Humble clinic grows into $450M business
BY JOHN DORSCHNER
jdorschner@MiamiHerald.com
In Cuba, many neighborhoods had clinics. Families gave them a little
money each week, and when they were sick, the clinic took care of them.
In Miami, in the early 1960s, as the new Cuban immigrants struggled to
make ends meet, a group of physicians and others, including Benjamín
León Sr., an accountant, set up the Clínica Cubana in Little Havana.
The original monthly fee in 1964 was $2 for an individual and $5 for a
family, recalls Benjamín León Jr., who later was chief executive of what
became known as Clínica Asociación Cubana, then Comprehensive American
Care, then simply CAC.
The first clinic was open 7 a.m. to 11 p.m., and in the beginning the
Cuban doctors, without Florida licenses, operated under the loose
supervision of a U.S.-trained physician.
For those who wanted them, the clinic offered insurance policies from a
Delaware company to pay for hospital stays.
The Cuban concept was personal service. The waiting room was a meeting
place, where patients could have a cafecito and maybe a snack, and spend
time chatting with friends and catching up with the news.
GROWTH, COMPETITION
In the 1970s, CAC became a licensed health maintenance organization.
Competitors appeared. The biggest was International Medical Centers, led
by Miguel Recarey Jr., who had been jailed for failing to file tax
returns and arrested for getting in a fist fight with a Saudi diplomat.
With a $4,000 investment, IMC grew rapidly, buying a hospital and
eventually getting more than $170 million a year from Medicare to treat
seniors.
The battle with CAC led to cost-cutting wars, complaints from doctors
that the HMOs weren't paying them, accusations of deceptive advertising,
investigations for insolvency and charges that they were giving campaign
contributions to local politicians in return for favors.
The accusations against CAC never led to anything, but in April 1987,
Recarey and three others were indicted, accused of paying kickbacks to
union leaders in return for their members joining IMC. Recarey fled
overseas and was never tried. IMC was bought by Humana.
The next year, León sold CAC's HMO and clinics to Ramsey Health, an
Australian based company, for about $32 million.
When Ramsey entered the market, HMOs in Florida were struggling.
Collectively, they lost $123 million in 1988. But as employers battled
to contain rising healthcare costs, the HMOs became popular, with
primary care doctors serving as gatekeepers, controlling access to
specialists and expensive tests.
In 1994, riding the crest of that success, Ramsey sold its local HMO and
the CAC clinics to UnitedHealthcare for $500 million. The clinics lost
members almost immediately. UHC, a Minneapolis-based firm, ''didn't
understand the culture,'' says former CAC Ramsey executive Mike
Fernandez. They stopped the cafecitos. ``They totally wasted their time
and their money.''
CENTER OPENS
Two years later, León, whose noncompete agreement with CAC Ramsey had
expired, opened his first León Medical Center in Little Havana --
promoting the coffees and ''warm and tender'' service that UHC had
abandoned.
At the time, HMOs were in a downswing. Many patients were angry at
gatekeepers stopping them from getting treatments, and many insurers
complained that Medicare wasn't paying HMOs enough -- 95 percent of what
the average senior's medical costs were in an area.
In 1999, UnitedHealthcare admitted defeat and sold all 18 CAC clinics to
Pan American Hospital for an undisclosed amount. The hospital couldn't
make them work. In 2001, it abruptly closed the remaining 12, throwing
1,000 people out of work.
Re-enter Fernandez, who had started a Medicare HMO that eventually
became CarePlus. He bought the CAC clinics for ''less than $100
million'' and took them back to the original model -- strong personal
services and cafecitos. He also spruced up the centers, including the
one on Bird Road, where he tripled the size and installed meeting rooms
where seniors could get together.
Fernandez and León were battling a tough tide that caused Medicare HMOs
in Florida to lose $72 million in 2000, but that changed with the
Medicare Reform Act of 2003. Best known for offering a prescription drug
benefit, the act also enriched the HMOs.
That made the Medicare HMOs and clinics more lucrative, and in December
2004 Fernandez sold CarePlus and the CAC clinics to Humana for $450 million.
Unlike UnitedHealthcare, Humana has kept CAC as a distinct entity, under
Hispanic leadership.
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