DMHC Assumes Control of Lifeguard after HMO Fails To Maintain Net Assets above State Minimum
The Department of Managed Health Care on Friday assigned a conservator to assume control of San Jose-based Lifeguard because the not-for-profit HMO has failed to meet state solvency requirements, the San Jose Mercury News reports. While Lifeguard has received high ratings among other HMOs in Northern California in terms of quality of care and consumer satisfaction, the HMO recently has been struggling financially. In August, a planned affiliation with Blue Shield of California collapsed, a "near-fatal blow" to the health plan's future. The HMO's financial reserves fell below the state's requirement of $17 million to $18 million, according to DMHC spokesperson Steven Fisher. The HMO also has liabilities of more than twice its assets, causing concerns about its ability to pay creditors. Although the HMO has not yet declared bankruptcy, Fischer said the state acted to "try to prevent an abrupt closing" that would disrupt patient care (Feder Ostrov, San Jose Mercury News, 9/14). Fisher added that the takeover will not impact the HMO's 168,000 members (Los Angeles Times, 9/14). However, given the concern about the HMO's future, some doctors could stop accepting Lifeguard patients, according to Dr. Larry William, medical director of the Santa Clara County Independent Practice Association. "It's likely that doctors will stop taking Lifeguard patients and that Lifeguard will come apart completely," he said. The conservator will determine whether Lifeguard "can be saved or should shut down," the Mercury News reports. The takeover is the fourth by the DMHC since its inception in 2000 (San Jose Mercury News, 9/14).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.