MEDPARTNERS: Reaches Final Deal with State
MedPartners Inc. and the state of California have reached a settlement that will allow MedPartners to pay its creditors and exit the California market. The agreement settles all outstanding litigation between the state and the company (Wall Street Journal, 6/10). In exchange, the company will continue to allow state officials to monitor the operations of its health plan and 113 clinics. In a statement yesterday, Gov. Gray Davis (D) said, "The health care industry, working with my administration, has forged a business solution designed to accomplish the objectives we set out at the beginning: uninterrupted access to health care services for patients in this network ... and payment to providers." The Los Angeles Times reports that hospitals "expect to receive about 85 cents on the dollar for the roughly $100 million owed by MedPartners." A federal bankruptcy judge still must approve the settlement. Judge Alan Buckner expressed concern yesterday "that the agreement was written in such a way that it might invite lawsuits from potential creditors" (Bernstein, 6/10). Gov. Gray Davis commented, "I am pleased that the health care industry working with my administration has forged a business solution designed to accomplish the objectives we set out at the beginning: uninterrupted access to health care services for patients in this network with the physician of their choice, and payment to providers who deliver these critical services. ... My administration will continue to monitor the resolution of this matter as called for in the agreement" (release, 6/9).
A Larger Trend?
The Times reports that MedPartners is the second such organization in less than a year to file for bankruptcy in California, and that the "settlement provides a blueprint for the state as it attempts to grapple with the huge disruptions in patient care that could result if, as many believe will happen, more firms like MedPartners get into financial trouble." In the wake of the MedPartners disaster, several health care organizations called on the state to develop a mechanism to better monitor companies like MedPartners that act as a middleman between HMOs and provider groups. Jack Lewin, executive vice president of the California Medical Association, said, "We now want to work with the governor and the administration to figure out a way to prevent other catastrophes like this from happening because there are still many large medical groups and independent practice associations that are on the brink of insolvency." MedPartners CEO Mac Crawford, noting that the presence of such "middlemen" as MedPartners is diminishing, said, "We don't think there's enough room in the health care equation for as many people trying to take a piece of the [profit] margin as there have been. You can only squeeze the dollar in so many ways" (6/10).