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Hospital Files Chapter 11 Bankruptcy To Escape HMO Contracts

Posted By admin || 19-Sep-2009

Central Lawn of AIIMS According to an article in the LATimes, Downey Regional Medical Center filed for Chapter 11 bankruptcy, stating that it would use bankruptcy to get out of "money-losing" HMO contracts. They article said: "The private, not-for-profit, 199-bed hospital said that it expected to emerge from bankruptcy within a year and that all services would remain open...It also plans to emerge with a new business model that excludes HMO patients in favor of patients with preferred provider organization (PPO) health insurance." Downing reported losses totaling $100 million due to unfavorable HMO contracts which pay hospitals a set fee per patient per month, regardless of the treatment costs for those patients. By contrast PPO contracts pay hospitals a fee for each service provided to patients, creating a much more lucrative arrangement for hospitals. However, patients who cannot afford PPO health insurance may be the ones who lose out financially. Many health insurance consumers cannot afford PPO health insurance which is considerably more expensive. If Downey's bankruptcy plan includes excluding HMO patients, what type of example does that set for other health providers? How many other hospitals and medical professionals will use bankruptcy in the future to escape HMO contracts and refuse service to HMO patients who make up the majority of those using health insurance?

(source:,0,5454518.story )

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