Now-defunct MedPartners sells off its L.A. assets.

Six months after physician practice management company MedPartners Provider Network was seized by the California Department of Corporations, the Birmingham-based company has sold all of its assets in the Los Angeles area.

The Mullikin Medical Group in Cerritos and the Friendly Hills clinics throughout Los Angeles were sold by MedPartners earlier this month to KPC Global Care Inc., a Riverside-based physician practice management company.

KPC Global Care is touted by health care analysts as an up-and-coming company that many believe works on a more-secure business model than MedPartners. Instead of acquiring clinics and representing the clinics' doctors in negotiations with managed care companies, as MedPartners did, KPC Global Care intends to sell back the clinics to the doctors who practice there and then charge the doctors a fee for negotiating on their behalf with managed care companies.

"MedPartners in its previous administration seemed to be so much into the Wall Street play, all about selling and acquiring," said Bill Thomas, KPC Global Care executive vice president and general counsel. "We don't need to do what MedPartners did and own and operate the clinics. We're also very happy to be a manager of a medical group that we don't own. Practices are more successful if you let them do what they want to do in the business world."

KPC Global Care is a private company that is owned and operated by a physician, Dr. Kali P. Chaudhuri, a Hemet, Calif. orthopedic surgeon. Chaudhuri was not available for comment last week, but KPC Global Care officials said they place a high priority on physician input when it comes to negotiating contracts with health plans.

"You have to keep your medical groups small enough so that you really can sit around the table and talk about good patient care," Thomas said. "If you get too big, too bureaucratic, that doesn't happen."

Yet KPC Global Care itself, with its recent acquisition of MedPartners assets, has suddenly become much larger.

Before this month's acquisition, KPC Global Care provided care to about 300,000 patients. Now it has picked up an additional 65 clinics with 500 doctors and 511,000 patients.

In spite of that size, KPC doesn't run the same risk of running into financial difficulty as MedPartners because of its different structure, according to Dr. Jack Lewin, chief executive of the California Medical Association.

"This is not a packaged management company, and it's not a Wall Street investment company," Lewin said. "It's a physician-owned company."

MedPartners didn't act as a traditional health maintenance organization. It was a physician practice management company that served as a go-between for HMOs and contracted physicians who worked at MedPartners clinics.

The theory behind a physician practice management, or PPM, company is to consolidate many doctors into one block and use that volume to negotiate better rates from HMOs.

At one point, MedPartners had 117 clinics, 1,000 doctors and 1.3 million patients in California under its control, making it the largest PPM company in the country. Some critics say its physician groups were too widespread rather than being concentrated in specific areas, making it impossible to generate the kind of clout with HMOs that MedPartners had been seeking.

In March, MedPartners received a "cease and desist" order from the California Department of Corporations and an audit began three days later. Soon thereafter, its physician management operations were taken over by the state.

Industry analysts say MedPartners, which has reinvented itself as Caremark Inc. and now manages plans for pharmaceutical coverage, owes $100 million to dozens of creditors in California. As part of the interim agreement with the state that was hammered out in the months after the takeover, MedPartners agreed to sell its remaining clinics and put the proceeds - estimated at about $50 million - into a special account that will be used to pay off creditors.

Early on in the MedPartners debacle, several doctors in Los Angeles joined together and formed the Pacific Physicians Alliance Medical Group Inc. That organization's goal was to buy back the medical practices from MedPartners and put them in the black.

But the group's proposal to buy the L.A. MedPartners clinics fell by the wayside, as did a bid by MedManagement Acquisitions Corp.

While the local doctors failed to take control of their clinics, they might ultimately succeed in that goal by purchasing the clinics from KPC Global Care. The founders of Pacific Physicians Alliance had sought more control by physicians in managed care contract negotiations - and that's just what KPC intends to give them.

"First of all, (KPC owner) Dr. Chaudhuri is local, and that makes a big difference," said Jim Barber, president of the Healthcare Association of Southern California. "The physician practice management business is a tough business for anybody, but I think having a local operator that has a little different business model and works with the groups of physicians is going to be better."

Chaudhuri formed KPC Global Care in 1994 in the wake of a legal dispute with a former partner, cardiologist Dr. Prem Reddy.

Chaudhuri sued Reddy for failing to pay on a promissory note and he wound up with an $8.5 million award. Instead of accepting the money, Chaudhuri took over the ownership of Reddy's fledgling PPM company and turned it into KPC Global Care.

"Chaudhuri is an honorable physician and wants to do the right thing by doctors and patients," Lewin said.