Court Appoints Receiver for Troubled Health Plan

Superior Court Judge William Pate on Friday named a receiver to supervise the transfer of financially troubled Greater San Diego Health Plan’s subscribers to a health-care company operated by several San Diego hospitals and two large health-care companies.

Pate took the action because the state Department of Corporations determined that the health plan “has recorded significantly escalating operating losses,” Asst. Commissioner Alice W. Suitt said Friday.

The health plan is a wholly owned subsidiary of San Diego-based Western Health Plans, a publicly traded company that lost $20 million during the three years that ended June 30. Regulators asked for a receiver to be appointed because they feared that more losses might hinder the health plan’s ability to fulfill contracts for patient care.

A receivership was the best way to “adequately protect the interests” of the health plan’s subscribers, Suitt said Friday. “This is the most expeditious route open to us, it was the most timely route, and it offers the most protection for the enrollees.”

The court ordered the Pace Group, a consulting firm, to complete the transfer of the San Diego health plan’s subscribers to the consortium that includes Children’s Hospital and Health Center, Community Hospital of Chula Vista, Grossmont Hospital, Mercy Hospital and Medical Center, Palomar Medical Center, Pomerado Hospital, Scripps Memorial (Chula Vista), Scripps Memorial (La Jolla), Scripps Memorial (Encinitas), Sharp Cabrillo Hospital, Sharp Memorial Hospital and Tri-City Hospital District.

That consortium also includes Choice, a health plan operated by Partners National Health Plans, Aetna Healthcare Programs of California and VHA Enterprises, a subsidiary of Voluntary Hospitals of America.

Western in July announced an agreement in principal to sell the San Diego health plan, which at the time included 125,000 members, to the consortium that includes the local hospitals, Aetna and Partners. However, Western failed to complete the sale by an Aug. 18 deadline, and state regulators have been “actively working” to solve Western’s cash problems, Suitt said.

Appointing a receiver “is not a strategy we use a lot,” Suitt said. “It’s a kind of a last resort strategy.”

In recent months, Western’s financial problems caused some private- and public-sector employers to not renew contracts with the San Diego plan. Maxwell Laboratories earlier this month told its employees that it would not renew a contract with Greater San Diego Health Plan, largely because of its financial difficulties.

Cindy Cohegan, a spokeswoman for the San Diego hospital consortium, declined Friday to comment on the court action. The hospitals believe that the Choice health-care program represents “the best choice” for Greater San Diego’s subscribers and health-care providers, Cohegan said.

Western, in a press release issued late Friday afternoon, said that, if the transfer takes place, San Diego health plan members who “do not choose otherwise will become subscribers of Choice.”

According to terms of the proposed agreement that the receiver will try to complete, Choice would pay the Greater San Diego Health Plan $50 for each subscriber who remains with Choice on Jan. 15, 1990. Choice would pay the health plan a minimum of $1.5 million, according to thepress release.