HMO Bankruptcy, Positive News?
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Hello, everyone.
In the April 1999 Review of Ophthalmology I wrote an article titled "HMO Bankruptcy: Don't Get Left Holding The Bag" (page 34). That article detailed the problems providers were having collecting monies owed by failing or failed healthplans.
Now, a year later, there's interesting news. This article from the Boston Globe was on the wire services today.
Gil Weber
Hospitals, doctors, to recoup payments under new law
By Kathleen Cannon, Associated Press, 4/6/2000 19:52
TRENTON, N.J. (AP) New Jersey hospitals and doctors left holding the bag for $150 million after two HMOs went bankrupt in the late 1990s will be partially reimbursed under a bill signed by Gov. Christie Whitman Thursday.
Health care providers will have to forgive $50 million, but the state and the surviving HMOs will each pony up $50 million to cover the remaining debt, under the controversial legislation Whitman signed at a New Brunswick hospital.
"That's an appropriate balance. It gives a lot of these hospitals the money that they weren't sure they were going to get and keeps them in the black," the governor said.
The bill, which was fiercely fought by the managed care industry, reimburses the health care providers that were owed money by the now-defunct HIP Healthcare of New Jersey and the American Preferred Provider Plan.
HIP went bankrupt last spring, APP in 1998. As a result, more than 200,000 New Jerseyans were left without health insurance coverage, "and we had a crisis," the governor said.
"But the crisis was averted, and it was averted thanks to the state's hospitals and the state's doctors, willing to step in and assume a burden in spite of the fact that it might mean real financial disaster for them."
The state will tap tobacco settlement funds to fulfill its share. HMOs cannot pass their new costs to ratepayers, under the new law.
"It was a bad bill when it was proposed. And now it's a bad law," said Paul Langevin, of the New Jersey Association of Health Plans, a managed care trade group that has threatened to sue to overturn the law.
Health insurance representatives have called the plan a dangerous precedent that forces surviving HMOs to bail out a competitor by paying their debts to health care providers.
John E. Matuski, chief executive officer of St. Peter's Medical Center, where the governor signed the bill Thursday, said the new law is a workable compromise.
St. Peter's was socked with $6 million in unpaid claims after HIP went out of business, he said. The HMO was founded in New Brunswick, and it had a concentration of patients in central New Jersey.
"When HIP went under, it was devastating," he said. Matuski said his staff geared up to voluntarily treat 100 HIP cancer patients in the days after the company folded.
"The real issue for us is, we never hesitated to continue to provide care to HIP patients even though there was no guarantee we'd ever get paid," he said.
Maury Coffee, vice president of Virtua Health, said his five southern New Jersey hospitals will recoup two-thirds of their $7.5 million in unpaid HIP claims.
"It certainly is a reasonable solution," he said. But a critic of the measure said it lets the failed HMOs off the hook.
"This law is a 'Get Out of Jail Free' card for HMO executives who collected inflated salaries," state Sen. Shirley Turner, D-Mercer, said in a statement.
Other critics have chided the governor's oversight of HIP's demise. State regulators approved a deal in July 1997 to have HIP turn over most of its assets to a for-profit company, PHP Healthcare Corp. Within eight months of the transaction, though, PHP stopped paying health care providers, leaving HIP heavily in debt.
Whitman on Thursday said the new law is the state's answer to that failure.
"It's obviously a recognition that we need to be partners in the solution of this," she said.
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