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Calif. Care Company May Dissolve

June 17, 1998

NEW YORK (AP) _ A California managed-care company formed three years ago to compete with the state’s large health maintenance organizations is being shut down, The New York Times reported today.

California Advantage planned to file for bankruptcy today, said Steven Fisher, a lawyer for the organization.

Existing contracts, some of which last until May, will be honored by the company’s insurer as California Advantage is slowly liquidated, the Times said.

The Oakland, Calif.-based company was formed in January 1996 by the California Medical Association and 7,500 of its member physicians who invested $1,000 each.

Managers had hoped to enroll 3.3 million people within 10 years, but the company has attracted only 6,000 subscribers, the Times reported. At least 40,000 subscribers were needed to break even.

``They had a very well-intentioned and very naive strategy,″ said Peter Boland, a health care consultant. ``It’s a sobering event: One of the country’s biggest medical organizations fails miserably.″

California Advantage tried to attract corporate investors but they were reluctant because the association did not want to sell a majority interest in the plan and yield physician control, the Times said.

California Advantage also tended to sign up patients who were sicker and costlier to treat because it offered subscribers easy access to thousands of specialists throughout the state.

``It was a noble and worthy venture,″ said Dr. Jack C. Lewin, a family practitioner and executive vice president of the CMA. ``Everybody liked the philosophy of putting patients first and profits second.″

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