Aug. 4--HIP Health Plans of Florida, the Hollywood health maintenance organization that has struggled unsuccessfully to meet state financial requirements, will be sold to a physician with a history of purchasing troubled HMOs, according to an agreement announced Thursday.
The announcement could be good news for HIP's 200,000 subscribers, most of whom live in South Florida and have witnessed months of uncertainty about the company's prospects. The HMO's largest contracts are with the school boards of Broward and Miami-Dade.
However, Don Pride, a spokesman for the Florida Department of Insurance, warned that any agreement would have to receive the go-ahead from the state.
'We won't know until we see their plan,' Pride said, when asked how long the review process might take. 'They'll have to make an acquisition filing, and the state will have to approve it.'
HIP is controlled by Health Insurance Plan of Greater New York, which is headquartered in Manhattan and has about 800,000 members in its home state, according to Ron Maiorana, a senior vice president and spokesman.
However, while the New York arm is profitable, HIP in Florida has experienced sharp losses. Most recently, state regulators declared that it fell $4.8 million short of a required $6.3 million cash reserve requirement.
The state demanded the company develop a plan to raise capital. However, it rejected an initial proposal, which would have cut staff, raised premiums and trimmed benefits to Medicare patients, because it didn't resolve the financial shortfall quickly enough.
Maiorana said HIP's problems reflect a generally difficult operating environment for HMOs in Florida. 'In 1999, HMOs lost $143 million in Florida, the worst deficit ever,' he said. HIP, he said, lost $18 million, but the parent covered the shortfall.
'With the sale of HIP Florida, HIP New York's earnings will now be able to stay here,' he said.
The proposed buyout of HIP Florida is being spearheaded by Dr. Steven Scott, a physician entrepreneur from North Carolina. Earlier this year, he purchased Beacon Health Plans of Coral Gables, which had been declared insolvent by the state.
Scott's business interests also operate an HMO in Tallahassee.
'The HMO industry in Florida is undergoing major reorganization and consolidation at this time,' said Scott, in a statement. 'The past few years have been difficult for HMOs and our industry is challenged by the need to adopt provider and member-friendly communication systems and achieve operating efficiencies.'
Terms of the proposal for purchasing HIP Florida weren't disclosed. However, in the Beacon deal, Scott purchased the company by covering its reserve shortfall, or $5.5 million. The shortfall for HIP is $4.8 million.
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