MedPartners' agreement earlier this month to sell its remaining California operations could return two integrated multispecialty groups to physician ownership.
The groups, Mullikin Medical Group and Friendly Hills HealthCare Network, broke new ground by becoming integrated networks before their physician owners sold them to publicly traded companies (See chart).
The agreement encompasses 500 physicians at about 65 clinics serving 511,000 prepaid health plan enrollees in Los Angeles and Orange counties. About 100 ancillary centers and other facilities are included. The price was not disclosed (June 14, p. 6).
"We firmly believe the game has been played out and the time has come for the physicians to regain ownership," said Nathana Lurvey, a Culver City, Calif., OB/GYN and a member of the governing board at Southern California Medical Corp., one of the organizations being sold.
"This has been an all-consuming quest on the part of most of us involved in physician leadership for the last couple of months," she added.
The deal is scheduled to close by July 31 and is subject to bankruptcy court approval. Birmingham, Ala.-based MedPartners saw its money-losing California operations seized by the state and plunged into Chapter 11 bankruptcy protection in March.
The buyer is KPC Global Care, a physician-owned management services organization based in Riverside, Calif. KPC is expected to sell the assets to the physicians in exchange for an agreement that it provide management services to the practices.
The deal was endorsed by Pacific Physicians Alliance Medical Group, a coalition of 120 MedPartners physicians formed after the company's California assets were seized. The alliance has hired an attorney and a business consultant to represent the physicians' interests.
Lurvey said physicians who stayed through multiple changes in ownership are committed to the idea of an integrated group.
"I think it's very possible that they (the alliance) will emerge intact, although the recent experiences with MedPartners will leave us operating somewhat differently, because now we have a sense of what the market requires and because many of the key (leaders) have gone on to other things," she said.
For example, she said, the groups may be consolidated and broken into smaller groups around geographical areas defined by mountain ranges and freeways.
Both the Friendly Hills and Mullikin names remain, but the entities' structures have been altered. Friendly Hills now includes a physician network formerly owned by Cigna HealthCare, and it is part of the larger business unit Southern California Medical.
Under an agreement with the state, the groups will no longer be able to assume risk for nonphysician services.
It's unclear how many physicians will be in each of the groups. MedPartners was unable to provide a breakdown by deadline last week.
The physicians are exploring financing options, but don't yet know how much capital they will need, Lurvey said. Another Southern California organization, 120-physician Talbert Medical Group, was able to finance a deal to buy back its assets from MedPartners earlier this month (June 14, p. 6).
MedPartners had previously negotiated to sell Mullikin and Southern California Medical to a local investor group, which apparently lost its funding at the last minute, said Maryann Ricardo, a consultant hired by the physician alliance. She said some of the physicians sensed that the investor group would have tried to extract unachievable profit margins. "They didn't want a MedPartners II," she said.