Los Angeles Times Examines Break Up of WattsHealth Foundation
The Los Angeles Times last weekend reported on the WattsHealth Foundation, which the Department of Managed Health Care seized control of last month when the foundation's HMO, UHP Healthcare, "fell more than $20 million in debt." Under an agreement between WattsHealth and the state, the HMO and several clinics and programs will be spun off into a separate corporation. The WattsHealth Systems network, created in 1989, was the outgrowth of the former South Central Multipurpose Health Services Center and provides adult day care, HIV counseling, mobile mammography and other services. In all, the network's affiliates include the Family Services Bank, the Los Angeles Black Business Expo and Trade Show, a property management company, WattsHealth Charities, Pacific Federal Insurance Co. and more than 24 health care programs and medical groups. Nearly 80% of the foundation's revenue comes from the HMO. Clyde Oden, the foundation's creator and head, said, "What we've done is to uniquely piece together pieces of programs into a coherent fabric. That's the genius of the WattsHealth family." Oden, who has been praised for his efforts to "address social ills" and tackle "central city problems," called his "vision" a "holistic" approach. That approach included using $3 million in funds from the HMO to "gain controlling interest" in Family Savings Bank, a loan that the DMHC called "questionable," the Times reports. Oden said, "The bank was part of the overall effort to make credit, or mortgages, available to people in the community so people could live in better homes. There's a connection between the shelter of the people and their health status."
In the past, UHP Healthcare has "earned high marks for its service to a community often denied decent medical care," the Times reports. But state regulators have taken "issue" with how the HMO was managed. A recent DMHC report showed that thousands of claims submitted to the HMO by care providers "routinely went unpaid for months." Between October 2000 and March 2001, the HMO failed to send out 4,763 medical claim payment checks totaling $33 million for an average of 16 days because of insufficient funds, the report said. Further, the report said that as of June 25 the HMO "was holding $9.5 million in claims in the system and was two months behind in entering claims into the system." Oden said that there was a backlog during that time, but added that claims were paid. While providers were going unpaid, WattsHealth affiliates were being paid millions of dollars for administrative and property-management services, the Times reports. DMHC Director Daniel Zingale said the agency is uncertain how WattsHealth's relationships with its affiliates affected the HMO. He suggested that WattsHealth's "social service goals" could be "more properly funded by grants," the Times reports. Oden maintains that the funds going to affiliates had "very little" to do with the foundation's "dire straits," adding that the HMO had financial troubles because of "unexpectedly high costs for hospital care, pharmaceuticals and 'other medical care.'" Of the recent changes in the foundation, Oden said, "The business model is being changed, and we will evolve into a new business model. This is still a good idea, but good ideas can be worked better" (Robinson-Jacobs, Los Angeles Times, 9/3).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.