Maxicare Will Not Challenge State Takeover

Maxicare Health Plans Inc. agreed yesterday not to challenge its takeover by the state Department of Managed Health Care, the Los Angeles Times reports. By agreeing to the takeover, Maxicare will continue to handle "day to day" operations, but state-appointed conservator J. Mark Abernathy will have final approval over any sales or transfers of the managed care company's assets (Gellene, Los Angeles Times, 6/1). The DMHC "seized control" of Maxicare last week in an attempt to prevent the Los Angeles-based HMO from "slipping into insolvency." However, the company then "unexpected[ly]" filed for protection in federal bankruptcy court, which could have "thwarted" state efforts to ensure the HMO makes its payments to hospitals and doctors (California Healthline, 5/29). The new deal removes the "legal cloud" over the managed care company and clarifies that the state is in control of Maxicare's bank accounts. Daniel Zingale, director of the DMHC, said, "The banks did not know who to release funds to." He added that the agreement "resolves the potential state-federal conflict" over control of the managed care company. Zingale said that Maxicare has "operated smoothly" since the takeover and that it is "current on obligations" incurred since May 25. While Maxicare is seeking a buyer for its California plans, the Times reports that it is "unlikely" that another insurer would want to take over Maxicare's contracts with doctor groups. "The contracts are what got them into trouble in the first place," Greg Crawford, an analyst with Fox-Pitt Kelton, said (Gellene Los Angeles Times, 6/1).