Regulators Demand Patients Be Notified of Rights if KPC Medical Group Collapses
State regulators have begun preparing for the possible demise of California’s largest for-profit medical group, which has been teetering near bankruptcy for months and last week missed payroll for hundreds of doctors, nurses and administrative employees.
In a tense meeting Monday in Los Angeles, state managed care chief Daniel Zingale demanded that health plans notify the 400,000 patients of KPC Medical Management of their rights in the event that the company goes under, and grilled KPC president Donald Smallwood about the firm’s financial status.
For the record:
12:00 a.m. Feb. 10, 2001 For the Record
Los Angeles Times Saturday February 10, 2001 Home Edition Business Part C Page 3 Financial Desk 4 inches; 108 words Type of Material: Correction
Caremark Rx--To clarify articles that appeared in The Times on Aug. 29 and Nov. 28, Caremark Rx Inc., an Alabama-based pharmaceuticals services company that was formerly known as MedPartners Inc., has never filed for Bankruptcy Court protection. In 1999, Caremark’s former California subsidiary, MedPartners Provider Network, was seized by state regulators and was placed in Chapter 11 Bankruptcy Court protection. The state and MedPartners Provider Network eventually reached a settlement. Certain assets of MedPartners Provider Network were sold to Riverside-based KPC Medical Management, which filed for Chapter 11 protection last fall. Some of KPC Medical Management’s assets, including hospitals and clinics, have since been sold to other entities.
At the same time, however, the company said Monday that it had received a temporary loan from two health plans and would use the money to pay employees.
“We have some happier people today,” said Smallwood, who added that some checks were hand-delivered to employees and others were sent out Monday by mail.
Smallwood said that details of a larger loan and other elements of a bailout plan for the company are still being worked out, but he and several sources said that they were hopeful that a resolution could be reached by the end of the week.
Despite the apparent respite, however, Zingale said he would press forward to develop a transition plan in case KPC files for bankruptcy.
A key issue, he said, is whether there are enough doctors in the Southern California areas where KPC is active to absorb patients should the company cease operating.
Already, medical groups who took over care for the roughly 100,000 patients that Cigna Corp. and Blue Shield of California transferred out of KPC last month are complaining that it is financially difficult to care for the new patients, because many are ill and expensive to treat.
Zingale said he didn’t have the authority to step in and shut KPC down in the event that care becomes compromised as the company struggles to right itself. Rather, he said, he would hold the health plans that contract with KPC responsible for assessing whether the group is functioning properly and is financially sound.
If KPC goes out of business, it would be the second time in a year that the massive group has been wracked with turmoil, disrupting care for patients and withholding pay to doctors and vendors.
Last year, a division of the company that previously owned KPC, MedPartners Inc., was taken over by state regulators and thrust into bankruptcy. The state, under the direction of Gov. Gray Davis, negotiated an agreement under which the remains of the company would be sold to Dr. Kali Chaudhuri. Chaudhuri renamed the company KPC and quickly ran into financial troubles of his own.
“This is a tough war,” said Chaudhuri, who has fought for and won two loans from the state’s health plans, arguing that if his group goes under the result would be chaos for nearly half a million patients. “We’ll see what happens.”
At the company’s clinics Monday, where already thin medical staffs were further weakened by absenteeism, some patients waited three to four hours for care, employees said.
One day last week, another employee said, no pediatrician was on staff at a large clinic, so children were seen by doctors who were not pediatric specialists.
Several workers said they would look for other jobs.
“I hear that Northwest Airlines is having an open call for jobs,” said a receptionist in one of the KPC clinics. “I’m going down there [Tuesday] on my day off. And I’m going to call the unemployment office.”
