Failed MedPartners Agrees to Pay Portion of Doctors’ Claims

Progress toward finalizing the settlement crafted by Gov. Gray Davis’ administration with the former MedPartners Inc. took a significant step forward Thursday, when the company announced that it had signed a portion of the agreement and would soon pay some of the $180 million in claims submitted by California doctors.

However, obstacles to the settlement remain. The company has not yet come to terms with the state’s hospitals, who say they are owed more than $100 million, and it is not clear whether the doctors will receive full or partial payments for the claims they submit.

The company, which changed its name to Caremark Rx Inc. after the failure of its MedPartners medical clinics, physician groups and health plan last spring, is in the process of exiting the California market altogether.

State regulators, with the backing of Davis, seized a portion of the company in March, saying it was not sufficiently solvent to be allowed to continue to operate its managed-care plan in the state. In June, the administration negotiated a settlement with the Alabama-based firm, under which MedPartners pledged to pay all of its bills in exchange for the return of assets seized by the state and release from legal liability in certain circumstances.

But efforts to finalize the settlement bogged down over the summer, when the company stopped making regular payments to doctors and hospitals.

Since then, administration officials have been working feverishly to get the talks moving again. But Caremark refused to resume payments until the doctors, hospitals and health plans with unpaid claims agreed not to sue.

Finally this week, the doctors who were owed a majority of the money agreed not to sue, and as a result the company signed off on the settlement and promised to pay $3.5 million of the claims by the close of business Thursday. The company has promised to pay another $15 million by the end of the month. An earlier payment for the same amount was made in October to a group of doctors who had also agreed not to sue.

“Even though this process has taken longer than we would have hoped, achievement of these milestones allows us to move into the final phase of our exit from California,” said Mac Crawford, Caremark’s chairman, president and chief executive.

Meanwhile, talks continue with representatives of California hospitals that cared for MedPartner patients, and insiders say that a settlement is not likely before the end of the year.

“What’s remaining is the hospitals,” Caremark spokesman Joel Wieden said. “We continue to make progress in our talks with them.”

Other than to say that the hospitals were “earnestly working toward a settlement,” Jim Barber, president of the Health Care Assn. of Southern California, would not comment on the state of those negotiations.

But privately, sources close to the negotiations say that there is a good chance that the portion of the agreement meant to protect the hospitals will fall apart.

“I could see the hospitals deciding that they’d rather have this decided through the courts than by agreeing to the settlement,” said one source, who spoke on condition of anonymity.

“The hospitals,” said another source close to the negotiations, “are not close to an agreement.”

Still, the agreement with physicians significantly improves the odds that at least a portion of the funds owed by the former MedPartners will be paid.

“It’s good news,” said Hobart Swan, spokesman for the California Medical Assn., which has been negotiating on behalf of doctors. “It means that physicians will start to receive money.”