Watts Health Foundation Files for Bankruptcy
Watts Health Foundation, which runs not-for-profit HMO UHP Healthcare, on Tuesday filed for bankruptcy protection, the Los Angeles Times reports. The hospital owes an estimated $50 million to $100 million to creditors, more than $15 million of which is to hospitals, including Cedars-Sinai Medical Center, University of Southern California University Hospital and Martin Luther King/Drew Medical Center.
According to the Times, Watts Health's unpaid debt appears related to a 30% decline in membership in the last several months. In addition, regulators said UHP did not have controls in place to monitor hospitalization rates and other services provided to members, which led to unnecessary costs.
Watts Health covers 75,000 members through its medical plan and 15,000 members in a dental plan. Most of its members are Medi-Cal and Medicare beneficiaries. Under federal bankruptcy law, hospitals are required to continue providing care for Watts Health members during bankruptcy proceedings.
Cindy Ehnes, director of the Department of Managed Health Care, said Watts Health did not give the state the required 10 days' notice before filing for bankruptcy. Had it done so, DMHC officials "might have expressed concerns about the quality of the management and put in place a conservator," Ehnes said. Watts Health "forestalled that" action by not providing notice, she said, adding that DMHC is "very concerned about anything that has the potential to destabilize hospital or medical group finances in the area."
Watts Health executives did not indicate why they did not provide 10 days notice before filing.
Gary Klausner, a bankruptcy attorney representing Watts Health, said the organization plans to use the bankruptcy protection to conduct "business as usual" and reorganize.
In the meantime, Watts Health will retain its 300 employees, including UHP CEO Curtis Owens, and continue providing coverage for members, according to Klausner. He said, "Our management is in place, and we have sufficient cash reserves," adding, "We are working with our creditors to develop a business plan and hope to emerge from this within a few months" (Girion/Vrana, Los Angeles Times, 6/3).