Downey Regional Medical Center files for bankruptcy protection

Downey Regional Medical Center has filed for Chapter 11 bankruptcy protection. HMO contracts were cited as the reason for the need for Chapter 11 bankruptcy protection.

The filing, officials say, would allow the hospital to get out of unprofitable HMO contracts. Downey Regional is a nonprofit, 199-bed facility, and hopes to emerge from bankruptcy in about a year. Its goal is to drop HMO patients in favor of PPO (Preferred Provider Organization) patients. PPO contracts take on the financial risk of medical coverage by paying hospitals a fee for each service provided.

Downey Regional claims to have lost more than $100 million in recent years, largely because of HMO contracts. HMO insurers pay hospitals a set fee per patient per month, regardless of how much treatment those patients receive.