Maxicare’s Reorganization Plan Approved

The U.S. Bankruptcy Court in Santa Ana on Monday approved Maxicare Health Plan’s reorganization proposal to emerge from Chapter 11 bankruptcy protection.

The confirmation clears the last major hurdle for the Los Angeles-based health maintenance organization to be released from court supervision, but a Maxicare spokesman said additional technical requirements must be met for the plan to become effective. That is currently expected to happen in early October, ending a process that began on March 16, 1989, when Maxicare filed for protection under pressure from its bank lenders, other creditors and state regulators.

The reorganization plan requires that Maxicare meet certain cash requirements in different categories before the plan becomes effective. “We have a significant amount of cash on hand, but we still have to generate more. But we don’t anticipate that will be a problem,” Maxicare spokesman Ed Coughlan said.

The company earlier received the necessary creditor and shareholder approval of the plan.

It calls for the distribution of $129.3 million in cash, $67 million in notes and new common stock and warrants to satisfy claims. Doctors and hospitals who continue to provide services to Maxicare members will own 49% of the new company. The new stock is expected to be issued shortly after the plan becomes effective.

“We’re thrilled with the significant progress we’ve made to date,” Maxicare Chairman and Chief Executive Peter J. Ratican said in a statement. “By continuing to concentrate on providing good service along with access to quality managed care at a reasonable cost, we will increase our membership and our profitability,” he said.

In confirming the plan, the court continued an injunction that prevents doctors and hospitals from billing Maxicare members for debts owed by the company.