KPC MEDICAL MANAGEMENT: Cash-Strapped Medical Group Turns to HMOs for Assistance

      With KPC Medical Management teetering on the brink of bankruptcy, owner Dr. Kali Chaudhuri has sought the help of HMOs to bail out his floundering medical group, the Orange County Register reports. According to Chaudhuri, higher rates from health plans, primarily HMOs, offer the only solution to KPC's financial woes. He said that the contracts he inherited from near-bankrupt MedPartners, the group he bought last September for $24 million, pay rates "well below" the state average. Through consolidation, clinic closings and reductions in staff, Chaudhuri has slashed the groups' costs by $10 million per month. "We did our part. We fixed things one by one," he said, adding, "And now we believe that with a little help from our partners in the HMO industry, we can not only break even but do well." Jack Lewin, CEO of the California Medical Association, agreed. "[Chaudhuri] still does not have an adequate level of funding to deal with the patients under the care of KPC ... and it's not going to get any better until he gets reasonable rates from all the health plans," Lewin said, noting that KPC's contracts run as much as 30% lower than what the medical group needs to remain financially viable. To break even, KPC President DOnald Smallwood estimates that KPC would need a 10% increase on top of the $25 million in monthly rate payments it now receives from 16 health plans. In recent weeks, Chaudhuri and Smallwood have made a number of trips from their Anaheim-based headquarters to HMO-rich Woodland Hills to negotiate with managed care companies. Some health plans remain wary of funding the failing medical group. "We don't want to put a Band-Aid on the problem ... we don't want to throw money at it and then be looking at the same situation two to three months from now," Blue Cross of California spokesperson Michael Chee said.

State Solution?
      Lewin hopes that the state will aid negotiations between KPC and the health plans. However, that scenario is "unlikely," according to Department of Corporations Assistant Commissioner Julie Stewart. She indicated that the department regulates HMOs, not medical groups, and has no authority to act as a mediator. While Lewin believes the newly formed Department of Managed Care, which will assume HMO regulation duties in July, will offer a solution, Stewart maintains that the new agency will have the same rules as the Department of Corporations. "What's changing is the agency that's going to be regulating the HMOs, but the law is pretty much the same," she said (Wolfson, 6/21).