Archive for the ‘Health’ Category

Hospital kitchens fail to meet basic hygiene levels

August 14, 2007

Almost half of all hospital kitchens in England are failing to meet basic standards of cleanliness, with evidence of medical waste found on food handling equipment, staff with poor standards of hygiene and infestations of cockroaches and mice, according to inspection reports. more…


Valley Health execs OK vote to sell hospitals

August 9, 2007

The Press-Enterprise Board members of Riverside County’s largest hospital district on Wednesday night approved holding a Nov. 6 election that could result in the sale of practically all assets, including hospitals in Hemet, Sun City and Moreno Valley.

About 200 people attended a public meeting in Hemet on Wednesday night to express both support and derision for the plan to sell to Select HealthCare Solutions.

The Del Mar-based hospital-development group wants to buy the district’s assets, including Hemet Valley Medical Center, Menifee Valley Medical Center and Moreno Valley Community Hospital.

Glen Newman, a Hemet resident, described the deal as a “giveaway.”

“This contract is so prone to favor the buyer that it stinks,” he said.

For the sale to be finalized, it has to be approved by a simple majority of district patrons.

Among the provisions of the sale agreement:

The purchase price is set at $135 million and includes substantially all the district’s assets, including the three hospitals; Hemet Valley HealthCare Center, a skilled nursing facility; and the Medical Arts office building in Hemet.

Select would make a deposit of $14 million, which would be used for operating capital and to meet obligations. Of that amount, $9 million would be nonrefundable if Select did not complete the transaction, including if voters reject the sale.

If voters do not approve the sale, Select will buy Moreno Valley Community Hospital for $47 million, with the $14 million deposit credited toward the purchase price. If Select fails to close the purchase on that hospital, Valley Health will retain the entire $14 million deposit.

Valley Health System would no longer continue to exist as a local health care district, which would not provide community health services similar to those provided by other districts that operate hospitals.

Dr. Kali P. Chaudhuri, chairman of the current hospital-management company, and his affiliates would  be allowed to have a role in the new management for at least five years, and they would be having voting control over the new hospital operations for at least five years.

VHS Releases Sales Agreement

August 8, 2007

Press-EnterprisePatrons of Valley Health System are expected to go to the polls Nov. 6 to approve the proposed sale of assets of the district, which operates hospitals in Hemet, Sun City and Moreno Valley.

More than a month after agreeing to sell to a San Diego County-based hospital development group, the Valley Health board on Monday released the proposed asset-sale agreement.

A special board meeting is scheduled for 6 p.m. Wednesday on the second floor of the Hemet Public Library for the board to discuss and vote on the agreement and issue a resolution calling for a public vote.

Select HealthCare Solutions, of Del Mar, wants to buy substantially all the district’s assets, including Hemet Valley Medical Center, Menifee Valley Medical Center and Moreno Valley Community Hospital. A simple majority of votes is needed for the sale to be approved.

The proposed sale agreement, more than 100 pages long, addresses various areas of the sale, from the purchase price to the future of the hospital district once the sale is completed and role that the district’s key partner, Dr. Kali P. Chaudhuri, would have in the future of the hospitals.

“We’ve tried our very best to cover everything and protect the community,” said Patrick Searl, chairman of the Valley Health board. He said the proposed sale agreement tried to anticipate and address any questions about the sale.

Among the provisions of the proposed sale agreement:

The purchase price is set at $135 million and includes substantially all the district’s assets, including the three hospitals; Hemet Valley HealthCare Center, a skilled nursing facility; and the Medical Arts office building in Hemet.

Select would make a deposit of $14 million, which would be used for operating capital and to meet obligations, once the board approved the agreement. Of that amount, $9 million would be nonrefundable if Select did not complete the transaction, including if the voters did not approve the sale.

If voters do not approve the sale, Select will buy Moreno Valley Community Hospital for $47 million, with the $14 million deposit credited to the purchase price. If Select fails to close the purchase on that hospital, then Valley Health will retain the entire $14 million deposit.

Valley Health System would continue to exist as a local health care district, which would provide community health services similar to those provided by other districts that no longer operate hospitals.

Valley Health would terminate the existing contract with the hospital-management company. A nationally recognized independent management company unaffiliated with the current management would be hired to manage the hospitals. Chaudhuri, chairman of the current hospital-management company, and his affiliates would be allowed to have a role in the new management for at least five years, and they would be having voting control over the new hospital operations for at least five years.

Searl said the sale to Select HealthCare was the best hope for the hospital district, which he said was “undercapitalized” and losing about $12 million a year.

“I believe it is Valley Health System’s only chance to keep the hospitals open,” he said.

Searl said the provisions concerning Chaudhuri were placed in the contract to address head-on any concerns about the controversial manager of the hospitals.

“This was pretty much asked by the public,” said Searl, who said disengagement with Chaudhuri was the only way to assure voter support for the sale. “These provisions were needed because of the political reality.”

But some critics remain unimpressed.

Chaudhuri “is one of the smartest businessmen I’ve ever met,” said Clyde Osborn Sr., a former hospital district board member defeated in his bid to win a hospital board post last year. “He will appear again.”

Chaudhuri, with the district, co-owns Valley Health Care Management Services LLC, which handles the district’s operations. Chaudhuri ‘s 15-year management contract with the district expires in 2013, but the board has sent Chaudhuri a notice of termination, alleging that revenue targets were not met. Chaudhuri has said he will step away without a fight if the sale to Select is completed, but he has reserved the right to question the termination notice in the future.

Contacted Monday, Chaudhuri said he has not yet seen the proposed sale agreement, but he also said he’s satisfied with the provisions concerning him that were read over the phone by a reporter.

“I have no ulterior motive,” he said. “I’m doing this willingly. This way I hope the hospital will survive. … If I didn’t do it, the hospital could end up like other hospitals in Southern California that have closed down.”

He said he wants the hospitals to remain open because he, too, lives in the community.

Select HealthCare President Matthew Cutler said the thoroughness of the proposed sale agreement should quiet what he described as “a vocal majority” opposed to the sale.

He said he has previously disclosed his funding partners, including Southern Co./Healthcare REIT in Indianapolis; Capital Source, a Bethesda, Md., health care financing company; and the physicians’ groups in Hemet and Menifee.

Inland hospital district partner puts off debate on termination notice

August 1, 2007

Press-EnterpriseValley Health System key partner Dr. Kali P. Chaudhuri is criticizing the hospital district board for giving him a notice of termination of his management contract, but he said he would “postpone any debate” on the matter so as not to risk the impending sale of the assets of Riverside County’s largest hospital district.

Hospital board members want to cancel Chaudhuri’s management contract because they say he failed to meet a requirement that the district maintain a certain level of revenue.

The board is engaging in counterproductive steps, Chaudhuri said, by giving him notice of a plan to cancel the contract instead of waiting until things shake out regarding the proposed sale of district assets to a San Diego County-based hospital development group.

He promised, however, to cooperate and do his best not to complicate the sale to Select HealthCare Solutions of Del Mar. However, he said he was reserving his right to question the proposed termination in the future.

The contract-termination notice, signed June 1, stated that the effective date of contract termination could be either Sept. 9 or Oct. 9, depending on the applicability of some contract provisions.

“I’ve already gone on record saying that I’m willing to terminate the … management agreement upon the successful closing of the proposed sale of all the VHS system which was voted unanimously by the Board,” he wrote.

He also said in the letter that he disagreed with the contentions raised by the termination letter, but “for the good of our VHS system, I sincerely believe it will be productive to postpone any debate regarding our respective positions at this time while the district is attempting to transition its facilities.”

Board Chairman Patrick Searl, who signed the termination letter, disagreed with Chaudhuri.

“Everyone’s just exercising their options under the contract,” Searl said by phone Tuesday.

“No one can tell the future,” he said, and should the planned sale with Select HealthCare Solutions not follow through, the board wants to be able to make decisions about management.

“We’re just covering our bases,” he said.

Searl said it is not yet determined who will manage the hospitals if the sale doesn’t go through and Chaudhuri is out of the picture.

Chaudhuri is chairman and 50 percent owner of Valley Health Care Management Services LLC, which handles the district’s operations. The hospital district owns the other 50 percent.

Valley Health System’s service area stretches from San Jacinto to Menifee and Idyllwild to Sun City and is home to about 360,000 people. The hospital district operates Hemet Valley Medical Center, Menifee Valley Medical Center and Moreno Valley Community Hospital.

Chaudhuri’s 15-year management contract with the district expires in 2013.

Valley Health officials have been working in recent weeks on an agreement that would address the terms of the sale of district assets to Select HealthCare Solutions. District voters would have to approve the sale agreement.

The notice of termination said the management company failed to meet requirements concerning debt service and revenue because of losses.

Chaudhuri said by phone Tuesday that the losses were not completely his fault.

“All the big decisions have to have their approval,” he said. “We can only recommend … the board has veto power.”

He said he has no direct involvement with or knowledge of the sale to Select HealthCare Solutions. He also said he is willing to step aside without a fuss if the sale is completed.

Group seeks to stop sale

July 20, 2007

The Valley Chronicle, CA -He said 350 doctors of the 400-plus in the system have signed letters opposing the hospital sale, a rate of 85 percent to 90 percent.

Valley Health’s Chosen Suitor has History of Failure in Perris Hospital

July 20, 2007

The man behind the impending sale of all the hospitals within Valley Health System said he lost about $300,000 involving the now-shuttered Perris Community Hospital, but insists that experience should not be held against him as he pursues Riverside County’s largest hospital district.

If anything, Matthew Cutler, president and CEO of Select HealthCare Solutions of Del Mar, said, he picked up slack from the failed Perris hospital that he plans to put to use as he goes about acquiring Valley Health’s hospitals, which include Hemet Valley Medical Center, Menifee Valley Medical Center and Moreno Valley Community Hospital.

“It should affect it because it etched on my mind what to do with a medical development project,” said Cutler, who described himself as a manager in the failed Perris hospital.

Board members said they have found nothing to make them question Cutler’s trustworthiness.

Chairman Patrick Searl said the hospital district did a background check on Cutler as part of their due diligence. He added that district officials are aware of his involvement in the failed Perris hospital.

“He’s an manager like everyone else, and he lost money like everyone else,” Searl said. “My hopes for the future of Valley Health System rest with the Select deal.”

Darren Magness, one of the district board’s directors, said he still believes in Cutler. He said directors spoke with Cutler’s financial backers and are convinced that they could follow through with financing for Valley Health’s assets.

But others say Cutler needs to be more forthcoming with his role in the Perris hospital.

“He’s intimately involved with a failed hospital in Perris,” said Dr. Neal Simpson, who said some local doctors lost money on that venture.

He said there has been no discussion with doctors about Cutler’s involvement with the Perris hospital. Simpson added that the medical staff did not get a chance to talk to Cutler before the board chose Select HealthCare Solutions.

Select HealthCare Solutions bested three other suitors — including Kaiser Permanente — that wanted to acquire all or parts of Valley Health’s assets. Since agreeing to sell to the company, Valley Health officials have been working on an agreement that would address terms of the sale.

Voters within the district, which stretches from San Jacinto to Menifee, Idyllwild and Sun City, would have to vote to approve the sale agreement before it could be finalized.

Perris Community Hospital, also known as Valley Plaza Doctor’s Hospital, was closed in 2005 after years of financial struggle.

Built in the 1970s, the Perris hospital had endured bankruptcies, several previous closings, at least eight owners and repeated name changes.

Cutler said he invested in the hospital at the behest of another investors’ group with which he has worked in the past, but that investment ultimately failed, he said.

“If people are telling you that I’m responsible for the Perris hospital, that’s correct,” he said.

Officials of Southwest Hospital Development Group, which owned the Perris hospital at the time of its closure, were unavailable for comment Tuesday.

Cutler said several physicians each lost between $50,000 and $150,000 on the failed Perris venture. Local physicians who reportedly lost money could not be reached for comment this week.

“We’re not interested in Valley Health System because of the physician but because of the facilites,” he said.

Valley Health System board gives key partner 90-day notice

July 20, 2007

Press-Enterprise The clock is ticking for Valley Health System’s key partner, Dr. Kali P. Chaudhuri.

Hospital board members want to cancel Chaudhuri’s management contract because they say he failed to meet a requirement that the district maintain a certain level of revenue.

“We’re just fulfilling our obligation under the contract,” said board Chairman Patrick Searl, noting that the revenue requirement likely will not be met because of losses over the past year.

The board has sent Chaudhuri a 90-day notice of cancellation of his contract. Chaudhuri said he plans to appeal the decision.

Chaudhuri, with the district, co-owns Valley Health Care Management Services LLC, which handles the district’s operations. Valley Health operates Hemet Valley Medical Center, Menifee Valley Medical Center and Moreno Valley Community Hospital.

Chaudhuri’s 15-year management contract with the district expires in 2013.

Valley Health officials have been working in recent weeks on an agreement that would address the terms of the sale of district assets to Select HealthCare Solutions of Del Mar. Voters within the district, which stretches from San Jacinto to Menifee and Idyllwild to Sun City, would have to approve the sale agreement.

If voters approve the sale, then the issue with Chaudhuri becomes a moot point, since Chaudhuri has agreed to step down as manager if the sale goes through, Searl said.

Board director Darren Magness said the management contract requires that the hospital maintain a certain cash flow over the district’s debt. He said the district spends about $9 million a year servicing debt, and current cash flow is below that required by the contract. He said the notice was sent to Chaudhuri about 10 days ago.

He said he supported board efforts to seek a bond, which failed, and subsequent efforts to sell the district assets. He said he also agreed to step aside as manager without a fuss to any buyer, as long as it was not Kaiser Permanente, which tried to buy the Moreno Valley hospital; or an old rival, Dr. Prem Reddy, chairman of Prime HealthCare, which also sought to buy Valley Health’s assets.

Chaudhuri said he has worked hard to keep the district hospitals open despite lack of financial support from the public.

Critical Condition: How Health Care in America Became Big Business and Bad Medicine — Anatomy of a Systems Failure

January 26, 2005

Doctor C’s Empire

It is safe to say that few MedPartners patients had ever heard the name Kali P. Chaudhuri when state and bankruptcy officials began grappling with the thorny question of what to do with the collapsed provider. A pathologist by training and an orthopedic surgeon by trade, Dr. Chaudhuri was an American success story. According to published accounts and medical professional records, he was born to a wealthy family in India, earned a medical degree in Calcutta, emigrated to the United States by way of Newfoundland, worked at a small hospital in Coudersport, Pennsylvania, and in 1984 settled in the Riverside County town of Hemet, about ninety miles southeast of Los Angeles. With a population that would nearly triple to more than 60,000 by 2000, Hemet was becoming a magnet for immigrants from India, Taiwan, and other Asian countries, as well as home to a growing Hispanic population.At first glance, Dr. Chaudhuri, or “Dr. C” as some called him, appeared to be a worthy successor to MedPartners. Starting from scratch, he had built a thriving orthopedic practice and served as chief of staff for Hemet Valley Medical Center. He taught orthopedic surgery at nearby Loma Linda University Medical School. The California State Senate cited him for his exceptional fund-raising efforts on behalf of a local hospital. He hosted political fund-raisers at his home. He was a pillar of the community.Along the way, Dr. Chaudhuri evolved into a medical entrepreneur. He organized a physician management company serving thousands of Hemet-area patients. By 1999, he had built a miniconglomerate, called KPC Global Care, that managed physician practices and served 200,000 patients in the Inland Empire, the rich agricultural basin in Riverside and San Bernardino counties. He also had become a millionaire many times over.If those state officials searching for a successor to MedPartners had looked more closely, they might have realized they were replacing one smooth operator with another. By all accounts, Dr. Chaudhuri was a charismatic figure, far more so than Larry House. Like House, he gave the impression that he understood the business of health care. He said all the things doctors wanted to hear, although many never seemed to notice that he practiced what he preached against–“for the last ten years, doctors have been bought and sold in the market like chickens.” Like House, his self-professed mission was to free doctors from the drudgery of paperwork and the health care bureaucracy so they could do what they do best–practice medicine. “I don’t want to sound like Mother Teresa,” Dr. Chaudhuri told a local newspaper. “I believe that if you do what is right, success and money will follow.”It sounded good. Except at the very same time state officials were supporting Dr. Chaudhuri’s bid in Bankruptcy Court to take over the MedPartners practices, a management company he co-owned, Valley Health Care Management Services LLC in Hemet, was engaged in some serious cost-cutting at the Hemet Valley Medical Center, a 240-bed, full-service, acute-care hospital.The Chaudhuri company froze the longtime pension plan and replaced it with a far less favorable one that required employees to wait six years to be vested–no matter how long they had worked there. It slashed sick days from eight to five. It canceled pay for jury duty and eliminated a bonus plan. Not surprisingly, the changes triggered an all-out labor war, with nurses staging repeated walkouts. During demonstrations, they carried signs singling out Dr. Chaudhuri for his role in the cutbacks: “Please don’t let the hospital go down the drain like most of KPC’s enterprises.”Many of the hospital’s nurses quit at the worst of all possible times. The dispute coincided with a severe nursing shortage, and those nurses who left had to be replaced by temporary workers. Ultimately, they would cost more than the savings from the cutbacks. Looming on the horizon were conflicts of interest involving Dr. Chaudhuri’s growing private medical organization and the publicly owned hospital.Nonetheless, in September 1999 Dr. Chaudhuri orchestrated the biggest deal of his life. A large piece of the MedPartners California branch was transferred out of Bankruptcy Court and into his KPC health care empire. Dr. Chaudhuri’s initials or name were stamped on many of the corporate entities, from the umbrella company, KPC Medical Management Inc., to individual clinics, like the Chaudhuri Medical Group of Long Beach/Artesia Inc. Dr. Chaudhuri was the sole shareholder and chief executive officer of most of the businesses. In some cases, he was the only member of the board of directors. In addition to the medical practices, his health care conglomerate also included companies that owned real estate, like TROL Realty LLC, MFH Realty LLC, and Montclair Realty LLC. Later, there would be talk that money moved mysteriously among the many businesses. For the time being, he was quite simply California’s most imposing medical entrepreneur.


The empire that Dr. Chaudhuri presided over was indeed huge. Nearly one million patients and one thousand doctors were covered by clinics under his control across four southern California counties. It was the largest physician practice management company in California, and one of the largest in the country. Annual revenue was close to a billion dollars. Some wondered how a man who only a few years earlier had overseen a modest orthopedic practice could manage such a vast system. Dr. Chaudhuri sought to dismiss the doubters. “I am a positive guy,” he would say later. Plus no less an authority than Merrill Lynch certified that Dr. Chaudhuri had the wherewithal to bring off the deal. “Dr. Chaudhuri is a man of considerable resources,” his lawyer, Bill Thomas, told the press. “All of his finances have been verified by Merrill Lynch [MedPartners’s banker].”Dr. Chaudhuri launched his new enterprise by closing clinics and firing doctors and staff members. By year’s end, some two dozen facilities had been shuttered, and seventy doctors and 500 staff members were let go. The drastic cutbacks did not translate into a smooth-running operation as 2000 began.The Cerritos clinic on East 183rd Street, on the Los Angeles County–Orange County line, ran short of supplies, from photocopier paper to toilet tissue. With too few employees, the clinic’s telephones rang constantly as patients sought in vain to schedule appointments. At the South Gate clinic on Tweedy Boulevard twelve miles south of downtown Los Angeles, most of the nursing and office staff resigned. So, too, did several physicians. In March, the water company shut off service for one day due to nonpayment. And by April, patients were feeling the impact of KPC’s management style.That month Dr. German Zermeno, a family practitioner, examined an elderly woman who had blood in her stool, which suggested the possibility of cancer in her gastrointestinal tract. He referred her to a KPC specialist, but the appointment was later canceled; her insurer had terminated its relationship with KPC. Next, the patient switched insurers and made another appointment. That failed also. The GI specialist canceled all appointments with KPC patients because of nonpayment. Finally, an appointment was scheduled with a specialist who had just transferred into the KPC network. Overwhelmed by a backlog of appointments, he was unable to see the woman for months. When Dr. Chaudhuri had taken over the former MedPartners practices, he had pledged to make sure specialists were paid. That promise was proving hollow.Dr. Chaudhuri either remained unaware of or chose to ignore what was happening at the clinics. As problems multiplied, physicians would later remember a staff meeting at corporate headquarters in Anaheim in January 2000 when many voiced their concerns. They talked about the deplorable state of the telephone network, among other things. Doctors were unable to communicate with other offices. Pharmacists seeking to refill prescriptions could not reach doctors for days, sometimes weeks. Patients couldn’t get through to make appointments, and they were forced to come into the office to get lab and X-ray results, as well as referrals. The unreliable telephone network meant that fax machines, the lifeblood of modern medicine, were equally unreliable.But KPC’s chief had a vision. And telephones were not a part of it. According to physicians who were present, Dr. Chaudhuri made it clear that he had no plans to upgrade the phones in the immediate future. Instead, he intended to spend millions to build a state-of-the-art computer system and employ the latest information technology that would track quality control and patient satisfaction. KPC would even have its own Web site so patients could make their appointments over the Internet. Never mind that many had no access to the Internet. When doctors continued to complain about the phones and general working conditions, he seemed annoyed. One recalled Dr. Chaudhuri saying: “Why do you only give me bad news?”KPC continued to unravel. In March, a ninety-year-old nursing-home patient under KPC’s care was unable to eat or drink. A request for a gastroenterologist to insert a feeding tube went unanswered. Four weeks later, still waiting for the specialist, the patient began bleeding in her lower gastrointestinal tract. She lost weight and became severely dehydrated. Finally, a KPC employee called 911 to take the woman to a non-KPC emergency room to have the tube inserted. The hospital found a tumor in her esophagus. In May, at KPC’s Long Beach clinic, Dr. Joseph A. Lombardo, a family practitioner, saw a young man in his twenties who needed “a biopsy of a probable malignant lesion on his face.” He sent the patient home when the staff was unable to find the “medical instruments necessary to perform the biopsy.”A medical clinic without instruments? No specialists to treat KPC patients? It was happening throughout the system because KPC wasn’t paying its bills. The company had run up $12 million in unpaid claims. The staff went through the motions of paying bills. They would write checks but then sit on them. Donald B. Smallwood, KPC president, conceded that they often cut checks with no intention of mailing them. Instead, they stashed them in locked filing cabinets in the Anaheim office.


KPC tried to create the impression that it was turning things around. Smallwood announced in May 2000 that Dr. Chaudhuri had negotiated a $12 million loan that would enable “the company to pay down claims and vendor invoices to a point that we are current with our obligations. Due to the large volume of invoices, it is anticipated that it will take approximately two weeks to get all of the checks out.”Even so, KPC remained in arrears on its bills. They continued to pile up along with the dunning letters. On July 21, Quest Diagnostics wrote that if it did not receive the “full account balance in the amount of $127,656.81” by August 4, it would terminate all laboratory services. “Your account will then be turned over to a collection agency or attorney,” Quest’s credit administrator said. Quest would have to stand in line. By August, the unpaid bills had soared to more than $18 million. Once again, a fresh batch of unmailed checks accumulated in file cabinets. Finally, KPC even halted that pretense and stopped cutting checks.Across Dr. Chaudhuri’s empire, specialists willing to look at a KPC patient were about as rare as a Californian who didn’t drive. Dr. Daniel Scaff, a pediatrician at the Cerritos clinic, was treating a ten-year-old girl who had headaches and was bleeding in the whites of her eyes “as a result of being improperly restrained at a dental office.” The headaches increased in frequency and severity, and she developed vision problems. Dr. Scaff requested a referral to a child neurologist–the only one still accepting KPC patients. Some days later, the little girl’s mother returned to his office, referral in hand, and said that when she called for an appointment she was told that the neurologist was not accepting any KPC patients.Elsewhere within the system, anesthesiologists refused to tend to KPC patients, so surgeries were delayed. Infectious-disease specialists were unavailable for AIDS patients. And although psychiatrists were supposed to meet patients with schizophrenia, depression, hallucinations, and other psychoses at least once before prescribing psychotropic drugs, one staff member reported that only two of her forty KPC patients on such medicines ever saw a psychiatrist. Some KPC physicians advised their patients that if they needed immediate medical attention and were unable to see a specialist, they should go to a hospital emergency room for treatment.Health plan enrollees who tried to ensure good health for family members also fared poorly with KPC. Parents seeking immunizations required by law for their children to attend school played the health care lottery daily, without knowing it. Sometimes KPC had the vaccines. Sometimes it didn’t. Many standard vaccines were in short supply, and Dr. Scaff recalled that there were acute shortages of hepatitis and polio vaccines at the Cerritos clinic. When parents arrived with children for their hepatitis shots, they often were told to return at a later date. “For each child who could not be vaccinated,” Dr. Scaff said, “I had to write a note to the school officials so that the child would be allowed to attend school.”Even some of the basics that patients have long taken for granted when seeing a doctor–their charts, mammograms, and X-rays–were often not available to KPC doctors when they examined patients. Dr. Jerry Floro, a cardiologist at KPC’s Artesia clinic, recalled: “I saw approximately half of my patients on any given day without charts. Often the charts couldn’t be located at all. This meant that I had to treat patients on whom I had no medical history.”At the Long Beach clinic, Dr. Shahla Heshmati, a pediatrician, said she often had charts for only one out of five patients. “When I saw a child in the clinic, I usually did not have any records of the patient’s prior visit, my previous evaluations of his or her health and medical conditions, immunizations, or laboratory tests,” she said. “I did not even have a record of the medications that I had prescribed previously, or whether the patient was allergic to any medications.”Dr. Joseph Lombardo, the family practitioner, said he “often had no medical records for the patient, even if they had been my patient for seventeen years.” Sometimes the records were missing because of KPC’s failure to pay its bills to storage centers that maintained and retrieved the records. Sometimes it was because of KPC’s inability to perform the most basic tasks. Part of Catherine Babington’s job as regional administrator was to check on the status of records at the Downey Clinic on Firestone Boulevard. In March 2000, she measured the volume of paperwork waiting to be placed in patient files. The result, according to Babington’s tally, was astonishing: “twenty-four feet of unfiled lab, radiology, and hospital reports,” including the most recent reports on the medical conditions of clinic patients.


Nowhere was the situation more out of control than at the Artesia clinic in southern Los Angeles County. In March, a patient who had been diagnosed with a kidney stone endured a prolonged and unnecessary delay. Dr. Ernesto Cortez had referred the patient to a KPC-contracted urologist. When the patient arrived for the appointment, he was told the urologist was no longer seeing KPC patients. Not to worry. Dr. Cortez asked the KPC referral department for another specialist. The news was not good. In an area with scores of urologists, there was not one who would take a KPC patient. The best they could do was send him to a specialist in Burbank–a sixty-mile round-trip.The clinic’s resident obstetrical ultrasound technician resigned in July. “She had been with the clinic for over ten years, had special training and skill in evaluating pregnancies, and excelled in detecting fetal abnormalities,” according to Dr. Eric Kaplan, chairman of the obstetrics- gynecology department for the Artesia–Long Beach area. She was replaced by technicians from a temp service. Within two months, even that arrangement stopped. The service wasn’t being paid. Left with no alternative, Dr. Kaplan said, the doctors began relying on technicians from the clinic’s radiology department “who had no particular training or skills in obstetrical ultrasounds.”Because of inexperience, one technician failed to detect early in a pregnancy a case of anencephaly, a condition in which the skull, scalp, and part of the brain are missing. Although some babies may survive for a short time, the condition is always fatal. It wasn’t until sixteen weeks into the pregnancy that the birth defect was detected. “Pregnancy termination at sixteen weeks is a prolonged and painful procedure,” said Dr. Kaplan, “and is riskier than the short and relatively painless procedure which could have been done at twelve weeks.”Since KPC wasn’t paying the Artesia clinic’s bills, suppliers refused to deliver certain medications, such as those needed to treat fibroid tumors of the uterus and endometriosis, both painful and potentially serious conditions. They also stopped shipment of mechanical devices used in cases of uterine and vaginal prolapse. On April 17, a desperate e-mail went out from a clinic staff member to a supervisor: “Artesia will be out of chemicals to process films by noon today, [mammogram] is already out and is sharing the main processor, which will not last through mid day. Patients are being rescheduled now.”The company that furnished lab coats for the staff repossessed them during office hours, while doctors were seeing patients. As Dr. Kaplan recalled: “I was approached by a vendor representative in the clinic hallway, in the presence of clinic patients, and was told to surrender my lab coats. I literally had to take my lab coat off of my back.”As the year wore on, even the most basic services collapsed. By July 2000, according to Dr. Angelyn Moultrie-Lizana, an osteopathic physician, “trash in offices and exam rooms was overflowing. Outside the clinic, trash accumulated in the shrubbery.” The air-conditioning in her first-floor suite stopped working. When KPC made it clear the air-conditioning would not be fixed, she moved her offices to the second floor.In August, Dr. Moultrie-Lizana was treating a breast cancer patient who had undergone multiple surgeries for removal of the cancer and reconstruction. Her oncologist wanted a bone scan to determine if the cancer had spread. Dr. Moultrie-Lizana secured a referral and advised the patient to contact her if she did not receive the paperwork in ten days. In mid-September, the patient called back, seeking a referral to another clinic. The Artesia clinic had been out of certain chemicals to conduct a bone scan for at least a month. “There is no telling what effect the month’s delay in assessing any spread of her cancer may have on this patient’s prognosis and life expectancy,” said Dr. Moultrie-Lizana.


An e-mail the following month from Dr. Yadegar, the radiology chief, to KPC’s medical director and other staff physicians underscored how its imaging services–just one phase of the clinic’s operations– were being overwhelmed by the company’s financial and management misfortunes:Computerized tomography: Our unit has been out of operation. Picker Corp. has put us on credit hold and are refusing to service the unit. As an alternative, we had been using Los Coyota Imaging Center, but last week I had a phone call from the president of Radnet, informing me that as of last Thursday they will stop seeing all KPC patients throughout Southern California.MRIs: Radnet is refusing to see our patients. I had Devin call MRI center of Long Beach to see whether we could send our patients there. We were informed that they will not accept our patients . . . The only facility left is DICI in Inglewood which is way too far for the majority of our patients.Nuclear Medicine/Nuclear Cardiology: As of the end of last week we were placed on credit hold by Syncore. We have cancelled all of our studies including patients that are being worked up for coronary disease . . . Some of these patients have been cancelled twice.The folks who provide ultrasound techs for our OB work pulled their techi out of our facility as of the end of last week . . . There are a lot of angry and frustrated patients out there and I assume that some of them are high risk OBs . . .Time was running out for Dr. Chaudhuri. Nevertheless, he continued to put a positive spin on KPC, just as he had done from the beginning. Profitability was always just around the corner–a result predicated on the time-honored managed-care formula of delay and deny. Although in KPC’s case the practice had the added twist of approving care by a specialist and then not paying the person for months. The company called it “cash conservation.”A national medical publication reported in January that Dr. Chaudhuri expected “to break even between March and June of this year.” By May, the situation was so dire that the health plans and Tenet had to come up with a $30 million cash infusion, prompting Dr. Chaudhuri to promise solvency by July. Within weeks KPC had reverted to form, which meant stiffing the specialists and stringing out patients. Instead of moving into the black, KPC remained mired in the red, and Dr. Chaudhuri was looking for another bailout. The situation became more grim when Blue Cross canceled its contract with KPC, and CIGNA, concerned about the quality of care and nonpayment of specialists, said it would begin moving many of its 70,000 enrollees into another system.The decisions sounded alarm bells in Governor Gray Davis’s office. A representative of the governor brought the health plans together to negotiate yet another financial aid deal. If KPC folded without warning, hundreds of thousands of patients would be dumped into other, already overtaxed practices. The wait to see a doctor could stretch into months. Critically ill patients would be forced into hospital emergency rooms. Other medical practices already were grumbling about the 100,000 KPC patients they were forced to pick up from insurers, complaining that many were sick and costing too much money to treat.


After several weeks of talks, the parties came up with a $30 million package on August 11, mostly in the form of a loan guaranteed by KPC real estate. Dr. Chaudhuri pledged to invest more money in the business, and the HMOs agreed to raise the monthly fees they paid for each patient. Once again, Dr. Chaudhuri foresaw good times. “If everyone keeps their promise,” he said, “not only will we break even, we will do very well.”Still, every time KPC seemed to take a step forward, it went back two steps. Just before the $30 million deal was structured, Drs. Barrientos, Yadegar, Floro, Lombardo, Kaplan, and fifty others all resigned en masse over the quality of care. According to their employment agreements, they were required to remain on the job for two months after submitting their resignations. After that, they established a new practice called Pioneer Medical Group Inc. Dr. Chaudhuri would blame the defecting doctors for the collapse of his empire, but the available evidence suggested otherwise.Within weeks of the relief package patched together in August, KPC faced another cash crunch. As usual, the bills weren’t paid. This time Quest Diagnostics skipped the threatening letter and told KPC it would “terminate all laboratory services effective November 14.” The HMOs withheld a portion of their November payment. Dr. Chaudhuri failed to come through with his share of the bailout. Even though KPC was obviously disintegrating, state officials believed there was little likelihood that its patients would be unloaded, severing long-standing doctor-patient ties. Daniel Zingale, director of California’s Department of Managed Care, told the Orange County Register on November 9: “It seems to me that everyone understands that an abrupt disruption of many patients’ care would not meet our standards.”On Friday, November 17, the HMOs announced that they would begin transferring their enrollees–about a quarter-million in all–to new doctors. Some insurers intended to do it at once; others over a period of weeks. State officials still promised it would be an orderly process.Dr. Chaudhuri’s health care empire had become a bottomless money pit. It began life with nearly one million patients. A little more than a year later, it was down to about 300,000. After clinic closings, layoffs, denial of services by specialists, and millions in financial aid, KPC was still hemorrhaging red ink, still not paying its health care providers, and hurtling toward a $40 million loss for the year.Over the weekend, Dr. Chaudhuri reacted to the insurers’ decision by setting in motion plans to close all KPC facilities abruptly and dismiss nearly all its employees–physicians, nurses, technicians, secretaries, and other staff members. All told, more than three dozen clinics across the Los Angeles metropolitan area would be shut down, disrupting health care for 300,000 patients and throwing 2,000 health care workers, including doctors, out on the street. Adding insult to injury, employees were told not to cash their last paychecks. The company did not have enough money to cover them. Some employees also lost health insurance coverage for themselves and their families when KPC failed to pay the premiums. The orderly transition state officials had promised quickly turned into something entirely different.