MedPartners Backs Away From Troubled California Operations
MedPartners Inc., parent company of the health-care services firm that was seized by state regulators last week, said Monday that it was under no obligation to continue to fund its troubled California operations.
The statement was intended to reassure stockholders that the parent company is in sound financial shape, a spokesman said, and will not be forced to prop up the bankrupt clinics and health plan, which provide services for 1.3 million Californians.
Monday’s announcement was one of several steps that MedPartners has taken over the last several days to distance itself from its troubled California operations. The company is even considering changing its name.
But MedPartners stopped short of saying it would withhold funds from its California operations.
“If they can do that, it places people in jeopardy,” said Eugene Froelich, the conservator appointed by regulators to run the firm’s health-care services plan, MedPartners Provider Network Inc.
The concern that MedPartners might quit funding the plan is “ one of the reasons the [state] decided to put in a conservator,” Froelich said. The company owns Friendly Hills, Mullikan and Talbert Medical Groups, with 117 clinics and 1,000 doctors.
MedPartners spokesman Robert Mead would not say whether the company would quit funding the California health plan and doctors’ group management business.
But sources close to MedPartners said that there are several scenarios under which the firm might continue to provide funding. One possibility, sources said, would be an agreement to sell the physician practice operations in which MedPartners, as part of the deal, would fund some ongoing losses.
The firm, which is attempting to quit the managed-care business and reposition itself as a manager of pharmaceutical benefits, has been concerned for several days that investors might flee as a result of the California action.
The company is likely to change its name to avoid continued association with the collapsing business of operating and funding doctor groups under managed care, according to Mead.
Sources say negotiations to sell the California businesses have been dampened by news that the state has taken over the health plan. And investors have been scared off as well.
Since the state took over on Thursday, the already flagging stock has lost value, dropping a third on Monday to close at $3.25 on the New York Stock Exchange.
MedPartners’ stock traded at around $32 a share in 1996, when it was the lead national player in what looked like a lucrative new industry, contracting with health maintenance organizations to manage and distribute funding to doctor groups.
In other action Monday, Froelich, the conservator, reiterated that patient care would not be interrupted by the state’s takeover of MedPartners Provider Network. And Froelich said that he is confident that with proper guidance the operations can become profitable again.
Today, the state Department of Corporations, the agency that regulates managed-care companies, will hold a public meeting on the MedPartners takeover and its implications. The 10 a.m. meeting will take place in the first-floor auditorium of the Ronald Reagan State Building at 300 S. Spring St. in downtown Los Angeles.
