A California court has scheduled a July 7 hearing on a motion to block MedPartners' sale of two large physician groups to KPC Global Care, a physician-owned management services organization.
MedManagement Acquisitions Corp., a consortium of Los Angeles physicians, alleges MedPartners illegally broke an agreement to sell the two groups to the consortium and should not be allowed to sell them to KPC.
The motion, filed June 21 in Los Angeles County Superior Court, could delay the expected July 31 close of the sale of Mullikin Medical Group and Friendly Hills HealthCare Network. Each employs about 250 physicians.
MedPartners, a Birmingham, Ala.-based physician practice management company, has reached separate agreements with other parties to sell Cassidy Medical Group, Eaton Medical Group, High Desert Primary Care and U.S. Family Care Medical Center, which combined have 135 physicians, as well as 120-physician Talbert Medical Group.
MedPartners is selling the two groups as part of a settlement with state regulators over its bankrupt California operations. The settlement requires MedPartners to sell its assets and exit the state in six to eight months.
In announcing the settlement, MedPartners also announced the sale of Mullikin and Friendly Hills to KPC, based in Riverside, Calif. KPC is expected to sell the groups' assets to the physicians in each group in exchange for an agreement allowing KPC to manage the groups' practices (June 21, p. 20).
MedManagement filed the fraud and breach of contract lawsuit six days after MedPartners agreed to sell Friendly Hills and Mullikin to a KPC subsidiary. The consortium claims MedPartners deliberately withheld key information that prevented the completion of due diligence and that it refused to extend negotiations beyond June 14-the day before the sale to KPC was announced.
MedPartners announced in March that it had entered talks with KPC to sell it unnamed assets.
"(MedPartners) went out of its way to make sure the deal would not close," said Arthur Southam, M.D., who has consulted with MedManagement regarding the failed transaction and is former chief executive officer of Health Net HMO.
Brad Karro, president and chief operating officer of MedPartners' California operations, countered in a written statement that MedManagement was the laggard. "The bottom line is that MedManagement could not get the deal completed in the time frame required by the letter of intent."
Karro later said KPC had extended a better offer than MedManagement.
MedManagement is asking for the KPC deal to be voided and is seeking unspecified damages.
The consortium lost a preliminary battle when Superior Court Judge Robert O'Brien denied its motions for a temporary restraining order against the sale and for an expedited trial.