Maxicare to Cut 9,200 Members on Medicare

Maxicare Health Plans said Tuesday it will drop 9,200 Medicare members in California and Indiana as of Jan. 1, following a trend throughout the managed care industry to back out of the federal entitlement program.

The company will continue to serve its 9,000 Medicare members in Los Angeles and Orange counties, but will close programs in San Bernardino and Riverside counties, affecting about 3,000 people. It also will close its Indiana program, affecting 6,200 people.

Like its competitors, Los Angeles-based Maxicare is withdrawing from markets where the amount of money paid by the federal government to take care of seniors is not enough to cover the cost, said Maxicare Executive Vice President Susan Blais.

The retrenchment is part of a restructuring in which Maxicare, which has been struggling since it crashed into bankruptcy nearly a decade ago, is attempting to rebuild its financial strength as well as its reputation in terms of responsiveness and quality.

“We looked at the needs of our members in those areas to see whether we could ensure that our members received the quality of care that they deserved, and we determined that they could not, based on the reimbursements in those areas,” Blais said.

Maxicare’s stock fell slightly on the news, losing 6 cents to close at $1.63 on Nasdaq.

Shares in the company have been volatile for the last month, sinking as low as 88 cents and then more than tripling last week to $2.63.

Greg Crawford of Fox-Pitt Kelton Inc., one of the only analysts who follows the troubled company, blamed the volatility on recent sales of large blocks of the stock by institutional holders.

Maxicare has not commented on the stock movement because the company is in a so-called quiet period--the months preceding a new stock offering during which company executives are constrained by law from saying things that could be interpreted as attempts to boost the value of its shares.

In September, company directors plan to offer what’s known as a rights offering to Maxicare shareholders, in which anyone who owns the company’s stock may purchase 1 1/2 additional shares for $1. The total that anyone can buy is based on the number of shares already held.