MEDPARTNERS: Management Group Struggles to Transform Bankrupt Business
Last August, Dr. Kali Chaudhuri and his company, KPC Medical Management, spent $24 million to purchase the bankrupt physician-practice management company MedPartners. But whether they have managed to stop some of the company's massive financial hemorrhaging is still unclear, the Orange County Register reports. The nation's second largest physician-practice management group continues to lose millions of dollars, 1,400 employees -- including 70 doctors -- have lost their jobs, and 29 clinics have closed their doors. Chaudhuri has managed to streamline the previously fractured computer system, which now connects all physicians and clinics through one system. Now, Chaudhuri is ready "to take the next step," which consists of a plan to sell KPC-paid doctors an 80% stake in their own practices. KPC would keep the remaining 20%. However, there have been "few takers," as Chaudhuri's asking price is $80 per patient each doctor serves under an HMO contract. Physicians also would have to agree to a 10-year contract with KPC to manage their practices -- while providing an additional fee of 12%-15% of their gross revenue to provide information technology support services. KPC is currently in negotiations with seven physician groups.
Health care analysts and physicians alike remain skeptical. Dr. Bryn Henderson, an Orange County-based health care consultant, said that the fair market value of many area medical practices is closer to $30 to $50 per patient. And a 10-year, 15% contract is not "something any medical practice should lock itself into," Henderson added. "It's unlikely any medical group will predicate their future on a 10-year contract, or that they could sustain their future on the future of HMOs. There is no stability there for them."
But many in the industry believe that doctors need to buy into Chaudhuri's plan for KPC to survive. If the venture fails, many physicians and patients "will be left scrambling" -- a prospect that some area specialists already know about firsthand. When MedPartners was forced into bankruptcy last March, specialists who contracted with the provider were stuck with unpaid medical bills. While KPC has tried to pay some specialists back, in December it started a "cash conservation" program, freezing payments to all non-critical vendors, including specialists. Dr. Santosh Mohanty, a Huntington Beach chest surgeon who is still owed thousands by KPC, said that he was forced to stop seeing KPC patients. Despite the skepticism, Chaudhuri is plowing ahead with his plan, arguing that if doctors buy into the idea, they will "have the clout needed to negotiate favorable contracts with HMOs and hospitals." He said, "I'm not buying and selling. My idea is to create a proper system, with both sides investing in it. It's not that I'm taking the money and going home -- we are partners" (Crabtree, 3/1).