Corpus Christi Caller Times Caller.com - Florida firm makes bid to buy ailing Certus HMO

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Thursday, October 14, 1999

Florida firm makes bid to buy ailing Certus HMO
Buyers of HMO that has 7,500 S. Texas members plan to focus on controlled growth
By Andrea Jares
Caller-Times

A group of Florida investors has filed plans with the Texas Department of Insurance to save Certus Healthcare, a health maintenance organization serving South Texas.
   Dr. Kiran Patel, owner of Tampa, Fla.-based Wellcare Health Plans, filed to buy the beleaguered HMO. The Patel family owns hotels and shopping centers in the United States and India.
   The Texas Department of Insurance is evaluating the application for the merger and could make a decision by Dec. 1, said Peter Hernandez, Certus' CEO who is employed by Wellcare. The application was made by Wellcare attorney Sandip I. Patel, Wellcare president Pradip C. Patel and Pallavi Patel, a brother of Kiran Patel.
   Wellcare took over the management of McAllen-based Certus three weeks ago, Hernandez said. In the meantime, all the assets still belong to Certus' owner, Canada-based Novopharms.
   Hernandez said Wellcare's offer to buy Certus is welcome.
   "I think for Certus and its membership, it's the best thing that can happen for them," he said.
   Department of Insurance figures show that Certus had a net loss of $5 million at by the middle of the year. The company lost $1.2 million in the first three months of 1999.
   Hernandez said he could not confirm the numbers but said Certus is not drawing as much red ink now.
   Certus also has lost half of its membership - some 10,000 members - since the beginning of the year, Hernandez said. Members left when physicians were not getting reimbursed for services, he said. Certus' new management is working to pay these physicians on time.
   This led to false rumors that Certus had filed for bankruptcy.
   Hernandez said Wellcare took over the Certus management as a way to assess whether Certus was worth buying. He said Certus had problems with growth that Wellcare is ready to address and is already moving toward fixing it.
   Controlled growth is the key to the new Certus, Hernandez said. Pricing should reflect long-term effects of the market, evening out sudden jumps in prices, he said. Certus is also looking at bringing more variety to the health plans that it offers, he said.
   McAllen-based Certus has about 7,500 members in an area that stretches from Lavaca County to the Rio Grande Valley. This includes Aransas, Brooks, Jim Wells, Bee, Kenedy, Karnes, Kleberg, Live Oak, McMullen, Nueces and Refugio counties.
   The Patels started Wellcare in Florida in 1998, said Nancy Gareau, vice president of operations for Wellcare in Florida. The company is now the second-largest Medicaid HMO in Florida with 100,000 members, she said. This year, Wellcare acquired HMOs in Connecticut and New York.
   Insurance commissioner Jose Montemayor said he is supportive of a takeover if it means that it will save Certus.
   The fourth quarter of 1995 was the last quarter in which HMOs turned a profit, he said. Since then, they have lost $1.15 billion in Texas.
   Montemayor said that on average, Texas HMOs lose $8 per customer per month.
   While profits have been down, customer growth has exploded, Montemayor said. HMOs are responding in tough financial times by consolidating, raising premiums and cutting expenses.



Business writer Andrea Jares can be reached at 886-3678 or by e-mail at jaresa@caller.com

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