Family Health Care Announces Failure

SIMI VALLEY —  Under the weight of a growing $6-million debt, Ventura County’s largest medical group laid off 300 employees and moved toward dissolution Monday, leaving 135,000 displaced patients to contact their health insurers to arrange for future coverage.

“It’s a very sad day for our patients and for health care in Ventura County overall,” said Mari Zag, spokeswoman for the Simi Valley-based Family Health Care Medical Group.

In addition to creating havoc for patients, Family Health Care’s failure hurts 200 primary care doctors and about 700 specialists affiliated with the plan in Ventura County and the San Fernando Valley. It also leaves about a dozen hospitals in Ventura and Los Angeles counties with bad debts.

The 7-year-old medical group--which operated four clinics and acted as a middle man between a network of doctors and health maintenance organizations--had teetered on the brink of closure for months.

The California Medical Assn. sought a $3-million emergency loan last month to keep it in business, maintaining that there were no other local physician groups that could absorb so many extra patients.

Last Friday, however, an 11th- hour meeting with the group, insurance company medical plans and state officials led nowhere.

Zag said the group’s failure was assured Monday after two large health plans canceled contracts and two others either failed to make promised October payments or grossly underpaid the amount due.

Family Health’s largest contractors were California Care Blue Cross, with about 33,000 patients, and Health Net and PacifiCare, each with more than 20,000 patients, Zag said. The group had contracts with 16 health plans, including Cigna, Aetna U.S. Healthcare, Blue Shield, Maxicare, and three senior-care programs.

Statewide, dozens of physician groups that provide health care for insurance company plans have failed in recent years. They usually cite low payments from managed-care organizations as the problem.

“We’re certainly not alone,” Zag said. “But I’ve been in health care for 25 years, and this is the worst [business climate] I’ve ever seen.”

Zag said she understands that affected health plans are attempting to shift their patients en masse to other physician groups. Another option would be for health plans to contract with doctors directly, bypassing such organizations as Family Health Care. That option is favored by many physicians, but not HMOs.

Family Health Care operated clinics in Camarillo, Thousand Oaks and two in Simi Valley.

Only one was set to be open today, at 2876 N. Sycamore St., Suite 101, in Simi Valley. It will provide urgent care for patients in the middle of treatment, who are receiving follow-up care after surgery, and pregnant women.

“It will be urgent care from 9 a.m. to 9 p.m, at least for right now,” Zag said. “And many of our physicians will continue to provide care on their own. They have an obligation both legally and professionally not to abandon patients.”

Patients should call their health plan for authorization before receiving care, she said.

Monday was an emotional day for employees and patients alike as word spread that Family Health clinics and offices would close for good at 5 p.m.

Kathy Parker, a patient in Simi Valley, was told her clinic would shut down but that other offices would remain open. When she saw the employees packing up, she had her doubts.

“It’s pretty scary,” Parker said. “I like my doctor, and I don’t want him to go away.”

At the group’s Jones Way claims office in Simi Valley, workers packed up belongings after they were told at 1 p.m. that they had to clear out their desks before 5 p.m.

Kathie Herman, a medical records clerk in Simi Valley, cried as her husband helped her carry plants, pictures and a Tweety Bird doll to her car.

“Even after everything that’s happened, I can’t say anything bad about this company,” said Herman, 60, a nine-year employee. “It’s been like a second home--one big family.”

The effects of the closure rippled across Ventura County, since doctors and hospitals countywide have contracts with Family Health.

Dr. Jody Balloch said her family practice partnership will take a huge hit.

“About 70% of our patients are Family Care--that means thousands,” she said. “We have had to lay off two of our 11 employees already,” because Family Health had paid only part of its debts since April.

Balloch is still obligated to provide care for six more months, she said, but she will receive nothing from Family Care.

“We’re in a bad situation,” she said. “We will continue to see HMO patients, but not get paid. And for the patients who need referrals, we have no specialists to send them to because most of the specialists terminated their contracts for lack of payment.”

Dr. Kenneth Saul said his five-doctor Thousand Oaks office will continue to care for Family Health patients, although the group owes them $32,000 and its contract was canceled last month.

“We’re continuing to see them,” he said. “We feel a moral obligation to treat these patients and just hope for the best on the money part.”

Specialists were hurt most when Family Health encountered hard times last spring. They have not been paid since April, while family doctors who provide primary care continued to be paid a set amount per month per patient until now.

Thousand Oaks neurologist Philip B. Maurice dropped his HMO contracts more than a year ago. But he still sees his longtime HMO patients. That includes a 12-year-old boy on the Family Health Care plan who has a history of epileptic seizures. The boy and his family learned Monday about the company’s failure, only because Maurice’s assistant spent hours on the phone trying to get authorization for a brain wave test.

On her fifth phone call, assistant Meagan McKinstry said she reached a company representative who told her there could be no authorization.

“We are bankrupt, [so] you might want to tell your patients that,”’ McKinstry said she was told. The boy’s test was postponed until his mother figures out how to pay the $300 tab.

Maurice said he’ll work with any of his remaining patients from the Family Health Care Medical Group to ensure they get the care they need.

“This today, in a microcosm, is the precise reason HMOs are going [belly] up,” Maurice said. “When they try to provide quality health care at bargain-basement prices, it just doesn’t work.”

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Times Community News reporter Paul Anderson contributed to this story.