Unified Physicians of Washington is in trouble, contrary to the rosy financial picture painted just five months ago by executives of the physician-owned HMO.
The Federal Way, Wash.-based plan last week agreed to operate under direct state supervision, and executives who said it was doing fine resigned. They are President and Chief Executive Officer James Peterson and Mike Dorris, vice president of finance.
In May Peterson told MODERN HEALTHCARE the 43,300-enrollee plan expected to break even next year (May 12, p. 14). According to the state, however, the plan was more than $435,000 in the red as of July 30.
Losses put it in jeopardy of falling below state operating requirements.
Washington requires that the assets of HMOs exceed their liabilities by $1 million. It doesn't set a minimum reserve requirement, but plans are expected to carry enough funds to cover claims and refund premiums if necessary.
UPW lost $4.8 million on revenues of $21.1 million in 1996, according to the state.
The first physician-owned HMO on the West Coast, UPW was launched three years ago with an initial capitalization of $7 million from more than 2,000 Washington physicians and physician assistants. Executives said the plan would offer lower prices without sacrificing quality because doctors were in the best position to control costs.
As it turned out, costs got the plan in trouble. In particular, administrative expenditures exceeded those at similar plans.
The insurance department warned UPW this past summer that it was below net-worth standards and had 90 days to repair the shortfall. Subsequent reports showed the carrier's financial condition was worsening, not improving, the department said.
Earlier this month, insurance department attorneys moved to assume control of UPW. Last week, to avoid being placed in receivership, the plan agreed to operate under the department's oversight until Insurance Commissioner Deborah Senn is satisfied with its condition.
"I truly want to see them succeed in their business," Senn said. "This cooperation holds great promise for restoring Unified Physicians and enriching the choices that consumers have."
UPW and the insurance department will restructure company finances, reduce administrative expenses and reorganize the management structure. The plan has to bring down its administrative costs, particularly, said Robert Harkins, the insurance department's public relations director.
"We really do have faith that this is going to turn things around," Harkins said.
About 90% of UPW's contracts are with the state government, providing coverage for Medicaid recipients and enrollees in a state-subsidized insurance program.