KPC Files for Chapter 11 Bankruptcy
KPC Medical Management filed for Chapter 11 bankruptcy Friday after reaching a deal with several HMOs to fund the final paychecks for the group's 2,000 employees, the Orange County Register reports. William Thomas, KPC's general counsel, said the group's decision to file for "reorganization" rather than liquidation is "best for the patients" and will allow the group to be "in control of the transition." Under the agreement, HMOs will provide $4 million to pay KPC's physicians, nurses, technicians, receptionists and other employees. In addition, the insurers will cover the salaries of about 100 KPC employees, who will remain to ensure that KPC patients' records, pending referrals, lab tests and other important medical information are rerouted to new doctors. Thomas said that the transition should take about three weeks, although the HMOs have an option to extend their funding if necessary. The implementation of the plan hinges on approval by Judge James Barr in the Riverside division of federal bankruptcy court. KPC requested an "emergency hearing," which Thomas said could take place early next week. KPC currently owes about $50 million to physician specialists and medical suppliers. Thomas said the group's assets "will go to the highest bidder" (Wolfson, Orange County Register, 11/25).
KPC's bankruptcy is "the latest, [and] perhaps the most ominous, sign" of California's troubled managed care system, the Orange County Register reports. The battle that has raged for months between KPC and HMOs will most likely "intensify" the continuing dispute over capitation. Through capitation, health plans pay a fixed monthly amount per patient to the physician groups caring for their enrollees. Beau Carter, executive director of the Integrated Health Care Association, said, "The plans still tend to shop around and look for groups that are willing to take the lowest capitation rates, rather than channel folks to those providers they know do a better job at managing care but have higher rates because they can command higher value." Some health officials predict the KPC incident will result in future changes in HMO reimbursement policies. Susan Blaise, vice president of Maxicare Health Plans Inc., said that KPC's failure is likely to "speed up changes" in the way health plans reimburse physicians. She added, "HMOs have been taking back more and more of the financial risk from doctors and other providers, and I think the current environment will only accelerate that trend."
However, some health experts are not as optimistic about the impact of KPC's bankruptcy. Jack Lewin, CEO of the California Medical Association, said, "The KPC bankruptcy will only exacerbate the problems and tensions between doctors and health plans, and there is nothing about that that can be good. ... [T]his process undermines the public's trust in all of us. It gives everybody a black eye: HMOs, doctors, regulators, everybody in health care." He added, "This will put the Legislature into action. It will create suspicions and doubts and rumors of profiteering and make everybody unhappy and everything unstable." Meanwhile, the increasing number of "dislocated, confused and angry patients is ... threatening to erode further whatever confidence remains in the private health care system," the Register reports (Wolfson, Orange County Register, 11/25).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.