FPA MEDICAL MANAGEMENT: Files For Bankruptcy
The once "high-flying" FPA Medical Management Inc. Sunday filed for "bankruptcy reorganization," the San Diego Union-Tribune reports. "The troubled managed care company also plans to pull the plug Friday on all health care services in San Diego, where it has overseen care to about 80,000 patients through 300 primary care doctors." Dr. Jeoffry Gordon, a San Diego physician who resigned from FPA last week and is trying to repurchase his practice, said of FPA's action: "It's bizarre, destructive, distasteful and incompetent" (Rose, 7/21). The Wall Street Journal reports that FPA's filing "for bankruptcy-court protection" in Wilmington, DE, "wipes out shareholders equity and leaves many doctors with unpaid bills." According to a spokesperson for Foundation Health Systems, "which has many FPA contracts," most of FPA's 1.4 million patients nationwide will still be able to see their primary-care doctor, although that may not be the case when it comes to specialists (Rundle, 7/21).
But in San Diego County, many of the estimated 80,000 FPA patients "may have to switch doctors or put off care until the dust settles on the medical company's bankruptcy petition." The San Diego Union-Tribune separately reports that doctors of the county's FPA Medical Group, a division of FPA, received a "Dear Physician" letter yesterday informing them "that they would be, in effect, on the streets as of Friday." The former FPA doctors will have to scramble to join "other doctor groups that contract with the HMOs in order to stay in business and keep seeing" current patients (Duerksen, 7/21). And in Sacramento County, news of the bankruptcy filing leaves the 500 or so FPA-affiliate doctors wondering if FPA "will pay them $1 million they say they are owed." FPA spokesperson Ann Julsen "said doctors who continue contracting with FPA will be paid money owed them in September or October," but "those doctors who want to sever ties with FPA" will have to "forfeit all payments" (Young, Sacramento Bee, 7/21).
The New York Times reports that FPA reached an agreement with one of its biggest creditors, the BankBoston Corp. A group of 21 banks spearheaded by BankBoston "agreed to inject up to $50 million to keep the company afloat and make overdue payments to doctors, nurses and hospital emergency rooms." However, some Wall Street analysts say the filing signals the end of FPA (Freudenheim, 7/21). The $50 million debtor-in-possession loan is subject to court approval. "With the protection afforded by Chapter 11 and the $50 million in post-petition financing, we are confident that the company's relationship with its payers, health care providers and creditors, and its business in general, will not only continue as before, but improve," said FPA chair and CEO Dr. Stephen Dresnick (Lunday, Bloomberg News/Ft. Worth Star-Telegram, 7/20). Following the Chapter 11 news, FPA's stock dropped 74%, or 53 cents down to close at 19 cents, on Nasdaq yesterday (New York Times, 7/21).
Time To Reorganize
In a statement released yesterday, FPA said it expects to "successfully exit" Chapter 11 by the end of this year. "The restructuring agreement reached with the company's largest creditors allows us both to recapitalize FPA and to implement our strategic plan to return to profitability. Our fast-track exit plan is indicative of how viable we and our largest creditors believe our new core businesses are," Dresnick said. FPA said its strategic plan involves exiting markets and shedding facilities that are either unprofitable or fall outside its core business areas. It also plans to strengthen remaining business and cut costs wherever possible (FPA release, 7/20). Click FPA Medical Management to read past California Healthline coverage of FPA's downward spiral.