MD Medicare Choice, a struggling Florida-based physician-run Medicare Advantage HMO serving 16,000 senior citizens, has been placed into receivership. A review of financial records showed MDMC, as the company is known, is financially insolvent, recording losses of $21 million since 2006. It has no cash flow. The company, unrated by TheStreet.com because it did not submit risk-based capital figures, had been under administrative supervision with the Office of Insurance Regulation since August and fell into further financial hardship last week when its access to $27.6 million in reserves, invested in the Reserve Primary Fund of Reserve Management, was frozen by the Securities and Exchange Commission because of a $785 million loss incurred as a result of Lehman Brothers' ( LEH) bankruptcy. A Leon County Circuit Court judge late Monday ordered Tampa-based MDMC, a Medicare Advantage plan with members in 23 Florida counties, placed into receivership for the purpose of liquidation. The Department of Financial Services will work with the Centers for Medicare and Medicaid Services and Humana, which will provide replacement coverage. Jason Weaver, an MDMC claims supervisor, said "everything is operating normally" but confirmed that CEO Antonio Marrero had departed. An undisclosed employee said on the phone that the insurance regulator will be forwarding paperwork to all claimants. There were no listings for Carlos Lugo Olivieri, a radiologist and president of MDMC, or Caribe Investment Group, the parent company. The Web site contained no information on the matter. The Reserve Primary Fund was closed and will be liquidated, creating a cash crisis that Congress has been warned about by Treasury Secretary Henry Paulson. MDMC is an unlikely victim of Wall Street's problems, an illustration of how far the crisis has spread across the country. MDMC's investments are not covered by the FDIC, and there is no guarantee it will receive more than $0.32 on the dollar, the amount indicated by the fund's owners. It is not clear why MDMC had $27.6 million in the fund which, according to Florida Department of Financial Services spokeswoman Nina Banister, was treated like a sweep account by the HMO when it only had $390,000 in invested assets in the second quarter. Banister said the DFS will be conducting an investigation into MDMC. Perhaps the answer lies in the balance sheet, which showed a $22.6 million debt owed by Medicare as of June 30. A letter from Abby Block, director of the Centers for Medicare and Medicaid Services, dated Sept. 29, says that "CMS has been unable to find any evidence to support this assertion." MDMC's liquidity problems were exacerbated by the company's rapid growth, which isn't atypical for new companies but can create pressure on cash flow. It increased its membership from 4,600 in December 2007 to 16,600 on June 30. What appears likely is that providers will be owed a substantial amount. Banister said the DFS's role is "to identify assets and liquidate." DFS has a head start because it holds a $310,000 deposit from MDMC that will be liquidated. Losses will almost certainly be taken by Florida Bank, which advanced a $10 million overdraft, according to court documents. As a result of the court order, CMS has terminated MDMC's Medicare Advantage contract, and the CMS Medicare Advantage Prescription Drug contract with MDMC was canceled. Humana policies have similar benefits. The insurance guarantee fund that provides a backstop for policyholders of failed insurance companies is unlikely to make good on any losses faced by providers or banks. TheStreet.com Ratings issues financial strength ratings for 4,000 life, health, annuity, and property/casualty insurers are available at no charge on the Insurers & HMOs Screener. In addition, the Financial Strength Ratings on each of the nation's 8,600 banks and savings and loans are available on the Banks & Thrifts Screener.