After investing $61 million in ZoomCare over the past three years, Endeavour Capital today went to court to try "to clear the way for a significant, badly needed cash infusion," the Portland-based private equity firm announced.
Endeavour, the largest outside investor in the on-demand clinics with a 42 percent stake in the company, is seeking a receiver for Zoom Management Inc. The cash infusion will cover necessary operating expenses for ZoomCare, which has been weighed down by costs related to an ambitious expansion, as well as obligations for its insurance affiliate, Endeavour announced.
“The core business is performing extremely well,” Endeavour Managing director and Zoom board member Stephen Babson said. “The company had ambitious growth plans and built a level of management infrastructure and costs that couldn’t be supported without rapid growth. The cost structure was too high to generate cash flow. Management has done a remarkable job bringing expenses in line with revenue and trending to be cash-flow positive. We believe the delivery system is working well but it needs capital to be stabilized.”
A spokesman for Zoom CEO Dr. Dave Sanders could not immediately be reached for comment.
The move comes about five months after Oregon insurance regulators sued Zoom Management to recover $3 million in cash for its affiliated health plan.
In early April, Zoom said it was leaving the insurance market at the end of 2017, and the Oregon Department of Consumer and Business Services placed the plan under supervision, meaning that the agency would oversee operations during the wind down.
About three weeks later, DCBS placed Zoom Health Plan in receivership, as the plan prepared to wind down operations. After filing the lawsuit against Zoom Management the following day, then-DCBS Director Patrick Allen said the $3 million in funding was “critical for Zoom Health Plan to meet its obligations to policyholders.”
All insurers struggled to cover higher-then-expected claims costs for the new population of customers buying plans under the ACA. Three other insurers either exited the Oregon market or went out of business and another, Moda Health, managed to hang on despite massive losses.
The market has shown signs this year of a turnaround, but not in time for Zoom.The Portland Business Journal is a KGW News partner. For more from our news partner, click here.