Foundation to End Medicare Role in Some Eastern Markets

Foundation Health Systems Inc. said Friday it will withdraw from the Medicare health maintenance organization business in some Northeast markets, affecting almost 8,000 customers.

Foundation, one of the largest managed-care companies in California, will stop offering HMO plans to Medicare patients in three counties in New Jersey and two in Connecticut as of Jan. 1.

The Woodland Hills-based company said it’s being reimbursed an average of $417 a patient per month by the Medicare program in those five counties, compared with $623 a person in New York. The federal government reimburses health-care costs for elderly patients at different rates for different geographic regions because of variations in costs from place to place.

Foundation shares rose 19 cents to close at $12.31 on the New York Stock Exchange.

Foundation said last month that it will pull out of Medicare in 10 rural Northern California counties and move to turn around unprofitable programs in the Northeast. Like Aetna Inc., which announced Medicare withdrawal plans earlier this week, Foundation is struggling to cope with government plans to cut growth in Medicare HMO payments by about $20 billion over five years.