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Health Plan Resumes Payments to Doctors

March 21, 1989

LOS ANGELES (AP) _ Maxicare Health Plans Inc., the nationwide health maintenance organization that is in bankruptcy proceedings, said Monday it had resumed paying the doctors who treat plan members.

Maxicare also acknowledged that some clients had trouble getting served by doctors or pharmacies after the bankruptcy filing Thursday, but said it was moving to ensure that service continued uninterrupted while the company seeks to reorganize under Chapter 11 of the U.S. Bankruptcy Code.

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 filing covers 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.

On Monday, the company said it had resumed payments to doctors that had been suspended last week.

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. Maxicare’s bankruptcy attorney, Leon Marcus, said last week the timing of the bankruptcy was partly determined by fear of such moves by regulators in states where the company 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.

Since the bankruptcy filing, there have been scattered reports of Maxicare members being refused care. Spokeswoman Tobi Nyberg acknowledged Monday there had been problems, but said the company, with the 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.″

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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