A controversial Cayman Islands National Insurance Company plan to give the contract for managing the overseas care of its patients to a cash-strapped Florida company has been dumped.
Following a board of directors meeting last week, CINICO issued a statement saying it had decided to keep the contract in the hands of Canadian Medical Network, rather than transfer it to Florida based CareGuide, as had previously been planned.
‘After consideration of all of the relevant matters, and having taken into account all factors the board has decided to preserve the status quo as regards its care management services,’ the statement said.
CINICO’s two-year contract with CMN expired 31 July, 2007. CINICO has since retained the company on a month by month basis.
Board member Sharon Roulstone confirmed to the Compass Thursday that she will resign from the insurer’s board, effective 31 June, but said her departure had nothing to do with the CareGuide issue nor the recent announcement that CEO Gordon Rowell would be leaving his post on 31 September.
She said she was stepping down from the CINICO board due to a hectic work schedule that includes membership of several government boards and the demands of private legal practice in addition to parenthood.
Mr. Rowell had privately flagged plans to resign as early as February or March, but only made the announcement public 28 May. His resignation was accepted by the board during its meeting last week.
AG’s report public
Meanwhile, the board had made public an Auditor General’s report on CareGuide that it received in early May. Confusion about CareGuide’s financial viability and its relationship with another company that used to hold CINICO’s overseas care contract led the board to ask Mr. Duguay to look into the matter for it in March.
The report concluded that CareGuide is in a weak financial position and that it is connected to CBCA Care Management, the company that provided overseas case coordination to CINICO from February 2004 to July 2005, when CMN took the contract over.
‘It is clear that recent financial results at CareGuide have weakened the company significantly. Currently, it appears to be in a weak financial position,’ Mr. Duguay wrote.
While the company’s financial viability should be an important factor in deciding whether to contract with CareGuide, Mr. Duguay added, ‘There are many other factors such as the board’s opinion as to the level of care that can be provided, potential cost savings etc. that must also be considered.
‘In the final analysis, it is the board of directors of CINICO who must make the decision on whether to proceed in entering into an agreement,’ the Auditor General noted.
Asked about the planned deal with CareGuide during a Finance Committee meeting in the Legislative Assembly 2 June, Mr. Rowell indicated he believed the deal offered the national insurer better value.
‘We had a publicly traded company (CareGuide) that had more connections to Florida, they were offering more services at a third of the cost, with savings of over $1.5 million at absolutely no financial risk to CINICO,’ he said.
Contacted by the Compass last week, Mr. Rowell would not comment on the latest development, citing a board policy that all press inquiries be directed to Chairwoman Sheridan Brooks-Hurst. Mrs. Brooks-Hurst said she had nothing to add to what was stated in the press release.
On the relationship between CareGuide and CBCA Care management, Mr. Duguay concludes it would be fair to state, for contract purposes, the two should be considered as one corporate body, with some former CBCA Care Management employees now with CareGuide.
CareGuide finances worsen
Documents provided to the US Securities and Exchange Commission in May show CareGuide’s financial position continues to slide. In the three months ending 31 March the company realised a net loss of $1.4 million and had a working capital deficit of $9.9 million.
In its quarterly report the company expressed concern over whether it could continue as an ongoing concern. On Tuesday morning, the company’s shares were trading at just over 6-cents a share on penny stock exchanges.
Penny Stocks are shares valued at less than US$5. The SEC warns investors that such stocks are subject to risks including limited liquidity, lack of financial reporting and fraud.
The decision to stick with CMN comes amid indications CINICO is edging closer to a break-even position financially.
Following a recent $9.2 million letter of credit from government to keep the insurer afloat and compliant with its ‘Class A’ insurance licence and losses of $8 million in 2007/08, CINICO is forecasting a reduced operating loss in the coming financial year of $1.3 million.