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Insight into federal and state health care legislation & CMS regulation

New Jersey Sues Management Co., Seeks HMO's Reins

New Jersey's Department of Banking and Insurance last month sued PHP Healthcare, charging that the medical management company placed HIP Health Plans of New Jersey in a "financially hazardous" situation. PHP, through its New Jersey subsidiary, Pinnacle Health Enterprises, last year signed a 20-year management contract with HIP.

After discovering that HIP had a negative net worth of $20 million in August, the state ordered Pinnacle to come up with a financial recovery plan for the HMO. But the state rejected the plan, and on Oct. 27 ordered HIP to cut all ties to PHP and Pinnacle. Two days later, Pinnacle CEO Paul W. Frankel, M.D., was found dead in his home, with a suicide note that blamed HIP's financial troubles for his decision to take his life.

A hearing on the state's request to place HIP in rehabilitation was postponed Nov. 5. The Medical Society of New Jersey asked to be represented at the hearing. The society represents some of the 7,000 doctors who hold contracts with HIP, and other providers to whom Pinnacle owes millions for care already delivered.

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