The Never-Ending Universal Health Story Takes Another Twist

By James Gutman - March 18, 2013

Just when we thought it was finally over, it isn’t. Less than two days after a federal bankruptcy court judge in Tampa, Fla., on March 11 approved the sale of Universal Health Care Group, Inc. over the objections of politically connected minority shareholders to an affiliate of CarePoint Insurance Co., a state judge in Tallahassee ruled that two subsidiaries of Universal are insolvent. That, in turn, could prevent the sale of the Medicare Advantage insurer from going through, according to BankUnited, Universal’s major secured creditor.

The state circuit court judge, however, did not then appoint a receiver. And this gives the prospective buyer, which is doing business in Florida under the name Citrus Universal Healthcare, Inc., hope that it can reach a deal with state regulators, who asked for the circuit-court ruling after Universal failed to respond to an earlier order to show cause why it shouldn’t be liquidated by the state, before another circuit court hearing March 21. That hearing could result in the appointment of a receiver — and thus the likely end of the planned sale.

Let’s review what has happened so far. First, after Universal’s recent net losses and low capital led Georgia and Ohio to bar the company from marketing for new enrollment, MA serial entrepreneur Miguel “Mike” Fernandez’s private-equity company agreed Jan. 25 to buy certain assets of Universal. Five days later, that deal was terminated without explanation, and two days after that, an affiliate of another legendary Florida MA entrepreneur, Kiran Patel, M.D., agreed to purchase Universal’s assets. Then, five days later, Universal filed for Chapter 11 reorganization under the Bankruptcy Code, and the bankruptcy court ordered an auction of Universal. On Feb. 28, this auction resulted in CarePoint, a small insurer owned by large New Jersey providers with no stake in Universal’s main service area, being chosen over a higher but more-spread-out bid from Patel. And Bankruptcy Court Judge K. Rodney May on May 11 finalized that result — but not yet to the satisfaction of Florida’s Department of Financial Services (DFS).

So how will this end? Will CarePoint be able to work out something with Florida Office of Insurance Regulation officials, who allege Universal engaged in financial mismanagement, and DFS, to allow the sale to go through? Will the March 21 hearing instead result in the appointment of a receiver to liquidate the company? Who is going to win in this case, aside from the lawyers? Stay tuned.

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