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Health Plan Resumes Payments to Doctors

March 21, 1989

LOS ANGELES (AP) _ Maxicare Health Plans Inc., which is reorganizing in federal bankruptcy court, announced it has resumed payments to doctors that had been suspended last week.

The nationwide health maintenance organization also conceded Monday that some members encountered difficulties getting served by doctors or pharmacies following its filing Thursday under Chapter 11 of the U.S. Bankruptcy Code.

There have been scattered reports of Maxicare members being refused care since the bankruptcy filing. Spokeswoman Tobi Nyberg acknowledged Monday there had been problems, but said the company, with a court order as leverage, was moving aggressively to ensure uninterrupted service.

″There have been instances of denial of care,″ Ms. Nyberg said. ″Where that has happened we are addressing that and making sure that quality medical care continues to be provided to our members.″

As is customary in bankruptcy cases, Maxicare on Friday obtained an injunction ordering doctors and others with whom it contracts for medical care to honor existing agreements with the company.

The order, issued by U.S. District Judge John Wilson, also bars regulators in various states from seizing the company.

The Los Angeles-based HMO, which has been struggling with losses for two years, has 1 million members in 13 states under the names Maxicare, HealthCare USA and Health America.

The reorganization covers Maxicare operations in Alabama, Arizona, California, Illinois, Indiana, Louisiana, North Carolina, Ohio, Pennsylvania, South Carolina, Texas and Washington. Because of the way it is regulated, Maxicare’s Wisconsin HMO isn’t included in the bankruptcy filing, made in U.S. District Court in Santa Ana.

Maxicare’s bankruptcy attorney, Leon Marcus, said last week the timing of the bankruptcy was partly determined by fear that regulators might seize the company in states where it couldn’t maintain required cash reserves.

HMOs like Maxicare offer members medical care for a prepaid, fixed price, rather than on a pay-per-visit basis. The company doesn’t own hospitals or clinics, but rather, contracts with doctors to treat its members.

The company hasn’t turned a profit in two years, and in the first three quarters of last year, lost $250 million. Analysts blame an ambitious expansion plan that saddled the company with $450 million in long term debt, and a general squeeze on the industry brought on by spiraling medical costs.

In the last year, Maxicare has pared itself down from 2.3 million members to 1 million members by selling or closing about 20 unprofitable health plans in 16 states.

Also Monday, the company revealed that Thomas A. Zimmerman, executive vice president and chief financial officer, resigned.

Zimmerman, a former vice president for finance at entertainment conglomerate MCA Inc., was part of a new management team installed in September 1988 after Peter Ratican was named to head Maxicare.

Ratican, who most recently was president of ailing De Laurentiis Entertainment Group Inc., replaced Chairman Fred Wasserman and President Pamela Anderson, the husband-and-wife team who founded the company in 1973.

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