Detroit Medical Center to Acquire OmniCare Health Plan, Ensuring Coverage for 67,000 Medicaid Beneficiaries

The Detroit Medical Center announced April 3 that it will acquire OmniCare Health Plan of Michigan, the largest Medicaid insurer in the region, ensuring coverage for 67,000 Medicaid beneficiaries and 32,000 employees of private companies, the Detroit News reports. OmniCare has suffered financial problems for the past three years and was placed under state supervision at the end of last year after posting a negative net worth (Donnelly, Detroit News, 4/4). Under the agreement, OmniCare will become a wholly owned subsidiary of DMC, which will pay $13.3 million to "rescue" OmniCare from "mounting debt" that included $20 million owed to DMC for patient care. Also under the deal, United American Healthcare, the firm that manages OmniCare's administrative operations, will forgive $2.7 million in managing fees and give the MCO a $2 million advance. With the cash infusion, the Detroit Free Press reports that the MCO will be in "good standing" with the state Office of Financial and Insurance Services (Kennedy, Detroit Free Press, 4/4). DMC spokesperson Howard Hughey said that DMC opted to acquire OmniCare because the MCO's financial situation "threatened" the care of Medicaid patients. "We had two decisions: one was to stop seeing [OmniCare] patients, a large majority of which were Medicaid patients. We weren't going to do that." DMC ended its Medicaid health plan in January of 2000 in order to concentrate on "broader care," complaining that state reimbursements are not high enough for Medicaid patients. However, DMC executives now say that having direct control of OmniCare will be an improvement to the current process, as the facility will be paid directly by the state rather than waiting on a third party MCO for payment (Detroit News, 4/4). While the acquisition should be complete within 30 to 60 days, it is unclear what will happen to Omnicare's nearly 200 employees or if the firm's name will be used after the consolidation is complete. Dr. Arthur Porter, DMC's president and CEO, said, "[W]e are disappointed that it had to come to this, but we are glad we were in a position to step in and keep giving quality service to the thousands of Medicaid patients that depend on OmniCare and the DMC" (Detroit Free Press, 4/4).