DMHC Files Bankruptcy Petition for Tower Health
The Department of Managed Health Care has filed a Chapter 11 bankruptcy petition on behalf of Tower Health, which the agency took over last month, the Los Angeles Times reports (Gellene, Los Angeles Times, 10/5). DMHC seized control of the HMO after it "failed to demonstrate a fiscally sound operation." Auditors said that Tower Health was holding $5 million in claim checks to doctors and hospitals that would have bounced if they had been deposited. Also, auditors found that Tower Health's finances were "potentially strained" by internal deals (California Healthline, 9/17). According to the bankruptcy petition, Tower owes $2.8 million to RX America, a Salt Lake City-based prescription drug insurance-broker. But the Times reports that local hospitals "dominat[e] the list of creditors," with Pasadena-based Garfield Medical Center, for example, owed $497,000. DMHC Director Daniel Zingale said the bankruptcy filing will permit auditors to "challenge previous financial transactions." The Times reports that state regulators will examine the health plan's decision to forgive a $19.5 million loan to its owners and affiliated companies (Los Angeles Times, 10/5).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.