Hospital, health plan, government and MedPartners officials may announce a definitive agreement as early as this week to bail out the physician practice management firm's bankrupt California operation. However, it will not have come without a struggle.
A source close to the negotiations, who spoke on condition of anonymity, said a proposed deal announced April 9 nearly unraveled in the middle of last week over objections by some of MedPartners' 15 hospital creditors. The hospitals, said to be those owned by Tenet Healthcare Corp. and Catholic Healthcare West, feared MedPartners could exploit potential loopholes to escape paying the $45.7 million its largest creditors claim is owed.
The California Department of Corporations seized MedPartners' state operations, known as MedPartners Provider Network, on March 11 because of concerns about the network's solvency. A state-appointed conservator immediately placed it in Chapter 11 bankruptcy. Birmingham, Ala.-based MedPartners, which owns 117 clinics that employ 1,000 physicians with 1.3 million patients in California, contracts with 17 health plans statewide.
Although some "deal-busting issues" remained on the table as of late last week, the source said the determination on all sides to complete an agreement would likely win out over the alternative: pursuing claims for pennies on the dollar in bankruptcy court.
Officials from Santa Barbara, Calif.-based Tenet, San Francisco-based CHW, MedPartners and the Healthcare Association of Southern California-which is representing hospitals in the negotiations-either strongly denied difficulties had cropped up or said they were committed to sealing a pact. "We've been working around the clock on this because everyone wants to see a settlement," said HASC President James Barber.
"It's a proposed settlement that needs to be finalized, and we remain confident that it will," said MedPartners spokesman Robert Mead.
State officials did not return repeated phone calls last week seeking comment on the negotiations.
The confidential terms of the proposed settlement, obtained last week by MODERN HEALTHCARE, would have the HMOs and hospitals providing MedPartners with up to $50 million in loans and accounts payable credits and deferrals, while the conservator would return day-to-day operations to MedPartners. In turn, MedPartners would pay claims from hospitals and physicians; guarantee continuity of patient care; and find buyers for its California assets, which are valued at about $30 million, according to the settlement proposal. Proceeds would be used to pay creditors.