FPA Medical Management, once the nation's third-largest physician practice management company, is going out of business.
FPA, which had hoped to emerge from Chapter 11 bankruptcy protection as a viable company, instead will come out as a shell.
On June 1, FPA sold virtually all its physician operations for $108.2 million to raise money to pay off creditors.
Durham, N.C.-based Coastal Physician Services purchased Sterling Healthcare Group, FPA's emergency-room division. And Coastal Chairman Steve Scott, M.D., separately bought Meridian Medical Group in Atlanta and Carolina Healthcare Group in Charlotte, N.C.
Louisville, Ky.-based insurer Humana bought back 50 clinics it had sold to FPA at least two years ago. Humana says it bought the clinics to protect its health plan and intends to resell them.
What's left at FPA are a few pieces of equipment and other hard assets that the company plans to sell within the next few months, spokeswoman Ann Julsen says.
Negotiations determined that the best way for creditors to get back even a small percentage of their money was for FPA to sell whatever it could, Julsen says.
FPA, which filed for bankruptcy on July 19, 1998, in Wilmington, Del., had planned to keep at least some operations and pay back creditors with newly issued stock.
But unsecured creditors, including doctors, balked at the plan. Meanwhile, the stock market values of other PPMs continued to drop, making another public stock issue less viable.
What's left of the cash doesn't cover much of the creditors' $2.3 billion in claims. So far, only $6 million in cash is scheduled to be distributed. Of that, $4 million will go to secured creditors, including banks who hold $319 million in FPA loans, and $2 million to unsecured creditors.
Secured creditors also will receive 100% of FPA's newly issued common stock, which is essentially worthless. The old stock was available for about a penny a share in late June.
Julsen says more money may be available after FPA pays an undetermined amount of administrative expenses, including attorney and U.S. Bankruptcy Court fees.
Others are already claiming what little money FPA has left. Out of the $108.2 million, $55 million goes to pay back banks who lent money to finance FPA's operations during bankruptcy.
Coastal, which itself has been in and out of bankruptcy, is paying $69.3 million in cash and assuming at least $20 million more in debts for its purchase of FPA subsidiary Sterling Healthcare Group.
Scott's $5.4 million purchase of the Atlanta and Charlotte operations, made through his StonyBrook Capital unit, was not broken out into cash and debt portions. Scott did not return phone calls seeking comment.
Humana paid $13.5 million in cash for 50 clinics in Florida, Missouri and Texas. Spokesman Greg Rotherham says those clinics, representing 121,000 Humana enrollees and an undetermined number of doctors, may well have gone out of business if Humana didn't step in.
When it filed for bankruptcy, FPA was the third-largest PPM, owning assets representing 7,900 physicians. As recently as March, it had filed a plan with the Bankruptcy Court that would allow it to emerge with nearly 400 physicians, along with its Sterling subsidiary, founded by current FPA Chairman and CEO Stephen Dresnick.
Dresnick joined FPA when it purchased Sterling in 1996. He replaced fired Seth Flam, D.O., as CEO on March 26, then stepped in for departed Chairman Sol Lizerbram, D.O., on July 15, four days before the bankruptcy filing.
