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KPC Medical Facing State Investigation

Health care: Another shortfall has group delaying payments to specialists and tightening up on supplies.


Just two months after Southern California's largest medical group received a $30-million bailout from health plans, KPC Medical Management is again experiencing a financial shortfall, prompting state regulators to launch an investigation of the Anaheim company's clinics and finances.

KPC president Donald Smallwood blamed the $20-million shortfall on a combination of late or reduced payments from health plans and others who owe the company money, as well as slower than expected sales of several real estate properties.

As a result, he said, KPC had once again delayed payments to specialists, and had become "very tight" on the purchase of supplies for its clinics. KPC provides care for 400,000 Southern Californians.

He did not dispute allegations made by a doctor at a large clinic in the South Bay that the facility had twice run out of X-ray developer, forcing physicians to send patients to a nearby emergency room for X-rays, and Tuesday was down to its last oxygen tank.

"We're running things very tight," said Smallwood, who said he did not know whether the clinic was indeed low on oxygen or X-ray developer. "We don't have a lot of surplus."

State regulators, stymied because they have no legal jurisdiction over medical groups like KPC, nonetheless plan to send an investigator to several of KPC's clinics this week, said Daniel Zingale, head of the newly created Department of Managed Care.

The investigator will take advantage of a back-door provision in state law that allows regulators to look at medical groups if they contract with health plans to provide care for HMO patients. But even if the investigator finds something amiss, the department will not be able to take action against KPC, said Joy Higa, a lead regulator.

Rather, Higa said, the state will only be able to pressure the health plans to change the way they do business with the group.

To that end, she said, regulators held a conference call with several health plans Tuesday, querying them about their plans to move patients should KPC go under or begin to provide substandard care.

The department is particularly concerned about reports that KPC plans to close several clinics and force patients to see doctors more than 30 miles away.

Smallwood said the company does plan to close a clinic in the Long Beach/Artesia area, but patients will be able to choose from two other clinics that are less than five miles away.

Similarly, he said, several clinics in the Inland Empire will close, but patients will have to travel only about 10 miles to get to another clinic.

He said that one clinic rumored to be on the block, the mid-Wilshire clinic in Los Angeles, will not close.

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