KPC Global Care wasted little time in revamping the properties it recently acquired from MedPartners.
Just seven weeks after the Riverside, Calif.-based physician practice management firm bought a large chunk of MedPartners' Southern California operations for $250 million, it has decided to close, by early December, 29 of its 84 new clinics.
Meanwhile, KPC confirmed it has reached terms to sell the assets of Friendly Hills Healthcare Network back to its 120 physicians, and will manage the group after the sale is completed, which is expected by Dec. 1. KPC said it was also negotiating to sell back former MedPartners assets to other physicians. It wouldn't provide details on those talks.
KPC will also lay off about 500 employees, or about 10% of its total workforce. The layoffs will include about 100 physicians, most of them at the clinics to be closed.
Birmingham, Ala.-based MedPartners, now known as CareMark Rx, had much of its California medical group operations forced into bankruptcy last March when state regulators seized control of the network. KPC, a fast-growing network of medical groups east of Los Angeles, purchased most of MedPartners' California assets during the summer.
According to KPC officials, the groups it acquired, which included Friendly Hills and 300-plus-physician Mullikin Medical Group, were losing a staggering $9 million a month.
"Even though Mullikin and Friendly Hills clinics often shared the same space, they usually kept separate medical records," said Donald Smallwood, president of KPC Medical Management, which is managing the MedPartners properties.
Although 60 of the 85 original Mullikin and Friendly Hills locations will remain open, they will take the KPC name, he added.
Along with the clinic closures and layoffs, three administrative centers in Redlands, City of Industry and Long Beach, all in California, would also be shut down. Reimbursement rates are also being renegotiated with the various health plans that do business with the medical groups, and ancillary services are being streamlined to further cut costs. Smallwood predicted that the properties would return to the black by the second quarter of next year.
Steve Valentine, president of the Camden Group, an El Segundo, Calif.-based consulting firm that specializes in medical group management, said such a swift return to profitability was too optimistic.
"That would be a big challenge, since there are a lot of costs that need to be wrung out," he said.
But Valentine added that KPC should be helped by the proceeds of the pending medical groups sales. Also, cash flow should increase starting in January when many HMOs will increase their patient copayments, allowing doctors to pocket more cash from an office visit, and health plans will lower the annual pharmacy limits for Medicare enrollees to $1,000 from $1,500, further decreasing pressure on physicians.