Maxicare, Tower to Cease by Year’s End
Maxicare and Tower Health, two HMOs seized by state regulators, probably will be dissolved by the end of the year and their members picked up by other HMOs.
Los Angeles-based Maxicare, the larger of the two HMOs, is wrapping up the sale of its Medi-Cal business to two HMOs, said Ivan L. Kallick, an attorney who represents the Department of Managed Health Care.
No buyers have emerged for Maxicare’s commercial business, he said, so the 154,000 people enrolled in Maxicare through employers will be assigned to other HMOs. “The goal is, by the end of the year, there should be no [enrollees] in Maxicare,” said Kallick, a partner with Manatt, Phelps & Phillips.
Maxicare had 254,000 enrollees, including 91,000 in Medi-Cal, when authorities seized it in May. The company is operating under Bankruptcy Court protection. Most enrollees are in Southern California.
U.S. Bankruptcy Judge Vincent Zurzolo on Tuesday approved the $15-million sale of Maxicare’s Los Angeles County Medi-Cal business to Care First, an Alhambra HMO that specializes in Medi-Cal coverage. The business accounted for $80.5 million in premiums to Maxicare in 2000, according to a Securities and Exchange Commission filing, and had about 82,000 enrollees.
Pending before the court is a $900,000 offer from Long Beach-based Molina Healthcare for Maxicare’s Sacramento Medi-Cal business, with about 9,000 enrollees. Approval is expected at a court hearing next week.
Kallick estimated that Maxicare’s unsecured creditors, mostly doctors and hospitals, would receive 50 cents on the dollar. The largest creditor is Cedars-Sinai Medical Center, which is owed $936,000, according to the bankruptcy filing.
Creditors of Long Beach-based Tower Health, which authorities seized two weeks ago, won’t do as well.
A state-appointed conservator has started assigning Tower’s 111,000 enrollees to other HMOs, said Daniel Zingale, director of the Department of Managed Health Care. Tower is so broke that there is not enough money to pay employees to run the HMO or to pay new health-care claims, Zingale said. The HMO’s current liabilities of $13.5 million are 20 times larger than its cash reserves.
“I can’t offer [creditors] much optimism,” he said.
Asked if the department should have taken control of Tower sooner, Zingale said: “There are always those who say we should have gone in faster and those who say we are being too aggressive.” The department had been monitoring Tower for at least a year.
Zingale said the 40,000 people enrolled in Tower through employers will be assigned to other HMOs accepted by their physicians. Many doctors participate in more than one HMO. “We want to transfer patients without disruption of care and we hope we can accomplish that,” he said.
The more than 60,000 Tower Medi-Cal enrollees are being assigned to new plans by L.A. Care, a quasi-government body that oversees Medi-Cal programs run by seven insurers in Los Angeles County. The HMOs most likely to benefit are Blue Cross of California, Care First and county-run Community Health.
