Detroit Hospitals Seek $75 Million from Management of Failed HMO

In a lawsuit pending in Wayne County Circuit Court arising out of the demise of the Detroit-based OmniCare, a once-large HMO servicing Medicaid recipients, several major Detroit area hospitals are seeking $75 million in damages from United American Healthcare, the former manager of the failed HMO, OmniCare.

In their filing, Beaumont Hospital, Henry Ford Hospital, the Detroit Medical Center, St. John Hospital, Trinity Health and Oakwood Hospital requested that Judge Isidore Torres award damages in the tens of millions of dollars for United’s mismanagement of Omnicare.

The hospitals allege that United American Healthcare breached its management agreement with OmniCare and mismanaged OmniCare, and that certain officers and directors of United American breached their fiduciary duties to OmniCare.

In the late 1990s, the state of Michigan filed a petition against OmniCare, putting OmniCare into supervision, then rehabilitation, and, when it was determined that OmniCare could not be salvaged, then into liquidation. The state’s filings asserted that OmniCare was operating with insufficient capital requirements, in violation of state law.

During the proceedings in Ingham County Circuit Court, United American Healthcare was found to have not paid many health care providers for tens of millions of dollars of medical care rendered to OmniCare Medicaid insureds. Yet, during this same period, United American Healthcare was paid over $50 million in management fees by OmniCare, the complaint alleges.

The hospitals’ attorney, Gerard Mantese, of Troy, Michigan, noted that, “during the liquidation process, the court approved an order allowing the hospitals to pursue claims against United American HealthCare and various of its officers and directors for mismanaging OmniCare.”

Source: Mantese and Rossman, P.C.
www.manteselaw.com