Alvarez & Marsal

Challenge: Founded in 1967 as a non-profit, African-American operated organization dedicated to providing health services to an underserved, poor population in South Los Angeles, Watts Health Foundation, Inc. enjoyed several decades of success and expanded its business operations to include a health center, now known as the Watts Health Center; several health plans; a bank; a real estate development company and other smaller businesses. Growth, however, brought new challenges. The organization began to struggle as the markets it served became more competitive. Several businesses were sold or separated, and the Foundation's core operation became UHP Healthcare, an HMO with approximately 100,000 members, primarily in the Medi-Cal and Medicare service lines.

Approach: In 2005, Alvarez & Marsal was engaged as Chief Restructuring Officer to assist the health plan with an operational turnaround and an evaluation of strategic alternatives. UHP made remarkable progress within only one year. Membership losses in the Medi-Cal line slowed, while membership in the plan's most lucrative line, Medicare, improved. At the same time, medical expenses were significantly reduced by renegotiating contracts and more aggressively managing admissions and lengths of stay. In the wake of these major operational improvements, the board of directors determined non-profit Watts would be best served by selling its more valuable health plan business and rededicating itself to its original charitable mission. In August 2006, the health plan assets were sold for $30.5 million to Care1st, a Medi-Cal HMO based in Los Angeles.

Results Achieved: The Foundation now looks forward to recapturing its earlier success as a community-based health education-oriented charity.