After recently being stripped of its state Medicaid contract, a Mobile, Ala.-based HMO affiliated with a university hospital system laid off about half its employees last week.
The layoffs at the HMO, PrimeHealth, affected about 90 people.
PrimeHealth was notified by state officials last month that its Medicaid HMO contract would be discontinued Oct. 1. The Medicaid HMO was begun in 1997.
PrimeHealth, which was formed in 1984, is operated by the University of South Alabama Foundation.
Earlier this summer, two university trustees sued the foundation, claiming it has pumped more than $35 million into PrimeHealth over the past three years to keep it afloat. It's money the university and the three hospitals of the University of South Alabama contend should have been spent on them.
The Medicaid HMO shutdown came after three clinics pulled out of the HMO's network, allegedly over back claims, according to a report from John Harkey Jr., whose Nashville-based managed-care publishing and research firm tracks about 700 health plans nationally.
A PrimeHealth spokeswoman said its Medicaid HMO, called BAY (Better Access for You) Health Plan, had about 40,000 enrollees. With the Medicaid HMO gone, PrimeHealth is left with about 40,000 commercial enrollees.
For the six months ended June 30, PrimeHealth posted net income of $6.3 million on total revenues of about $54 million, according to Harkey, who has reviewed the plan's recent financial filings with the state department of insurance.
Several months ago, PrimeHealth received a $14 million infusion from the state when the plan's Medicaid contract was adjusted upward.
Kathryn Parks, interim executive director of PrimeHealth, was unavailable for comment at deadline.
However, Parks was quoted in Harkey's report as saying "BAY Health is over and will not likely be revived."