The Health Insurance Plan of Greater New York rushed to the defense of its troubled New Jersey-based affiliate last week by filing a $90 million lawsuit against current and former top executives of PHP Healthcare Corp., the New Jersey plan's medical manager. The suit alleges multiple counts of fraud.
HIP of New York joined HIP Foundation-parent of HIP Health Plan of New Jersey-in the New York State Supreme Court action. The lawsuit names as defendants the company's former President and Chief Executive Officer Jack Mazur, Senior Vice President William Lubin and Senior Vice President and counsel for managed care Jerrold Hercenberg.
During the period covered by the lawsuit, New Brunswick-based HIP of New Jersey paid $345 million in premiums to Reston, Va.-based PHP. The money was supposed to be used to pay claims from hospitals and physicians. HIP alleges that PHP management, through the company's Pinnacle Health Enterprises subsidiary, diverted those funds to PHP, forcing HIP of New Jersey to assume financial responsibility.
As a result, HIP of New Jersey's net worth fell below state-mandated levels, the suit contends, prompting state Insurance Commissioner Jaynee LaVecchia to seize control of the 200,000-enrollee plan last month (Nov. 30, p. 6; Nov. 2, p. 14).
PHP officials declined to comment on the lawsuit.
PHP filed for Chapter 11 bankruptcy in Delaware last month. Pinnacle is seeking to be liquidated under Chapter 7 of the U.S. Bankruptcy Code.
Earlier this month, LeVecchia announced a pact with providers who serve enrollees of HIP of New Jersey. Over a 90-day period, hospitals and doctors will get 75 cents for every dollar of care they provide. In exchange, providers will receive a 30% advance on the $120 million owed them.
Separately, HIP of New York has decided to contract with nongroup physicians. In mid-November, it agreed to add 12,000 private physicians to its panel of 3,000 doctors.
-With Chris Rauber