Zoom clinic owners will pay fines, fund insurance plan
The owners of the Zoom+Care health clinic chain will pay $285,000 in fines to the state as part of a settlement over their failed health insurance plan, as well as nearly $2.2 million to ensure that medical claims for the plan's remaining members are paid through the end of the year.
It is but the latest round of drama for Portland-based firm founded in 2006, which recently settled what the chain's founders characterized as a hostile takeover attempt by their investors. Court filings in that case featured claims of staffing issues and major budget cuts, as well as potential threats to quality of care.
Tuesday's announcement concerned a health plan that Zoom's owners tried to set up in 2014. The plan never sold many memberships, however, and early this year Zoom's owners decided to shut it down and focus on their clinic chain, which now has outlets in Salem, Vancouver and Seattle, with 35 clinics in all.
Lawyers for the Oregon Department of Consumer and Business Services took the Zoom Health insurance plan into receivership in April, essentially taking over the company to ensure its financial obligations are met. The state also filed a suit saying the plan had misrepresented its finances in official filings to the state, claiming the parent company had made a $3 million payment to Zoom Health, when in fact it had not.
Under the settlement filed Tuesday in Marion County, Oregon officials and Zoom's parent company, Zoom Management, Inc., essentially made the matter go away, ensuring that the state halts its probe into the plan.
"The size of these fines shows that DCBS will not tolerate repeated violations of the insurance code," said Jean Straight, the acting director of the department.
Zoom's owners, however, chalked their violations up to a misunderstanding and mistakes, blaming "complex" state rules, among other things.
"I do think innocent mistakes were made," the firm's cofounder, Dr. Dave Sanders, told the Portland Tribune Tuesday.
The settlement does not affect an ongoing FBI probe into the plan, and Sanders declined to predict its outcome. However, Stephen Babson of Endeavour Capital, part-owner of Zoom, recently told the Portland Tribune he expected the probe to end favorably for the company.
The funding of nearly $2.2 million provided by Zoom management as part of the settlement will be used by the state to pay the plan's liabilities and any remaining member claims, officials said. In all, the plan still has 338 members.
Without the $3 million "loan" represented in the insurance plan's filings, which the parent company never made, the company would not have been solvent, according to the state.
"They said they had a $3 million asset in their financial filings that didn't exist," said state spokesman Jake Sunderland. "$3 million is the difference between a company that is solvent, and isn't .... That had a significant impact on the company's ability to pay its claims."
Sanders, however, claims the state's depiction is "absolutely not true... Those funds were never needed for ongoing operations. The company was never insolvent." He predicted that the company, when it finally shuts down, will end up more than $2 million in the black.
Did the company's decision to book a $3 million loan that was never made reflect in any way the financial difficulties cited in the recent lawsuit by Endeavour Capital, the clinic chain's major investor?
Sanders says the decision not to make the loan despite reporting it to the state was based on legal advice, and not intended as a misrepresentation. He said the loan was always intended to be timed with whenever a large bill was received from the federal government under complicated Affordable Care Act rules.
But he said it's true the firm was figuring out how to juggle limited financial resources. "Zoom was under a period of financial stress," he said. "Our view was resources should be preserved and utilized for patient care."