Leaner Maxicare to Focus on Strong Markets : Health: As the firm emerges from 21 months under Chapter 11, it hopes to regain its old customers and increase penetration in key areas.
Maxicare Health Plans Inc., a giant among health-maintenance organizations in the 1980s, emerged Wednesday from 21 months in Chapter 11 bankruptcy proceedings as a much smaller company.
Having reorganized under federal bankruptcy provisions that protected it from creditors, Maxicare must quickly step up its marketing efforts if it is to enlarge its account base and regain profitability in an increasingly competitive business, industry analysts say.
Maxicare, which filed for Chapter 11 protection in March, 1989, gave one indication of a return to financial health on Oct. 29, when it reported a third-quarter profit--its first in four years. Its executives say they also expect a good fourth quarter.
To continue making financial progress, Maxicare must strengthen its presence in current service areas. At its peak, Maxicare was operating in 26 states and providing coverage to about 2 million at the end of 1987. The company, which offers medical insurance plans to employers, serves 285,000 and operates in California and six other states: Illinois, Indiana, Louisiana, Wisconsin and North and South Carolina.
Much of the shrinkage was by design. The reorganization plan called for it to concentrate its efforts on its strongest markets, said Maxicare Chairman Peter J. Ratican. Doctors and hospitals that have been most supportive of Maxicare also operated in those seven target states, Ratican said. Nevertheless, the company has lost more than half of the membership in the plans it kept.
“Our goal is to recapture some old accounts--those who were frightened by the bankruptcy,” Ratican said. “We also want to attract new businesses and increase penetration in existing accounts.”
Ratican noted that Maxicare must move quickly to retain and gain business because many companies are entering the open enrollment season. Open enrollments--the only time employees can switch health-care plans without penalty--are in December and January at most companies. Maxicare faces an immediate challenge because one major employer--the federal government--is in a 33-day open enrollment period that ends Dec. 13.
Maxicare will also scramble to try to retain California Public Employees Retirement System--an important client. After studying 19 health plan operators, a consultant to CalPERS recently recommended that the agency discard Maxicare and six other HMO plans currently offered to state employees. Ratican said he disagreed with the consultant’s findings and would make a special effort to retain the CalPERS account.
