KPC Legal, Executive Expenditures Probed by Bankruptcy Judge
KPC Medical Management, which "racked up" more than $300 million in debts before declaring bankruptcy last November, is now being questioned about why the company paid millions of dollars to lawyers instead of providers the week before it filed for bankruptcy, the Riverside Press-Enterprise reports. The company paid almost $2 million to its attorneys the week before filing for bankruptcy and has since proposed paying "top executives" $480,000 a year to shut down operations. Court records show that the week before filing for bankruptcy, KPC paid its lawyers $1.9 million, of which only $50,000 went to the company's bankruptcy attorney. In addition, records show that KPC Chair and CEO Kali Chaudhuri was paid $5 million in January 2000, around the same time the company was negotiating with several HMOs for a $12 million loan "to keep its operations afloat." KPC officials said that the payments were "proper" and added that the bankruptcy court must approve all legal and executive payments before money is released. KPC blames its financial problems on HMO reimbursement rates that were too low to cover the cost of providing care. Bankruptcy Court Judge James Barr will hold a series of hearings on the issue over the next few weeks (Beeman, Riverside Press-Enterprise).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.