The demise of KPC Medical Management ignited a debate over who bears responsibility for the failure of the state's largest physician group. The
California Medical Association blames the health plans, the state and a few physicians. The California Association of Health Plans says the business model was flawed.
Anaheim, Calif.-based KPC was expected to file for bankruptcy by Nov. 21, says Jack Lewin, M.D., chief executive of the CMA. Published reports quote company officials saying the clinics would close Nov. 22. California's Department of Managed Health Care gave health plans permission on Nov. 17 to switch enrollees to other physician groups.
The failure comes a little less than three months after health plans funneled $30 million to KPC earmarked to pay physicians. However, it was initially unclear how many physicians actually were paid. On average, KPC, California's largest practice manager, owes doctors $25,000 each.
"KPC with its current (capitation) rates and negotiated loans is now viable," Lewin says. "It appears the health plans had planned all along to let this happen. They . . . withheld the higher (capitation) rates and forced KPC into bankruptcy.
"This has all the appearances of an orchestrated effort on the part of the health plans with the tacit support of state officials. I hope that's not the case, " he says.
The payments to doctors coupled with continued cooperation on the part of the health plans makes Lewin's accusations ludicrous, says Bobby Pena, spokesperson for the California Association of Health Plans.
"The health plans have acted very appropriately and admirably and have done (their) job of stepping up to the plate," Pena says. "CMA has taken the very easy position of sitting back and heaping blame at us . . . It was in the best interest of the (plans' enrollees) to keep KPC going. It's for the best interest of (enrollees) that plans started walking away. You cannot have access in jeopardy."
In the end, more than 300,000 patients relied on KPC for their care, a number that fell off dramatically from its 1 million enrollment 18 months ago.
KPC's founder and Chairman Kali Chaudhuri, M.D., bought the practices from the now-defunct MedPartners. Chaudhuri couldn't be reached for comment. Messages left for his legal department were not immediately returned.
KPC couldn't make a go of it because health plans reneged on their promises and state officials refused to become involved and enforce contracts, Lewin says.
"The state did not cooperate and let the transfers occur. And now the bankruptcy is unavoidable."
California needs an agency that intends to hold health plans accountable, he says. Although he believes state managed care chief Daniel Zingale is sincere, Lewin says that the DMHC is "awfully politicized."
The DMHC regulates health plans, not the contracts they negotiate with physicians or physician groups, says Joy Higa, the department's assistant director for plan and provider relations.
Several physicians' decisions to leave KPC and accept lower capitation rates from plans contributed to KPC's failure, Lewin says.
"There were some cannibalistic doctors involved," Lewin says. "One of the problems is that the health plans have doctors so divided . . . I predict that any of those groups who accept the lower rates will themselves be bankrupt in six months or a year."
KPC's failure stems from a failed business model of PPMs, Pena says.
"We've shown where our true concern lies with our (enrollees)," Pena says.