Now that Southern California's largest PPM, KPC Medical Management, has received a $30 million cash infusion, its employed and affiliated physicians hope to get their financial lives back in order.
On Sept. 14, after nearly five weeks of "the check's in the mail" promises by the state's biggest health plans, Kali Chaudhuri, M.D., KPC's embattled founder and chairman, said the money finally reached KPC's account.
Virtually all the money will go to specialists, some of whom haven't been paid for their services since January. The plan is to pay the oldest claims first, according to California Medical Association CEO Jack Lewin.
Both Lewin and Chaudhuri said that the process ought to take no longer than four weeks to complete.
Lewin, whose organization was instrumental in hammering out the deal with the HMOs, now is asking doctors to "stay with KPC . . . and make it work." But many of the doctors themselves aren't sure it can.
Chaudhuri describes the funds as "a combination of contributions and loans." He did not say how much of the $30 million was loan and how much was contribution, nor did he specify the repayment terms.
In mid-August, when Chaudhuri first announced the deal, he called it a short-term solution that also included higher capitation rates, as well as other improvements that either saved KPC money or shifted some costs back to the plans.
KPC's new capitation rates, estimated to be about 30% higher by the Los Angeles County Medical Association, "are now adequate to keep (it) afloat. (Chaudhuri) should be good," Lewin says.
Lewin gave much of the credit for the plans' rescue to two of the HMOs, Health Net and Blue Cross, "who came forward to do the right thing." He also credited state officials for keeping the plans honest.
Chaudhuri, who saw his hopes dashed repeatedly, now says "I am a positive guy" concerning KPC's future. Yet despite the apparent resolution of the ordeal, which began when Chaudhuri purchased the former MedPartners groups in August 1999, many of KPC's physicians were too shell-shocked to take much comfort in it.
KPC physicians, who number approximately 1,200 according to LACMA, heard the rosy scenarios too many times to believe them now. Yet they're genuinely unsure of what to do, caught as they are between a company that defaulted on its payments to them on the one hand, and one that may potentially be a reinvigorated powerhouse on the other.
The median amount owed to doctors is pegged at $25,000, although the figure is somewhat misleading because individual physicians were owed differing amounts, depending on how many KPC patients they saw and for how long. Many of the doctors "were owed six figures," says LACMA's treasurer, Marci Zwelling, M.D.
Ernie Meth, M.D., a nuclear medicine physician from Murrieta, said after KPC's debt to him reached "the low six figures," he instructed his staff to "discreetly" inform KPC patients they could no longer see the doctor.
As a final step, Meth sent bills totalling $100,000 to some 300 patients, who, angry and frantic, called their insurers to find out what was happening. "The carriers got on Chaudhuri, and we started getting paid," Meth says. KPC now owes him about half the original amount.
Meth is not the only physician who is no longer treating KPC patients, and while no one knows exactly how many there are, Zwelling says the resignations and refusals are widespread. "The network is having difficulties maintaining patient flow," she says. "We're seeing every day (where) there are (KPC) patients in the hospital waiting for a surgeon, and they can't find one who's willing to take the case."
Chaudhuri would not comment on how many physicians have resigned from the network or are refusing to see KPC patients, other than to say the number is "insignificant."
Joel Epstein, M.D., a pulmonologist in Lakewood, also terminated his contract with KPC, in March, after KPC missed a $25,000 payment. "I've had to cut back (on expenses)," Epstein says. "We tightened our belt." Epstein's income has dropped 40% over the past year or so, and while KPC wasn't the sole reason for that, it was a part of it.
Howard Gilman, M.D., an anesthesiologist from Los Alamitos, says his group of seven physicians was owed "six figures" by KPC. "We were promised over and over again we would get reimbursed, but it has never come to pass."
He hasn't yet terminated his contract with KPC, but he's hardly seeing any KPC patients because about 65 KPC-associated physicians at the hospital where Gilman works have resigned, so he's not getting any of those referrals. His income is down about 20%, which he calls "discouraging."
Andre Maginot, M.D., a vascular surgeon in Long Beach, says KPC owes his group of eight so much money, "it's hard to tell anymore." But he estimates the amount is at least $200,000. "It's been a constant problem. We have trouble getting them to answer us when we call . . . we get voice mail."
Luckily, he says, the debt is only about 20% of the group's revenues, "but we have to internally pay surgeons to do work out of our own pockets, so this is becoming a real problem. It's getting harder to get up at 3 a.m. to see a KPC patient."
He hasn't refused to treat anyone, but that day may not be far off. "Not on an emergency basis, but electively, if they (KPC) continue this way, we're contemplating telling them we can't take care of them anymore. We can't go on indefinitely fighting for every penny."
Then there are the Palan brothers, Henry and Tom. They're not physicians, but they run a diagnostic center that contracts with KPC and worked for many KPC physicians. They're out 40% of their income--Henry Palan wouldn't say how much that is, but "it's a pretty sizable chunk for two Joe blows. We're living on our credit cards."
Now that the $30 million is in, Chaudhuri is promising that a monitor has been hired to oversee the process. Lewin calls the individual "a very reputable outside person" who should be able to reassure doubting physicians that the payback process will be accomplished in a timely and fair manner.
When and if they do get paid, the physicians, especially those who terminated their contracts, will have to re-evaluate their relationships with KPC. "Many (of them) tend to blame (KPC) rather than recognize that the health plans . . . had a lot to do with the delays and the dragging" on payments, says Lewin.
Palan doesn't know whether or not to be angry at KPC, the insurers or someone else. All he knows is that "at 40% of our income (from KPC), you can see why I want it to work out."
Epstein says before he returned to KPC, "I'd want more specifics. How have things changed? Is the cap higher? How will they pay us?" If the CMA came out and endorsed Chaudhuri, "That would really help."
Gilman is hopeful he'll receive the money KPC owes him. "I'll probably hang in there" and stay with KPC, he says.
In August, Chaudhuri said that the plans agreed to improve their contracts because they audited KPC's books and came to support the company. Earlier this year, KPC reduced its debt from $9 million to $2 million.
Steven H. Heimoff is an Oakland, Calif.-based healthcare business writer.