A deal between MedPartners and the state of California will allow the company to proceed with plans to sell its physician and contracting groups there under the state's watchful eye.
The agreement, announced April 9, returns control of MedPartners Provider Network to the Birmingham, Ala.-based company; it had been under the authority of a conservator appointed by the state Department of Corporations. The arrangement also guarantees the company won't suddenly shut down its California operations.
The signing of the deal was pending as of Modern Physician's deadline. It calls for the state to appoint a new conservator to make sure MedPartners' California operations are funded and patient care is provided as the company prepares to exit the state.
"We had from the very beginning said we wanted to resolve the situation and move forward," says MedPartners spokesman Robert Mead.
The corporations department, which regulates HMOs and contracting agencies, took over the network on March 11 because of its shaky finances. The state feared MedPartners would shut down the network and practices representing 1,000 physicians, leaving 1.3 million Southern California patients in the lurch.
The state put the provider network subsidiary in Chapter 11 bankruptcy after taking it over.
California Gov. Gray Davis considered a MedPartners settlement so important that he kicked negotiations out of the corporations department to its parent agency, the Business, Transportation and Housing Agency.
The state expects MedPartners to take three to six months to wind down its operations, says Donna Campbell, an agency spokeswoman.
Mead says once a deal is signed, MedPartners likely will announce the sale of at least some of its physician groups in California.
That is part of a strategy MedPartners announced last November, when it said it would sell its physician practice management operations and concentrate on its Caremark International pharmacy-benefit management business.
Mead estimates MedPartners will spend $100 million to exit California. The state's health plans may pay one-quarter of that.
The plans are offering up to $25 million in loans if MedPartners is strapped. Their generosity comes from being stung by losses caused when another practice manager, FPA Medical Management, went out of business. Health plans lost at least $100 million when Miami-based FPA filed for bankruptcy last July.
"I think (FPA) was certainly something we had in the back of our mind," says Lisa Haines, a spokeswoman for Foundation Health Systems. About 100,000 of the Woodland Hills, Calif.-based HMO's enrollees use MedPartners doctors.
Assuming a deal is signed, MedPartners' remaining loose end is its provider network's bankruptcy case.
Now that control is being transferred from the state, MedPartners on April 21 asked the U.S. Bankruptcy Court in Los Angeles to throw out the case. The court had not responded to the request by Modern Physician's deadline.
The California Medical Association, which was involved in the negotiations between the state and MedPartners, hopes the court will reject the company's request. The CMA believes making MedPartners answer to a court in California will ensure that the company upholds its end of the deal, spokesman Hobart Swan says.