A California physician is convinced he can make money where physician practice manager MedPartners failed dismally. But many observers believe he faces a difficult challenge.
Kali Chauduri, a 54-year-old orthopedic surgeon, sits at the helm of KPC GlobalCare, a rapidly expanding physician management services organization. Already it oversees the care of nearly 1 million Southern Californians in fast-growing Riverside and San Bernardino counties.
Chauduri's ascent out of nowhere was noted by California analysts and the media even before he pulled his latest, largest and most stunning coup--a proposal to pick up the pieces of MedPartners as it bails out of California to concentrate on pharmacy benefit management.
In March, Chauduri, who is chief executive officer, board chairman and president of GlobalCare, announced his intention to acquire 65 ex-MedPartners clinics that serve more than 500,000 patients. The deal faces a challenge in local court by another company, but it's expected the GlobalCare offer will be approved by bankruptcy court. Though the amount of the offer has not been disclosed, it is rumored to be about $30 million.
Chauduri is a proponent of physician independence and insists his doctor-friendly approach will make things work. Although short on specifics, his philosophy reflects an anti-managed-care view.
He calls managed care a "monster" that sucks up 30 cents of every healthcare dollar before doctors, hospitals and ancillary service providers get a penny. As a result, providers fight among themselves for the crumbs. "It's a divide-and-conquer strategy" by health insurers, Chauduri says, with apparent exasperation.
His solution is familiar: Providers must unite and organize. "Primary-care physicians and specialists should get together, then they should get together with hospitals, then with the guy who sells the bed pans and wheelchairs, so I don't have to deal with someone living in Birmingham (MedPartner's base) or Nashville (the home office of practice manager PhyCor) or people on Wall Street, who bought doctor practices and used their income streams to go public," Chauduri says.
GlobalCare is a for-profit, privately held company. While Chauduri won't rule out the possibility of a stock offering, he says he has no need for one now. Personal wealth, access to bank loans and backing from Merrill Lynch & Co. provide all the funding he needs, Chauduri says.
Chauduri comes from a wealthy family in northern India, but he says he set out from his father's home 37 years ago to make his way in the world with the rupee equivalent of $1.10 in his pocket.
He says one key to achieving his vision is to let physicians own their practices. After the MedPartners deal is completed, he says he will sell doctors' practices back to them, at cost plus interest and not a penny more. In return, the physicians must sign management agreements with GlobalCare. Its fees will be 8% to 15% of the practice's revenues, depending on whether they contract for billing only or for other services such as managed care contracting.
"Once doctors, hospitals and ancillary service providers get together on the local level, we're not divided and conquered by someone else anymore, right?" Chauduri asserts.
Several physicians with whom Chauduri has done business speak well of him, but he also is attracting skepticism.
One skeptic is Michael Cushing, a Norwalk, Calif., doctor whose practice would be part of the MedPartners' sale to GlobalCare.
Cushing says he has nothing personal against Chauduri, but after being burned by MedPartners, he is leery of a repeat scam. "Fool me once, shame on you; fool me twice, shame on me," he says.
Cushing says many other physicians also oppose the GlobalCare deal but are afraid to say so because they feel MedPartners pressured them to cooperate. MedPartners denies using such tactics.
On the other hand, Aetna U.S. Healthcare manager Ed Tanida applauds Chauduri and his business. "He's done a good job, and I have a lot of respect for him," says Tanida, who is general manager for Aetna's Orange County/Inland Empire region.
Tanida praises GlobalCare's management information systems as among the best he's ever seen. Chauduri says he will make the system available to each group that contracts with GlobalCare.
"There's a big difference between GlobalCare and MedPartners," Tanida says. Unlike MedPartners, GlobalCare is a local company and "more attuned to what's going on, " Tanida says. Despite planned expansion, the company will remain essentially local because it will move into contiguous counties, he says.
Some local physician-administrators are more doubtful of Chauduri's chance of success. Bob Margolis, M.D., CEO of Healthcare Partners Medical Group, has watched Chauduri's rise closely. He says Chauduri is taking "a very large gamble" and so are those who support his bid.
"He claims to have significant financial backing, both personally and from others," Margolis says. "He claims to have management systems capable of taking on over 1 million capitated lives. He claims to be able to integrate what was a very nonintegrated set of physician practices.
"But like many people, I have reservations about whether he does (have all that) or the buy-in from the physicians involved, who are critical to the success of this venture," Margolis says.
Healthcare Partners is a Torrance, Calif.-based IPA with 3,000 physicians.
Chauduri shrugs off the criticism. Of course, his model is "not without problems," he says. Even if providers get together, health plans are under considerable pressures to keep rates stable--and plans are consolidating, too.
But Chauduri promises physicians they'll have a profit to enjoy, if they trust him.
How can the Cushings of Southern California know they are not going to be saddled with unacceptable risk while a raider piles up a private fortune?
Chauduri says doctors can opt out of GlobalCare contracts if they want. "Every one of our contracts is cancelable for cause, and one cause is if they lose money," he says.
Physicians, he says, need to come together to get involved in influencing the direction of managed care. "The fellow physician is not our enemy and neither is the hospital. My mission is to create a system that will help the doctors understand the business. I've been angry, so I've been upfront."
Somebody, Chauduri seems to be saying, must change the system, and if no one else can, Chauduri will.
Steven H. Heimoff is an Oakland, Calif.-based writer who specializes in healthcare business topics.