The state of California returned control of MedPartners Provider Network to its parent company last week but without a definitive agreement about how MedPartners will repay the network's debts.
MedPartners hailed the return of its contracting network as paving the way for the sale of its physician clinics in California, which employ about 1,000 physicians at 117 sites.
The state seized the network in March and plunged it into Chapter 11 bankruptcy protection to shield unsecured creditors.
Under an interim agreement, which a bankruptcy judge last week approved for implementation, a state-appointed monitor will oversee network operations and ensure that MedPartners continues to fund its clinics with working capital.
Meanwhile, the state and MedPartners said they were continuing to negotiate a definitive agreement. MedPartners spokesman Robert Mead said the Birmingham, Ala.-based company expects to reach that goal "very soon."
Hospital creditors have actively participated in the discussions, but some expressed misgivings about the terms of a proposed settlement (May 3, p. 4).
MedPartners has stated repeatedly that it has the resources to pay creditors.
Several creditors of MedPartners Provider Network declined to comment last week, citing ongoing negotiations. Among them were the Healthcare Association of California, which represents multiple hospital creditors, and San Francisco-based Catholic Healthcare West, one of the largest creditors.
An official of one creditor, Good Samaritan Hospital in Los Angeles, was anticipating a positive outcome, since all parties were still talking last week.
"We're basically looking to the state to look after our best interests, and they've been very positive and very responsive," said Gaynor Rabin, the hospital's administrative director of managed care and contracting.
Harry Anderson, senior director of corporate communications at Tenet Healthcare Corp., said the return of the network probably wouldn't affect creditors. He said Tenet hospitals continued to be paid. "It doesn't settle the overall situation. It just puts MedPartners back in charge," Anderson said.
Earlier this month, MedPartners posted first-quarter net income of $10.8 million, or 6 cents per share, compared with a net loss of $25 million, or 14 cents per share, in the year-ago period. Revenues for the quarter ended March 31 rose 26% to $785 million.
Mead said the return of the network, which conveys health plans' payments for prepaid healthcare services to hospitals and physicians, will help the firm proceed with selling its clinics by offering "clarity" to potential clinic buyers.
MedPartners' clinics were not included in the seizure or the bankruptcy filing.