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Weiss Ratings: 10 HMOs Weak, Nearing Failure

Ten HMOs, covering more than 500,000 members, are in serious danger of collapsing, according to Weiss Ratings Inc. Of the 10 HMOs all rated E-minus ("very weak"), two — PriorityPlus of California and Rio Grande HMO, of Texas — have over 100,000 members.

Weiss counts 14 health plans that have failed this year. Only one plan achieved Weiss's top rating of "A," Blue Shield of California. Three others earned A-minus ratings.

On the upside, Weiss says most larger health plans have returned to profitability, and the end of the industry's financial decline may be in sight.

Oxford Health Plans is a case in point, turning its first profitable quarter in two years. Cost-cutting helped Oxford post third-quarter net income of $28 million. Two days before its announcement, Oxford President William Sullivan resigned to "pursue other interests." Sullivan was the last senior manager left from the HMO's heyday, which ended on an October 1997 day that saw its stock plummet 62 percent in a single trading session.

The bleeding is almost over for Kaiser Permanente, which has lost half a billion dollars in the last two years. Kaiser posted a $29 million net loss for the third quarter, down from its $89 million third-quarter loss last year. The company says if its North Carolina and Northeastern operations — which are being sold — were removed from the equation, it would have turned a $107 million surplus.

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