FPA Medical Management's Chapter 11 bankruptcy filing last week left thousands of stockholders and creditors, many of them physicians, holding the bag for the company's demise.
In its filing, the country's No. 3 physician practice manager reported total assets of $46.3 million and liabilities of $345.5 million.
As of last month, FPA had a network of 7,900 physicians in 29 states, but it has been taking steps to downsize rapidly.
FPA expects to file a full reorganization plan and a disclosure statement with the U.S. Bankruptcy Court in Delaware by Sept. 30, with a hearing date scheduled for Oct. 28. The company said it plans to emerge from court oversight by year-end using a "fast-track exit plan."
Last week the court approved $50 million in interim debtor-in-possession financing provided by a syndicate of FPA's existing lenders led by BankBoston. Some of the proceeds will be used to pay debts previously owed to physicians, physician assistants and nurse practitioners who continue to do business with FPA.
Under a plan approved by FPA's largest creditors, existing stockholders would lose their equity while senior creditors, such as banks, would receive half of the up to 40 million new shares of stock that would be issued once the company emerges from bankruptcy.
Other new shares would be earmarked for employee options and warrants for unsecured creditors. The plan requires court approval.
Also, FPA plans to relocate its headquarters from San Diego to Miami, home of Chairman and Chief Executive Officer Stephen Dresnick, M.D.
Meanwhile, reports continued to surface that FPA owes millions of dollars to physicians. Regulators in several states are grappling with whether health plans that contracted with FPA for physician services should be held responsible for paying the doctors.
At the same time, more health plans including Woodland Hills, Calif.-based Health Net and Atlanta-based Cigna HealthCare of Georgia moved to cancel contracts with FPA, saying doctors aren't being paid.
Hard hit are physicians who sold their assets to FPA for stock before the company's financial troubles became public.
In Orange, Calif., Orange Coast Managed Care Services and St. Joseph Medical Corp. completed a $50 million all-stock sale to FPA on March 20, when the stock was worth $18. Last week FPA shares traded at under 20 cents. Physicians at the groups have filed a class-action lawsuit against FPA, claiming it misrepresented its financial picture, the Orange County Register reported.