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KPC Medical Files for Chapter 11 Bankruptcy

Health: Action follows closure of 38 clinics. State warns patients to be aware of regulations protecting their care.


KPC Medical Management Inc., the largest for-profit medical group in Southern California, followed its closure of 38 clinics last week by filing for bankruptcy, a move that will further complicate payment for the care of more than 250,000 residents of the region.

"Bankruptcy poses a greater threat for continuation of care than groups closing for other reasons," said California's managed-care chief, Daniel Zingale. "But there are regulations in place to protect patients."

Zingale warned former KPC members to be aware of charges beyond their previous co-payments, delays in care or in scheduling medical procedures, delays in filling prescriptions and reassignment to new doctors more than 15 miles from their homes or jobs.

"All are violations of the patients' rights regulations passed last year," Zingale said.

He urged KPC members facing any difficulties in obtaining care to call the state's toll-free hot line at (888) 466-2219 or contact his agency online at http://www.hmo

For the Record
Los Angeles Times Saturday February 10, 2001 Home Edition Business Part C Page 3 Financial Desk 4 inches; 108 words Type of Material: Correction
Caremark Rx--To clarify articles that appeared in The Times on Aug. 29 and Nov. 28, Caremark Rx Inc., an Alabama-based pharmaceuticals services company that was formerly known as MedPartners Inc., has never filed for Bankruptcy Court protection. In 1999, Caremark's former California subsidiary, MedPartners Provider Network, was seized by state regulators and was placed in Chapter 11 Bankruptcy Court protection. The state and MedPartners Provider Network eventually reached a settlement. Certain assets of MedPartners Provider Network were sold to Riverside-based KPC Medical Management, which filed for Chapter 11 protection last fall. Some of KPC Medical Management's assets, including hospitals and clinics, have since been sold to other entities.

KPC filed in Riverside County for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Though such a filing might allow the company to reorganize its business, officials said this was the first legal step in the liquidation of the Anaheim-based company.

According to William Thomas, KPC's general counsel, the Chapter 11 filing will allow the company to wind down its operations and transfer patients' medical records to new health-care providers without having to put the business in the hands of a court-appointed trustee who "would be less familiar with the health-care business."

Several health maintenance organizations--including Health Net, PacifiCare, Blue Cross and Aetna--have signed an agreement to put up roughly $5 million to meet a missed payroll for KPC's 2,000 employees and operate a small staff to oversee the transition. The plan requires the approval of federal Bankruptcy Judge James N. Barr in Riverside. A hearing is expected later this week, Thomas said.

In the mid-1990s, a number of the clinics now owned by KPC, including the Friendly Hills and Mulliken medical groups, experienced financial troubles after the rapid expansion of their former corporate parent, MedPartners Inc. (which has since changed its name to Caremark Rx).

State regulators took control of the clinics in 1999, pushing MedPartners' California subsidiary into bankruptcy. The state arranged the sale of much of the business to Dr. Kali Chaudhuri, who formed KPC believing he could make a go of the business. KPC Global Care Inc., a separate Riverside-based medical-management company owned by Chaudhuri, continues to operate and is not involved in the bankruptcy.

The same issues that plagued the former MedPartners--management problems and the inability to collect large enough payments from HMOs and insurers to cover the cost of providing patients with care--put the company under once again.

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