Health Maintenance Organizations Finances

MedPartners Provider Network Inc., which provides health care for 1.3 million Californians, may not have sufficient cash to pay new claims and has not proved to the state that it is fiscally sound, according to a state report. The company's cash reserves have been depleted by $21.5 million as a result of overpayments to hospitals, according to the report, which was issued last week by the state Department of Corporations after the company failed to fully respond to questions raised in an audit.

State regulators Wednesday seized Watts Health Foundation, whose troubled HMO covers 96,000 mostly poor and elderly people in Los Angeles, Orange and San Bernardino counties. The action came two weeks after the foundation agreed to protect the HMO's finances by spinning off the 70 clinics it operates. It also agreed to other accounting reforms. But the Department of Managed Health Care said the changes would have done little to improve the HMO's "severe cash flow and liquidity problems."

Citing its own miscues and continued distress in the managed-care industry, Kaiser Permanente on Friday reported a startling $270-million loss for 1997, the first time that the pioneering HMO has lost money in its half-century history. Kaiser said it will have to raise premiums for next year and take other steps to remedy its financial condition. While a Kaiser loss had been expected, the magnitude was more than five times the firm's own projections and caught industry watchers off guard.

While premature twins Paige and Hannah Rafferty remained under intensive care last fall, their parents received upsetting news: The babies, weighing just over 3 pounds, would need to go to a cross-town Sacramento hospital. The ultimatum from the Raffertys' health maintenance organization had nothing to do with the quality of care the babies were receiving. Instead, it was about money and health care bureaucracy.

Five health maintenance organizations that threatened to leave Los Angeles if they were not granted a $15-million tax break are nearing a compromise with the city that they say will keep them from leaving. "The momentum is all moving toward a resolution that keeps those companies in Los Angeles and keeps their jobs here," said Gary Mendoza, Mayor Richard Riordan's deputy for economic development.

California health care companies are pursuing reforms aggressively, but Wall Street isn't so sure it likes what's happening, industry analysts and executives at two giant Orange County HMOs said Wednesday. Stock prices for health maintenance organizations, particularly in California, rebounded a bit Wednesday from the beating that Wall Street dished out Tuesday as traders worried that a price war might break out and earnings might suffer.

Acting on an administrative recommendation, the City Council's Budget and Finance Committee approved a report Tuesday that rejects a tax rate reduction requested by several health maintenance organizations based in Los Angeles. It also approved a recommendation that a special tax code be created that would tax HMOs only on work done within the city limits.

After an hour of contentious debate, the Los Angeles City Council put off a decision Wednesday on whether to reduce the tax burden of five major health-maintenance organizations by millions of dollars, opting to study the issue for two more weeks. Although Councilwoman Laura Chick urged quick action to revamp the HMOs' tax structure, she bowed to a request to delay the matter after some of her colleagues objected to what seemed like a hefty tax break for one particular industry.

After an hour of contentious debate Wednesday, the Los Angeles City Council put off a decision for at least two weeks on whether to reduce the tax burden of five major health maintenance organizations by millions of dollars. Although Councilwoman Laura Chick urged quick action to revise the HMOs' tax structure, she bowed to a request to delay the matter after some of her colleagues objected to what seemed like a hefty tax break for one particular industry.

After months of intensive negotiations, city officials are putting the final touches on a proposal to knock off millions of dollars from taxes paid by local health maintenance organizations--but not as much as the local companies had requested.

The financial woes of health-maintenance organizations and their affiliated doctor groups loom biggest in regions where managed care has made the biggest inroads, where a dwindling group of players dominates the marketing of health care. California, Oregon and Colorado are bastions of managed care, as are Michigan, Wisconsin, Minnesota, New York, Pennsylvania and part of New England.

There was a time when health care was the hottest investment on Wall Street. Now, the health-care industry in the United States is entering a shakeout period, and the highflying investors who drove stock prices up to incredible peaks two years ago have fled. Sound, profitable companies are cleaning up their operations by cutting out unprofitable accounts and withdrawing from doing business in some states and communities. They're also raising premiums to improve profits.

Does paying for health care have to be so difficult? Americans enjoy--and insist on--good medical care but argue and dissemble endlessly about paying for it. The old system of fee for service saw a type of outright fraud called "cost shifting" in which fully insured patients were overcharged by 20% or more to pay for those with less or no insurance. It wasn't so much a crime as an open secret that allowed care for the poor. But costs got out of hand and employers and the government rebelled.

Financial strains in the nation's private health-care system threaten to disrupt care for millions, but neither federal nor state officials have comprehensive plans to deal with the industry's problems. As health plans struggle to survive in today's cost-cutting environment, there's no question workers will pay more for their health insurance--and some will be priced out of the market altogether.

The nation's private health care system is on the verge of a multibillion-dollar financial crisis that could lead to bankruptcies and closings of hundreds of physician groups, government supervision of others, and temporary disruptions of medical services for millions of Americans. The scale of the problem is dramatically illustrated by California's seizure Thursday of the giant MedPartners Provider Network Inc., whose 1,000 doctors provide care for 1.

After their unprecedented takeover of troubled MedPartners Provider Network Inc., state regulators acknowledged Friday that they do not have a plan for what to do next. They now must cope with how to guarantee continued care for 1.3 million patients and determine who will bear the costs of the firm's liabilities.

In what appears to be the largest governmental seizure of an ailing health-care company, state regulators on Thursday took over MedPartners Provider Network, which covers 1.3 million Californians. The state Department of Corporations immediately placed MedPartners in Chapter 11 bankruptcy protection but said care for patients would continue. Regulators were attempting to forestall the possibility that the company would shut down without making arrangements to take care of patients, sources said.

The nation's private health care system is on the verge of a multibillion-dollar financial crisis that could lead to bankruptcies and closings of hundreds of physician groups, government supervision of others, and temporary disruptions of medical services for millions of Americans. The scale of the problem is dramatically illustrated by California's seizure Thursday of the giant MedPartners Provider Network Inc., whose 1,000 doctors provide care for 1.

In what appears to be the largest governmental seizure of an ailing health-care company, state regulators on Thursday took over MedPartners Provider Network, which covers 1.3 million Californians. The state Department of Corporations immediately placed MedPartners in Chapter 11 bankruptcy protection but said care for patients would continue. Regulators were attempting to forestall the possibility that the company would shut down without making arrangements to take care of patients, sources said.

MedPartners Provider Network Inc., which provides health care for 1.3 million Californians, may not have sufficient cash to pay new claims and has not proved to the state that it is fiscally sound, according to a state report. The company's cash reserves have been depleted by $21.5 million as a result of overpayments to hospitals, according to the report, which was issued last week by the state Department of Corporations after the company failed to fully respond to questions raised in an audit.