California has named a conservator to oversee the day-to-day operations of Lifeguard, a highly regarded, 163,000-member HMO in the San Francisco Bay area. Officials said that as of July 31, the company, based in San Jose, Calif., had a tangible net equity of about $5.9 million -- or about $11.5 million below the required level. The company "failed to demonstrate a fiscally sound operation and adequate provision against the risk of insolvency," according to a complaint filed by the state Department of Managed Health Care. Lifeguard, a not-for-profit established by physicians in 1977, consistently won high marks for quality of care and patient satisfaction, earning a "commendable" accreditation last year from the National Committee for Quality Assurance. Its financial problems were attributed to a lack of substantial negotiating clout compared with larger HMOs and an economic downturn in northern California. In late August, Lifeguard announced it would not proceed with a planned affiliation with Blue Shield of California. At the time, the company issued a statement quoting its chairman, president and CEO as saying, "We are confident in our future, energized by our independence and our focus on our core markets." -- by Michael Romano
Calif. takes over HMO
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