KPC to Shutter Medical Clinics

The largest for-profit medical group in Southern California will close its clinics, disrupting care for 300,000 patients and presenting the first major test of the state’s new managed care regulations.

Anaheim-based KPC Medical Management’s will offer minimal care to patients today and Tuesday and will probably be closed by Wednesday, said company President Donald Smallwood. Patients will be directed to new doctors and, in emergencies, to local hospitals.

KPC’s membership has slipped from nearly 1 million patients to current levels in about 18 months. The group is the troubled successor to clinics owned by the former MedPartners Inc., whose spectacular failure last year was a precursor to the financial storms currently wracking California’s managed care system.

“We’re meeting with the health plans to work out a transition plan.”

The collapse of KPC comes after months of effort by state regulators and others to shore up the doctor-group management company in the first real test of the state’s new regulatory system for managed care. Doctors call this test a miserable failure, but regulators say it would have been even worse had they not intervened.

“Right now, there is very little oversight and accountability,” said Assemblyman Martin Gallegos (D-Baldwin Park), who called on the new Department of Managed Care to step up its regulation of medical groups--and the health plans that contract with them.

“I know that government works slowly, but if we move too slowly on this we’re going to get there too late,” Gallegos said. “If somebody doesn’t step in quickly and do something to ensure the financial viability of the system, the whole system is going to collapse.”

The company has been losing money since it bought the majority of MedPartners’ Southern California clinics last year. In September, a coalition of health plans agreed to lend the company $30 million and increase the amount paid each month to care for HMO members.

“We terminated our contract with KPC for breach-of-contract issues,” said Michael Chee, spokesman for WellPoint Health Networks, which operates Blue Cross of Southern California. “They have not been able to pay doctors, and they have not been able to take care of administrative responsibilities.” Chee said WellPoint has notified by mail its 38,000 members who were receiving care from KPC doctors, as have other health plans including Cigna and Health Net.

The timing could not be worse for KPC’s patients, who will face losing their doctors as the infrastructure for managed care is collapsing.

So many medical groups have gone out of business or filed for bankruptcy protection during the last two years that it will not be easy for the doctors employed by KPC to find new groups to join--and their patients might have to permanently switch to new physicians. In California, medical groups receive monthly payments from health plans to provide all aspects of care for their members.

“This could really be the beginning of the end, unless the state steps in and starts regulating the payments between HMOs and doctors,” said Jamie Court, who heads the Santa Monica advocacy group Consumers for Quality Care. “Failing to do that could be catastrophic for consumers.”

State managed care chief Daniel Zingale conceded that care will probably be disrupted for some KPC patients as health plans struggle to connect them with new doctors and as physicians try to join new medical groups.

Still, he said, the state was able to force health plans that do business with KPC to hold off on moving patients out of KPC until they could prove that new doctors were available in the neighborhoods where the patients live.

The health plans provided that proof last week, he said, and on Friday most were given permission to switch patients to new groups.

“These kinds of things are never good for patients,” said Zingale, who was forced to confront the massive financial problems at KPC when he became the first head of the new Department of Managed Care at its inception in July. “At best, they provoke a lot of anxiety among patients, and at worst, they actually compromise care.”

Dr. Marcy Zwelling, a Long Beach physician who has monitored KPC for the California Medical Assn., said she plans to ask the state attorney general to investigate KPC’s demise. The state, she said, should determine whether the group went under because of internal reasons--such as the financial burdens and negative cash flow inherited from MedPartners--or because the health plans forced it out of business by paying too little.

“This has happened so many times,” said Zwelling, who blames regulators and the state’s managed care plans for the collapse.

Zingale has deliberately avoided regulating medical groups directly and has stayed away from what he views as the private relationship between health plans and the medical groups with which they contract.

Instead, under the rules set up by the Legislature and Gov. Gray Davis, who declined to give the department the right to regulate the way health plans pay medical groups, Zingale has focused on forcing the health plans to provide smooth transitions for patients if they must move them.

As part of that effort, he pushed the plans to consider a bailout of KPC last summer, telling them that if the mammoth group failed, they would be held responsible for paying doctors and making sure that patients were cared for.

In June, KPC officials warned that it had not paid many doctors and vendors for months, and that it likely had only a few months to survive. KPC patients should call their health plans to see whether new doctors have been assigned, or call the state Department of Managed Care at (888) HMO-2219.