MEDPARTNERS: Cuts Deal with California Officials
In what appears to be "an angel of a deal for patients and their doctors," MedPartners Inc. and California officials late Friday settled their month-long dispute over the state takeover of MedPartners Provider Network, although the "devil may be in the details," the Orange County Register reports (Crabtree, 4/10). Gov. Gray Davis' (D) administration agreed to return control of the troubled California network to MedPartners, which, in turn, agreed to pay its California debt and continue funding clinics in the state. "My paramount concern is that patients continue to have uninterrupted access to health care by their existing physician. This agreement provides us that assurance," Davis said (Weintraub, Orange County Register, 4/10).
Give and Take
The Los Angeles Times reports that under the deal, California would "step back from its aggressive oversight," making the state-appointed conservator a supervisor and placing the company "back in charge and severely lesson the possibility that regulators will question its past accounting practices." According to a Davis aide, California regulators would "monitor" MedPartners' books and "oversee not only the health plan but also the clinics" -- significant in that regulators contend that the company "deliberately structured itself" so that clinics could not come under state oversight. While the company would not be released from bankruptcy, it would be permitted to "resume control of day-to-day operations and [represent] itself in bankruptcy court." The company will continue to withdraw from the California market, with all sale proceeds going into a California bank account and no management fees leaving the state. Once the provider network is liquidated, the state's major HMOs would contract directly with former MedPartners clinics so that patients will not have to switch doctors (Bernstein, 4/10).
MedPartners CEO Mac Crawford called the agreement, which is subject to final approval by California regulators, state and federal courts and MedPartners' lenders, a "major step" toward resolving the situation. The Wall Street Journal reports that a final agreement is expected in "several weeks," but that Crawford said the company "is backing its pledge by establishing a $25 million line of credit" should an emergency situation arise. A Merrill Lynch analysis gives "fairly clear evidence that MedPartners can meet its California obligations, and several HMOs and hospitals may provide "standby sources of financial support," according to a person familiar with the deal (Carns/Rundle, 4/12).
The Times reports that the managed care industry and the California Medical Association voiced concerns about the deal. CMA CEO Jack Lewin worried that MedPartners "might renege on its promise to pay all the bills" and Health Net President and CEO Cora Tellez said there might be "problems selling the clinics" (4/10). The Orange County Register reports that even if the settlement goes through, "patient disruption and failing physician practices remain possible." After months or years of poor management under MedPartners, many affiliated medical groups "are financially debilitated ... and may have trouble attracting the right buyer." In addition, the Register reports, should buyers express interest, "many are likely to restructure their acquisitions, raising the possibility that more physicians will be laid off" and patients will have to find new doctors and clinics. Many MedPartners medical groups are trying to buy their practices back and some "large companies are negotiating to gobble up large chunks" of the network, the Register reports (Crabtree, 4/11).