Financial pressures push Clinicas to begin pulling plug on HMO subsidiary

Financial pressures that tightened during the pandemic are pushing Clinicas del Camino Real health system to close over several months an insurance plan covering about 12,000 people on Medi-Cal and Medicare, company officials said.

State regulators said they weren’t properly notified of the move and have opened an investigation.

Headquartered in Camarillo, Clinicas reported a $15 million loss last year, laid off 12 of 13 employees at its subsidiary HMO, AmericasHealth Plan, in mid-March and began a closure process that could take nine months.

Clinicas is a nonprofit system that started as a clinic for farmworkers in the 1970s and now consists of 16 clinics across Ventura County. It operates on a budget of more than $100 million, including about $14 million in federal money.

The decision to close the HMO was fueled by AmericasHealth Plan’s continued losses as well as spiraling costs felt by Clinicas and health care systems nationwide, said Clinicas CEO Dr. Gagan Pawar. She said the move is part of a plan to focus on caring for low-income people and other under-served populations.

"We are refocusing ourselves on what we are good at," she said.

The California Department of Managed Health Care, which regulates insurance plans, learned of AmericasHealth Plan’s pending closure on Monday and immediately opened an investigation, said spokesman Kevin Durawa. The probe focuses partly on the lack of notification documents filed by AmericasHealth Plan, he said. The notice is required directly from insurance plans going through a closure or change of control.

Pawar said both the Department of Managed Health Care and the California Department of Health Care Services, which oversees Medi-Cal plans, were notified of the changes by a consulting company now running the HMO's daily operations. She said Clinicas has not been told of the investigation.

The layoffs and pending closure has stoked false speculation the plan is shuttering immediately, Pawar said. It will stay open perhaps until the end of the year in an "unwinding" process designed to protect continuity of care, she said.

Durawa said in a statement he could not comment on any other aspect of the investigation.

Triggered by financial losses

AmericasHealth Plan, a for-profit company created by Clinicas in 2011, covers about 9,000 low-income people in a pilot program with Gold Coast Plan, the public entity that administers Medi-Cal insurance to more than 250,000 people in Ventura County. In the partnership, started in 2021, as many as 10,000 Medi-Cal members were given the choice of having their coverage handled by AmericasHealth Plan.

The balance of the HMO's enrollees came from similar “plan to plan” contracts with Medicare Advantage insurers including SCAN, Anthem Blue Cross and Central Health Medicare Plan.

Gold Coast officials declined interview requests but issued a news release Thursday stating its partnership with AmericasHealth Plan ended Friday because of the planned closure. Coverage that had been handled by the HMO will transition back to Gold Coast. Patients being treated in the Clinicas system will stay there and will be able to keep their current doctors or pick new ones.

“We will be working closely with the leaders from Clinicas del Camino Real to ensure a seamless transition for these members and the providers who care for them,” said Nick Liguori, Gold Coast’s CEO. “Our top priority is to prevent any interruptions to their care.”

Local health systems to pay more than $70 million in settlement over Medi-Cal claims

Medicare Advantage plans that had assigned patients to AmericasHealth Plan will also take over the coverage over the next several months, Pawar said. Clinicas will continue to provide treatment for all of the patients, she said.

“Patient care will not be disrupted at all,” she said.

Barry Zimmerman, director of the Ventura County Health Care Agency, said the news of the closure sparked initial concerns about care for the HMO’s Medi-Cal patients and possible barriers for treatment authorizations and payments for care. He said the agency was told Gold Coast will cover all those issues.

“I think we’re feeling more comfortable,” Zimmerman said.

Bond rating downgraded

Another Clinicas subsidiary, MedPartners, handled payments to providers and treatment authorizations for AmericasHealth Plan and will continue to do so during the unwinding period, Pawar said.

The decision to begin closing the HMO was driven by regular financial losses incurred by AmericasHealth Plan, Pawar said, describing it as a "loss leader."

Antonio Alatorre, CEO of AmericasHealth Plan until he and other employees were laid off in March, challenged Pawar’s statements, saying the HMO was exceeding projections for the year.

“We were going to end the year with a profit,” he said.

Clinicas faces financial challenges, too. Fitch Ratings, which tracks bond ratings, said Clinicas sustained a $15.3 million loss in operations in 2022. In January, Fitch downgraded the system’s rating regarding bonds issued three years ago but still described the organization as investment-grade, meaning it is expected to meet its obligations.

Such pressures have grown common in health care. Earlier this year, California Hospital Association CEO Carmela Coyle said half of the state hospitals finished 2022 at a financial loss.

Pawar, a physician who served as chief medical officer, was named CEO in November 2021 after the Clinicas board opted not to renew the contract of the system’s long-time leader, Roberto Juarez. She said the system’s financial pressures include inflated costs, workforce shortages and patient visits that fell during the closure.

But the system is recovering and is still healthy, she said, pointing at plans to open an urgent care in Simi Valley in the summer.

"We've turned the corner," she said.

Emily Wadhwani, an analyst with Fitch Ratings, cited the company's turnaround plan on Friday but also said there's a chance the downturn could continue.

"We are in a period of time of pretty sharp performance challenges in healthcare," she said.

Tom Kisken covers health care and other news for the Ventura County Star. Reach him at tom.kisken@vcstar.com or 805-437-0255.

SUPPORT LOCAL JOURNALISM: To see more stories like this, subscribe here.

This article originally appeared on Ventura County Star: Clinicas del Camino Real reveals plan to pull plug on HMO subsidiary