The Illinois Department of Insurance’s case to put the state’s seventh-largest health maintenance organization out of business may hinge on whether Nat Shapo jumped the gun.
As director of the insurance department, Shapo last month declared Richton Park-based American Health Care Providers Inc. insolvent, alleging mismanagement of the HMO after a financial review.
Shapo and his regulators say American had $25 million more in liabilities than assets and therefore should be liquidated. The insurance department requires HMOs to be in the black by at least$1.5 million.
Now that lawyers on behalf of American and Shapo’s department have begun a battle in Cook County Circuit Court Judge Aaron Jaffe’s courtroom to decide whether American should be liquidated, debate has centered on the HMO’s balance sheets, unaudited financial statements and the credibility of Shapo’s regulators.
If American loses its legal fight, nearly 90,000 people would have to find new health insurance, but the state would protect American’s enrollees from being held liable for unpaid bills.
American, however, began last week an aggressive defense of its operations, pointing to a 1999 annual statement filed March 1–after the state moved to liquidate–that showed the HMO barely above legal solvency requirements, at $1,543,925.
Furthermore, a key state insurance regulator testified the state used some unaudited numbers and moved to liquidate the company before financial examiners completed their review of the HMO. American’s legal team, from Lord, Bissell & Brook, wants to know if Shapo’s regulators are “abusing” their powers.
“The state is trying to drive this company out of business,” Ronald Lepinskas, one of American’s attorneys, said in court.
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But the insurance department pointed to American’s history of unpaid bills, low cash reserves and complaints from doctors, hospitals and consumers that led to putting the HMO under supervision in 1997. “This is a company under constant regulatory supervision,” Francis Higgins, an attorney on behalf of the insurance department, said last week at the court proceedings, which are expected to continue later this month.
No matter how the trial turns out, the results likely will be watched closely by Gov. George Ryan and his staff.
The 32-year-old Shapo is viewed as a rising star in the governor’s administration and was research director of Ryan’s gubernatorial campaign. Meanwhile, American Chairman Asif Sayeed was one of the Ryan campaign’s biggest individual contributors, donating more than $40,000 from his companies before the November 1998 election, according to records.
Satisfied to be single: Despite losing $25 million on operations in the last two years, Mercy Hospital and Medical Center doesn’t plan to give up its 150-year tradition as an independent.
Mercy last week hired outside consultants to help turn the South Side facility around in the wake of board discoveries that the management team under former Chief Executive Charles Van Vorst was using the hospital’s investment income to pay bills, the hospital said. Van Vorst has been unavailable for comment.
“The hospital has good fundamentals, is in a thriving neighborhood and has a good revenue base of about $500 million,” said board Chairman Donald Petkus. “The mandate [for the consultants] is to return the hospital to firm footing.”
Building on the block? Catholic Health Partners has signed a letter to discuss selling Columbus Hospital’s 12-story north building to Chicago-based NeuroSource Inc., which helps neurosurgeons and neurologists expand their practices. Sources say the building would be used to expand the Chicago Institute of Neurosurgery and Neuroresearch, founded by noted neurosurgeon Leonard Cerullo.
Catholic Health Partners, which awaits an offer from NeuroSource, has been consolidating its inpatient operations from Columbus to nearby St. Joseph Hospital.
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E-mail Bruce Japsen at [email protected]