Bankrupt FPA Seeks Pay Hike for Top Execs

FPA Medical Management Inc. directors voted pay raises of up to 70% for three top executives days before the money-losing operator of physician practices filed for bankruptcy protection, court documents show.

The San Diego-based company and its 90 units filed Chapter 11 petitions on July 19 in U.S. Bankruptcy Court in Wilmington, Del., listing total assets of $46.3 million and liabilities of $345.5 million.

On July 14, its board approved a $350,000 raise for Chairman and Chief Executive Stephen J. Dresnick, who was earning $500,000, and $50,000 raises for executive vice presidents Jack Greenman and James Lebovitz, who were making $345,000, court records show. The arrangement also includes a provision that could enable the executives to collect hefty bonuses--Dresnick’s would be more than $1 million--for staying with the company through the bankruptcy reorganization.

While a judge considers the bonuses, FPA officials have angered fired employees by refusing to pay them for accrued vacation time or provide any severance allowance, workers said. FPA Medical executives declined to comment on the bonus plan or worker’s complaints.

FPA, which went public in 1994, grew rapidly by acquiring doctors’ practices in the East, Southeast and Southwest. At its height, FPA oversaw the practices of 800 doctors treating more than 1.4 million patients as one of the U.S.’s largest practice-management companies.

Physician-practice managers buy up doctors’ practices and clinics, handling the administrative duties and negotiating with health plans in return for a percentage of the practices’ income.

FPA racked up losses because some of the practices had contracts with insurers providing fixed payments for patient care that didn’t cover costs.

The company began closing facilities in Arizona and Texas in early July, and fired thousands of workers in those states and in California in preparation for the bankruptcy filing.

At the same time, FPA’s board decided to bump up top executives’ salaries at the advice of its financial consultant, Arthur Andersen, court papers say.

The new executive salaries will be the basis for calculating bonuses under a proposed employee-retention program, the papers show. Dresnick stands to receive 125% of his salary, or $1.06 million, and Greenman and Lebovitz would get 75% of their base pay, or $296,250 each, if the plan is approved by a judge.

In all, the plan would provide bonuses totaling $2.8 million to FPA’s 27 top employees if it’s approved by U.S. Bankruptcy Judge Peter Walsh.

FPA’s shares, which reached a 52-week high of $40 in October, fell 3 cents to close at 22 cents on Nasdaq.