Paramount Health Care, the managed Medicaid arm of major health system and skilled nursing operator ProMedica, this week announced a move to substantially scale back its footprint in the wake of serious financial losses for the plan.

The Toledo, Ohio-based Paramount will exit the central and southeast regions of Ohio, cutting its overall enrollment by about 31,000 beneficiaries; the plan will continue to cover 184,000 managed Medicaid enrollees in the western and northeastern parts of the Buckeye State, according to the company.

“Our decision to scale back our Medicaid service area was difficult, but necessary to help ensure that we are able to cover the plan’s costs in view of the state’s announced reimbursement rates for 2020,” Paramount president Lori Johnston said in a statement. “Limiting our service area to two of three regions of the Ohio Medicaid Managed Care Program enables Paramount to responsibly continue providing the highest quality Medicaid plan to our members.”

Paramount has been a thorn in the side of ProMedica over the last year, posting a loss of more than $100 million through the first three quarters of 2019.

Just this past week, ratings agency Standard & Poor’s lowered its outlook for the Toledo-based health system from “stable” to “negative,” placing the blame squarely on Paramount’s struggles in the state.

“The outlook revision reflects ProMedica’s weaker financial performance in fiscal 2019 owing to Paramount’s state Medicaid product that led to a significant operating loss of $102.8 million for the interim period ended September 30, 2019; and what we view as weaker credit metrics for a ‘BBB’ rating, notably weaker debt and operating lease adjusted coverage below 1x,” S&P credit analyst Anne Cosgrove said in a statement announcing the change.

S&P’s outlook for ProMedica’s HCR ManorCare skilled nursing assets was sunnier, however; in the first quarter of 2019, for instance, the ManorCare arm helped to partially offset the health system’s Paramount losses.

ProMedica entered the skilled nursing space back in 2018, when the system teamed up with real estate investment trust (REIT) Welltower Inc. (NYSE: WELL) to acquire HCR ManorCare’s assets from bankruptcy in a joint venture arrangement; ProMedica also assumed full control of ManorCare’s operations.

In a recent interview with the National Investment Center for Seniors Housing & Care (NIC), Welltower CEO Tom DeRosa pointed to the Paramount insurance arm as a reason for optimism — while also describing the companies’ ongoing integration plan as “on track.”

“ProMedica is one of the best examples of a fully vertically integrated health and wellness delivery ecosystem,” he told the group. “Welltower was excited to have a role to demonstrate the viability of our platform to facilitate a landmark health care transaction.”

Paramount emphasized in its announcement that the Ohio Medicaid pullback will not affect ProMedica’s other health care operations in the affected regions.

“Paramount has a longstanding commitment to individuals served by Ohio Medicaid,” Ohio Department of Medicaid director Maureen Corcoran said in the statement from Paramount. “Their commitment to quality care remains strong and unwavering. We will work with them to ensure a smooth transition for each individual affected in the central/southeast area.”