Maxicare, Tower Health Likely to be Dissolved by End of Year
Two managed care companies seized this year by the Department of Managed Health Care -- Los Angeles-based Maxicare and Long Beach-based Tower Health -- will likely be dissolved by the end of the year, and their members will be transferred to other HMOs, the Los Angeles Times reports. Maxicare had 254,000 members, including 91,000 Medi-Cal beneficiaries, when DMHC assumed control in May. Tower Health, which DMHC seized two weeks ago, has 110,000 members, including more than 60,000 Medi-Cal beneficiaries. Ivan Kallick, an attorney representing DMHC, said that no buyers have been identified for Maxicare's commercial business, but the company is finishing the sale of its Medi-Cal business to two HMOs. On Tuesday, U.S. Bankruptcy Judge Vincent Zurzolo approved the $15 million sale of Maxicare's Los Angeles County Medi-Cal business to Alhambra-based Care First. Approval of the $900,000 sale of Maxicare's Sacramento Medi-Cal business to Long Beach-based Molina Healthcare is expected next week. Kallick said that Maxicare's unsecured creditors -- the largest is Cedars-Sinai Medical Center, which is owed $936,000 -- would likely receive 50 cents on the dollar. As for Tower, the HMO is "so broke" that it lacks sufficient funds to pay employees or pay new health care claims, DMHC Director Daniel Zingale said. Tower's current liabilities total $13.5 million, 20 times the amount it has in cash reserves. Zingale said, "I can't offer (creditors) much enthusiasm." Tower's 40,000 employer-based beneficiaries will be switched to other HMOs. L.A. Care, the "quasi-government body" that oversees Medi-Cal programs run by seven insurers in Los Angeles County, will assign Tower's Medi-Cal beneficiaries to new plans (Gellene, Los Angeles Times, 9/28).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.