MEDPARTNERS: Largely Unregulated, Say CA Officials

      California regulators said they are unable to regulate much of the MedPartners Provider Network they took over last week, partly because of the way the company is structured and partly because state law has not kept pace with the managed care revolution (Bernstein, Los Angeles Times, 3/18). Meanwhile, the plan's parent company, Alabama-based MedPartners Inc., filed two court actions in Los Angeles yesterday seeking to overturn the state's takeover, which they contend has hampered the company's ability to pay providers and has unfairly characterized the plan as bankrupt. "Under the circumstances, the company felt compelled to take action to ensure continuity of services to patients as well as to protect the interests of our affiliated physicians, other providers, our shareholders and our creditors," said MedPartners Chair and CEO Mac Crawford (MedPartners release, 3/17).

Managed Care Mambo
      Peter Wolfson, the state-appointed attorney hired to oversee the bankruptcy proceedings of the provider network, said the company "very cleverly constructed a corporate organization that circumvented the ability" of California regulators to control it. Donna Campbell, deputy secretary for California's Business, Transportation and Housing Department, said the oversight problem is not unique to MedPartners, but it is systematic. Under current law, the state only regulates health plans, not managed care "hybrids," she said. The Times> reports that sources say this allowed MedPartners keep "just enough money in the regulated portion ... to meet state requirements, masking huge losses in its clinics and other operations." According to bankruptcy documents, the California plan owes hospitals and other providers "at least $73 million," a figure sources say may be "grossly overstated."

Not So
      Crawford disputed charges that his company was letting the California plan dry up. "How could I exploit something when I have not taken a single nickel out of California and I've put in $256 million?" He added, "I think this company has gone above and beyond what anybody would expect to ensure that this (health plan) remains in place and these patients get treated" (Los Angeles Times, 3/18). The Wall Street Journal reports that Crawford said he plans to use the proceeds of the plan's sale to pay physicians, hospitals and other providers. Moreover, California regulators have "just about shut our system down," said Crawford, who maintained that the state takeover and bankruptcy declaration disrupted "what he had expected to be an orderly process" (Hays/Rundel, 3/18).