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PUBLICLY, THE LOSSES were, blamed on unpaid bills and the Medicare cuts folded into the federal Balanced Budget Act. But while St. Vincent Infirmary Medical Center and the University of Arkansas for Medical Sciences were compiling record losses from the more obvious forces pressuring health care providers, they quietly soaked up buckets of additional red ink last year to ball out a health maintenance organization.
In July 1999 three years after it helped launch QCA Health Plan Inc. as a hedge against cross-town rival Baptist Health UAMS gave QCA $1 million and took an 11.59-percent share of the ailing health plan to help keep it afloat. The unusual purchase was flagged as questionable by private auditors and its value on the balance sheet was lowered to zero.
UAMS reported $9.6 million in losses to Medicare officials at year's end and placed 90th among 91 hospitals ranked according to net income by Arkansas Business.
On Nov. 29, as part of a $9.15 million bailout engineered by OCA's interim chief executive officer, Tom Brown, and Insurance Commissioner Mike Pickens, St. Vincent Infirmary Medical Center suspended $3 million in QCA accounts receivable and moved the unpaid bills to its list of debts. In return, St. Vincent received a convertible surplus note for subordinated debt.
The note can only be paid off when QCA becomes profitable and only with Pickens' permission, but St. Vincent Health System could exchange the note for $3 million in QCA equity. That would put it in a position similar to that of Baptist
Health, which owns a quarter of Arkansas Blue Cross Blue Shield's HMO, Health Advantage. ABCBS owns half through a company called US Able. The remaining 25 percent is owned by 250 affiliated doctors.
In a Medicare cost report filed for the period ending Aug. 31, 1999, St. Vincent Infirmary and Doctor's Hospital reported combined losses of $2.6 million.
By year's end, St. Vincent Health System chief financial officer Rick Canady said the system had lost $700,000 and written off another $7.5 million in unpaid bills - for a total loss of $8.2 million.
QCA reported the highest Arkansas losses of any HMO doing business in the state during 1999 - $10.2 million.
Canady said last week the $3...