wins a $15-million arbitration award against Maxicare for underpayment of services provided to members in 1981-87. After the award, Maxicare cancels its contract with the medical group, leading it to file another lawsuit against Maxicare. The suit is settled in September and the contract is reinstated.
April, 1988--Maxicare restates its financial results for 1987, reporting losses of $255.9 million and a negative net worth of $29.3 million. It renegotiates its $175 million in bank debt.
Aug. 8, 1988--Maxicare Chairman and Chief Executive Fred W. Wasserman and President Pamela K. Anderson resign under pressure. One of the company’s directors, Peter J. Ratican, takes over as chairman and chief executive.
August-September, 1988--Maxicare sells or closes operations in 14 states to meet bank loan payments.
Feb. 6, 1989--Maxicare announces that it has signed a “standstill agreement” with its lending banks, deferring principal and interest payments through April 30.
March 8--Maxicare closes Family Health Services, a subsidiary based in Orange, laying off 500 employees and ending services to 55,000 members at the end of the month.
March 16--Maxicare files for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code.
