Doctors Health files for bankruptcy protection Owings Mills group lost $40 million last year

Health care

November 18, 1998|By M. William Salganik | M. William Salganik,SUN STAFF

Doctors Health Inc. of Owings Mills has filed for bankruptcy protection and reorganization.

Company officials could not be reached for comment on the Chapter 11 filing. But Blue Cross officials confirmed that Doctors Health has canceled its largest remaining contract, under which it cared for about 8,800 Blue Cross HMO patients.

Dr. Scott Rifkin, who resigned as chairman of Doctors Health in April but remains a stockholder and a participating physician, said yesterday that he believes the company has about 25 employees managing medical practices. As recently as two months ago, it had about 150 headquarters staff, but many worked on contracts that since have been canceled.

Creditors with the largest claims, according to the filing in federal bankruptcy court late Monday, are HBO & Co., an Atlanta-based health data company, $397,084; and Health Care Automation (HCA) Inc. of Owings Mills, $139,008.

Perry Snyder, chief executive officer of HCA, said his company had been processing claims for Doctors Health. HCA has replaced its Doctors Health business with a larger contract with Genesis Health Ventures, which will involve doing some work Doctors Health used to do. Snyder said HCA, with about 200 employees, has added about a dozen.

This is the latest in a series of troubles for Doctors Health in particular, and in general for companies that assemble groups of doctors to manage HMO contracts.

"The premises are still valid, but there's no question that [those companies] overreached," said Jonathan Weiner, professor of health policy and management at the Johns Hopkins School of Hygiene and Public Health.

The companies assemble groups of physicians, sometimes by buying and managing practices, sometimes through joint contracting. Then, they agree with a health management organization to provide care in return for a fixed fee per member per month. If care costs exceed the fixed payment, the company loses. Doctors Health lost $40 million in the fiscal year that ended June 30.

Ernest Viscuso, vice president for network contracting, development and services for Blue Cross and Blue Shield of Maryland and the National Capital Area, said that, until Saturday, Doctors Health had been managing care and processing claims for 7,000 commercial patients and 1,800 Medicare members for Blue Cross and Blue Shield HMOs.

Viscuso said he hoped that the change would be invisible to patients, who would continue to see the same doctors. Those doctors will send claims and approval forms to Blue Cross rather than to Doctors Health.

Rifkin said some doctors who have been contracting with Doctors Health might experience short-term cash-flow problems, but that doctors could participate in other insurance contracts. Patients should not be affected, he said.

Over the past few months, Doctors Health lost its largest contract -- one that provided 56 percent of its managed-care revenue -- when NYLCare announced that it was dropping its Medicare HMO program in Maryland and some other states.

Stewart B. Gold resigned as chief executive officer last month. He said the move was voluntary at a time the company wanted to cut administrative costs.

Also locally, New American Health, the managed-care contracting arm of North Arundel Health System, based in Glen Burnie, announced in September that it was shutting down. And Pioneer EyeCare, based in Pikesville, is selling the practices it owns, in some cases back to the physicians from whom it bought them.

Pub Date: 11/18/98

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