About Valley Health System

January 13, 2007

Valley Health System is a Local Health Care District that owns and operates three acute hospitals and a skilled nursing facility. 

Hemet Valley Medical Center, a 340-bed facility located in Hemet,

Menifee Valley Medical Center an 84-bed facility located in Sun City, and

Moreno Valley Community Hospital a 95-bed facility located in the city of Moreno Valley.

Hemet Valley HealthCare Center, a 113- bed skilled nursing facility located in Hemet. 

District encompasses approximately 882 square miles in the San Jacinto Valley in west central Riverside County. It includes Hemet, San Jacinto, Sun City, and the surrounding unincorporated areas. Population of the District is approximately 360,000, however Moreno Valley and its primary service area are located outside the boundaries of the District.

The District was formed in 1946 and purchased as existing 18-bed hospital from the City of Hemet. Since then, Hemet Valley Medical  Center has undertaken a number of projects in expanding to its present 240 licensed bed capacity. Menifee Valley Medical Center and Moreno Valley Community Hospital were opened in 1989 and 1990 respectively.


Kaiser Hospitals

September 11, 2005

Crtical Concerns about Kaiser Hospitals

VALLEY HEALTH SYSTEM: Board rejects price of nurse-recruiter

June 28, 2005

A meeting draws foes of a bid to pay $50,000 for each foreign worker.

SUN CITY – Hemet’s Valley Health System board backed away Monday night from a proposal to hire its key business partner, Dr. Kali P. Chaudhuri, to recruit foreign nurses for $50,000 apiece. Instead, the board set up a committee to review more broadly what the district can do to recruit and retain nurses, both locally and from overseas.

Nearly 100 people, many of them nurses, jammed a meeting room at Menifee Valley Medical Center for about two hours to oppose the contract with Chaudhuri’s Strategic Healthcare Services Inc.

Several speakers said the district could attract more nurses if it improved salaries and benefits, including longevity pay and pensions, and if it purchased newer equipment for the district’s emergency rooms and hospital wards.

“There are nurses out there that would love to work in this community,” said Hope Sullivan, a Menifee hospital emergency-room nurse.

Another Menifee nurse, Maureen Alcantar, said the hospital’s medical equipment is old and frequently breaks down. “I’ve had cardiac patients turn blue in front of me,” she said.

Alcantar said this adds to the frustration of trying to care for patients. She urged the board to spend money on equipment upgrades rather than on fees to Chaudhuri’s staffing company.

Keith Garrison, who oversees medical equipment for the district, said Tuesday that repairs were made to some equipment and said the district plans to replace other equipment later this year.

Several speakers urged the board to avoid another business deal with Chaudhuri. The district’s day-to-day management is handled by a joint venture between Chaudhuri and Valley Health System. Chaudhuri’s financial ties to the district have sparked several recall elections, including one that turned out a former board majority.

“Get Kali out of everybody’s pocket,” said Joe Campbell, a Hemet man who said his bad heart has landed him repeatedly in the district’s flagship hospital in Hemet.

Board chairman Darren Magness said the district supports the concept of recruiting nurses from overseas to help fill vacancies, but “we don’t support the price tag” on Chaudhuri’s proposal. He said the district’s finance committee forwarded Chaudhuri’s proposal to the board for discussion, but did not recommend approval.

Chaudhuri did not attend the board meeting. In a letter to the board, he said he is looking at other alternatives, such as recruiting local nurses, to solve the district’s registry problem.

His attorney, William Thomas, said Tuesday that Chaudhuri’s company has provided the district with resumes from foreign nurses who have met some of the requirements for working in the United States. The nurses must pass their licensing exams, but they are nearly ready to obtain a visa and enter the United States, he said.

Thomas said Chaudhuri’s company will have no problem placing its nurses elsewhere if the district doesn’t want them.

Chaudhuri had proposed to recruit 40 to 50 foreign nurses, put them through cultural training, help them obtain visas and pass California’s nurse-licensing requirements, provide transportation to the Hemet area and four months worth of room and board. If any nurses left within the first two years, Chaudhuri’s company promised to replace them or provide a credit for the remainder of their term.

Recruiting foreign nurses could save the district money in the long run, said Geoff Lang, the district’s interim chief executive officer.

A staff nurse costs the district about $61,000 a year; a registry nurse costs more than twice that, Lang told the audience Monday night.

The district is spending more than $10 million a year on temporary “registry” nurses because it can’t attract enough permanent nurses to fill about 80 openings, Magness said. That expense is a major reason the district lost $2.6 million on operations through the first 11 months of its fiscal year, he said. Valley Health operates hospitals in Sun City, Hemet and Moreno Valley.

“We have to solve that problem,” Magness said in an interview Tuesday. “If we solve that problem, there’s more money for equipment and benefits.”

Several board members acknowledged the district needs more staff and equipment, but said the district also needs to make payroll and keep the lights on.

“In the last several years we’ve been in survivorship mode,” said board member Russell Hoxie. “I think under the circumstances we’re doing the best we can.”

Compare Quality of Hospitals

March 13, 2005

Centers for Medical and Mediaid Compares quality of care provided by the hospitals.

Click here for more info

Now With Less Chaudhuri!

January 27, 2005

Physician forced out of deal for three OC hospitals, still has mitts on one

Critics have called Dr. Kali P. Chaudhuri a cancer. State Senator Joe Dunn is proving to be the cure—though, it should be noted, that Dunn hasn’t actually cured cancer. That would be amazing.

Still, Dunn has accomplished something almost as amazing. He’s restored faith in government.

Four years ago, Chaudhuri’s KPC holding company shuttered 81 Southern California medical clinics it had purchased just a year before. The closures stranded 300,000 patients without care and, in many cases, without medical records. Insurers and doctors scrambled to pick up the pieces. Asked to account for the chain’s assets, a bankruptcy judge said the money trail was too complicated to follow. The resulting charges of mismanagement, fraud and diversion of assets led to dozens of lawsuits and thousands of creditor claims against Chaudhuri and KPC, most of them unsatisfied to this day.

Then Chaudhuri emerged as the unlikely architect of a deal to buy four North County hospitals from the struggling Tenet Hospitals group.

The sale is proceeding—but now with less Chaudhuri.

Orange County physician Alil V. Shah, Integrated Healthcare Holdings Inc.’s (IHHI) principal investor, has taken over the deal. Shah and fellow investors bowed to pressure from doctors and Dunn (D-Santa Ana) to limit Chaudhuri’s influence over the hospitals.

An attorney for IHHI insisted the new agreement would virtually eliminate Chaudhuri’s role in operations at the hospitals—Western Medical Center of Santa Ana, Coastal Communities Hospital in Santa Ana, Chapman Hospital in Orange and Western Medical Center of Anaheim. But a federal Securities and Exchange Commission filing obtained by the Weekly indicates something different: Chaudhuri will own and operate Chapman Hospital.

The deal guarantees hospital staffs no fewer than three permanent seats on the governing boards of each hospital and prohibits Chaudhuri’s control over contracts with outside services, vendors or suppliers. That concession ought to satisfy stakeholders who recall that Chaudhuri surrounded the KPC clinics with a string of outside suppliers he controlled—and then gave those suppliers preferential payment terms even as the clinics slipped into bankruptcy.

At a Jan. 20 state hearing Dunn convened in Anaheim, Chaudhuri said he would also agree to limit his investor involvement in IHHI to an option to buy 25 percent of the business after two years. But that doesn’t mean the notorious Chaudhuri will be out of the picture. Besides acquiring outright ownership of Chapman Hospital, the new agreement allows him an option to buy a 49 percent interest in the real estate beneath the other three hospitals.

That makes his critics edgy. At Dunn’s hearing, deputy director of the state Department of Managed Healthcare (DMHC) Bill Barcelona painted a stark picture of the KPC medical meltdown under Chaudhuri’s management.

“Chaudhuri came in like a white knight . . . and then went out leaving a domino effect of clinic closings and more than $200 million in debt,” he told state officials. “Whole medical groups ended up trashed like old used cars on the side of the road. It was total and complete chaos. The DMHC is concerned we will see a replay of what we saw happen to those clinics and, ultimately, the patients they serve.”

The four hospitals being sold represent almost a quarter of the hospital-bed capacity in the county. Western Medical Center of Santa Ana—one of just three trauma centers in the county—is especially critical to the local health-care network. Under the new agreement, IHHI will be required to maintain trauma services at the facility for just two years, with a one-year notice of any scaling down or termination of such services.

Michael Fitzgibbons and Robert Steedman, respective past and present chiefs of staff of the trauma facility, have been critical of what they call Chaudhuri’s “legacy of bankruptcy.” Both were scheduled to speak at Dunn’s hearing but, at the last minute, chose to do so only through the physicians’ staff attorney, Tom Curtis.

Curtis told Dunn the doctors believe they face retribution from Chaudhuri.

“We understand other physicians were told by Chaudhuri they could be assured they would not be sued if they joined the Shah-Chaudhuri group and that it was ‘probable’ that Steedman and Fitzgibbons would be sued,” Curtis told the senator.

The threat carries some weight. Several doctors say Chaudhuri has told them he “thrives on litigation.” But in the newly minted deal, Chaudhuri agrees to “hold harmless” all parties to the agreement.

“This agreement we are signing assures everyone that no one will be suing anyone,” Curtis said.

The deal’s attributes—Chaudhuri’s limited role in three other hospitals and the staff’s strengthened role in hospital management at those three—come at a high price: Chaudhuri gets Chapman Hospital and immediate access to land.

When asked if the doctors were sacrificing Chapman Hospital, Curtis would say only that his doctors group was “withdrawing our concerns about the acquisition. We believe those concerns at this point have been appropriately addressed.”

Chaudhuri assured Dunn that his intentions are pure, part of his effort to clear his name among those who would malign him. He said he has no intention of buying the land as a prelude to closing the hospitals. When Dunn asked about Chaudhuri’s interest in the separate land purchase, Chaudhuri said simply—some might say ominously—”My interests are confidential. When the sale is complete, it will be made public.”

Dunn believes otherwise: confidentiality means no deal. After Chaudhuri and IHHI failed to make public terms of the sale, as Dunn requested, the senator on Jan. 26 contacted the state Department of Health Services, requesting they postpone licensing, which was scheduled for Jan. 30.

Said Dunn, “It is extremely important these agreements be vetted by the public before they are cemented in place.”

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.

Dire Prognosis – Buyer of four Tenet Hospitals leaves doctors fearful for County’s health-care future

December 2, 2004

OC Weekly/ – Dr. Kali P. Chaudhuri describes himself as a visionary whose purchase in the next few weeks of four Orange County hospitals will come as a shaft of light through the gathering health-care darkness. But many of his former patients and employees know Chaudhuri as the man whose medical management is the darkness itself, leaving patients stranded without health care—and doctors, technicians and medical suppliers to pick up the pieces.

“An awful lot of us know about Chaudhuri,” says Dr. Michael Fitzgibbons, who sits on the board of Western Medical Center in Santa Ana. “Half the doctors in this county have either suffered financially or have patients who have been affected by the pain he’s caused. And now he’s back.”

Within days, Chaudhuri’s Costa Mesa company Integrated Healthcare Holdings Inc. (IHHI) is set to close a $72 million deal for four Tenet Healthcare Systems hospitals: Western Medical Center Anaheim, Chapman Medical Center Orange, and Western Medical and Coastal Communities Hospital in Santa Ana.

It’s a sale many view with disbelief. They recall what happened when Chaudhuri, under his namesake companies KPC Global and KPC Management, purchased a network of Southern California clinics from a failing MedPartners back in 1999. Fourteen months after the buyout, all 81 clinics were closed, leaving unpaid bills and salaries, mounting debt, and doctors scrambling—and legally obligated—to find new sources of care for some 250,000 stranded patients. Most of those patients were even deprived of their medical records; many ended up in local emergency rooms as a last resort.

It was the health-care equivalent of a train wreck, and his critics say Chaudhuri was the engineer.

Fitzgibbons was one of the physicians caught in what he calls the “KPC debacle.” For him and many other doctors who remember it, the prospect of Chaudhuri running their hospitals is the worst of all possible scenarios.

“We know he doesn’t pay,” said Fitzgibbons. “We know he doesn’t back the physicians. He’s got a new company now [IHHI], and as far as I can tell, it’s the same old model as those failed KPC clinics. But this time, he’ll be in control of hospitals.”

So vehemently do they oppose Chaudhuri’s takeover of the four Tenet hospitals that in October Fitzgibbons and fellow physicians took to the streets with picket signs. More than 70 doctors from the targeted hospitals formed their own acquisition group and offered Tenet a competing bid. One of those physicians, Chapman Hospital board member Dr. John Luster, says their offer topped Chaudhuri’s in upfront cash and absolute dollars and was backed with more stable loan guarantees and a solid business plan that put practicing doctors, “not a venture capitalist with an M.D.,” in charge of the hospitals.

It’s no secret that Tenet—which runs more than 100 hospitals nationwide, 35 in California—needs to raise cash fast. Revelations of overbilling, unnecessary surgeries and doctors’ kickbacks have brought a chain of lawsuits and regulatory fines that have bloodied the health-care giant. Hence the need for cash.

But why sell to Chaudhuri’s IHHI?

“IHHI represented the most qualified bidder, in the best interests of Tenet and the community,” said Steve Campanini, a Tenet spokesman. Campanini said all other details of the bid process are confidential.

But critics of the deal say Tenet—which will continue to run several county hospitals—is simply afraid of competing against a well-organized group of doctors.

“Tenet may be taking some very calculated steps here to position itself against such a threat,” says Jeremy Hogue of Sovereign Healthcare Consultants in Newport Beach, a company that represented some of the doctors in their failed attempt to buy the hospitals. “Remember, Tenet will still own and operate five other competing hospitals in the county. Even under financial duress, they’re not about to hand over major medical institutions to a bunch of doctors they may have to compete against tomorrow—not only for profits, but also for quality services, patient loyalties and professional staffing. Chaudhuri may present less of a challenge to them along these lines.”

“If the Chaudhuri deal goes through,” Luster predicted, “Chapman Medical is gone. And once again, it’ll be the patients who will suffer the most.”

Few doctors—and fewer reporters—have met Chaudhuri. Intensely private, he lives on a secluded estate near Hemet at the end of a street that bears his name. He retains an interest in three Inland Empire hospitals, just a few of his numerous financial holdings, medical and otherwise.

Raised in Bombay amid the wealth and privilege of a high-caste Indian family, Chaudhuri, 59, attended Calcutta University, where he trained as an orthopedic surgeon. In California, he became a millionaire many times over. He is described as driven, a doctor who traded his scalpel for the pen of a venture capitalist. Those who have met him say he is exceedingly charming, adept at deflecting criticism with a smile and a prediction of better days ahead.

“Ideas just roll off his tongue,” one doctor said recently. “You have to earn an audience with Chaudhuri. But once you’re there, he’ll fill you with visions and light. But I’m not sure whether he listens much.”

“I play chess four or five moves ahead,” said another doctor at odds with the physician-turned-businessman. “Chaudhuri plays 15 moves ahead. I don’t often agree with his methods, but I’m always in awe of him.”

In a recent interview, Chaudhuri dismissed criticism of him and the Tenet deal as “sour grapes.”

“These doctors are understandably upset. They had their own offer. It obviously fell short. And I don’t argue with their suffering under KPC,” he says. “But why did it happen? [MedPartners] was already in a downward spiral and losing $10 million a month. What we accomplished there was a soft crash landing instead of a hard crash landing for everyone involved. It was beyond me to stop it. In that sense, I was a victim, too.”

But in their book Critical Condition, Pulitzer Prize-winning investigative reporters Don Bartlett and James Steele paint a different picture of the clinics’ disintegration under Chaudhuri. They recount reckless cost cutting, inept record keeping, patient dumping and loss of services due to unpaid bills that led to a medical “meltdown” resulting in discontinuity of care and, in some cases, the deaths of patients. “Nevertheless,” Bartlett and Steele write, Chaudhuri “continued to put a positive spin on KPC, just as he had done from the beginning. Profitability was always just around the corner.”

Chaudhuri sees the Tenet deal as a way to vindicate himself. He is, he believes, the right man with the right plan to turn around four hospitals. At the heart of that plan is something Chaudhuri calls an “integrated management model” that will give doctors quick access to medical information.

“I am not running; I am not hiding,” he says. “If I have done something wrong, would I come back here? I am facing this head-on. I am answering all questions.”

He acknowledges he’s been involved in some 30 lawsuits but says he has “never lost a judgment.”

When I ask him about Caremark Inc. vs. KPC Global Care, he says I’ll have to speak to his attorney.

The Caremark case displays Chaudhuri’s preternatural ability to ride the ups and downs of any business cycle. It was from Caremark, then doing business as MedPartners, that Chaudhuri purchased 81 clinics in 1999. In their lawsuit, Caremark says Chaudhuri never made even one payment on his $9 million promissory note to the seller. When KPC Global crashed and burned in November 2000, Caremark says it raced to retrieve its investment—but too late. By then, all 81 clinics were closed and $30 million in company assets had disappeared. Others closer to Chaudhuri had gotten there first—Tenet, lawyers and a few of KPC’s high-ranking officials.

A bankruptcy judge subsequently awarded Caremark a $4.2 million judgment against KPC, by this time a husk of a company depleted of its assets. Chaudhuri offered to buy Caremark’s judgment for just under $500,000. Caremark sized up its options and took the money. The move effectively made Chaudhuri a creditor against himself.

What happened to KPC Global’s assets on the company’s path toward insolvency may never be unraveled. Speaking to a Riverside Press-Enterprise reporter, the bankruptcy judge said his court was unable to track the many convoluted transfers of funds between what had been MedPartners and Chaudhuri’s numerous companies.

The collapse of Chaudhuri’s health-care empire continued to reverberate. KPC Medical Management and Chaudhuri Medical Corporation are tied up in bankruptcy court on a separate matter; 1,000 creditors are knocking on those doors. In late 2002, Bartlett and Steele report, Chaudhuri suddenly dumped the Inland Global Med Group, stranding another 50,000 patients and leaving 240 physicians with more than $6 million in unpaid bills.

Chaudhuri holds financial interests in various other enterprises in and outside the medical arena as well, including supply houses and real-estate firms that had dealings with his medical groups but were sufficiently insulated from attachment under bankruptcy laws. Even his sprawling Hemet estate is held in trust out of the reach of creditors.

Through it all, Chaudhuri keeps smiling, promising and projecting an image of optimism, success and mission. It’s like watching Tony Robbins and Mother Teresa in one well-dressed evangelist. In one breath, he is “integrating doctors into the decision-making process” of his “ground-breaking” medical model. In the next, he is extolling doctors who stick to what they do best—treat patients—”and let the managers manage.” He says his failures have only made him better prepared to succeed. He speaks of “rescuing his reputation”—but then says, “This is not about me, not my personal glory. I am only doing my part to reorder this system . . . to benefit the patient.”

At the end of the interview, Chaudhuri asks me to “judge me by what I do, not by what I say.”

“It’s one thing to lose a restaurant, or a hardware store, or even a clinic in your community,” says Dr. Jeff Kaufman, a board member at Western Medical and a leader in the doctors acquisition group. “But we’re not talking about widgets here. We’re providing life-supporting medical care out of these facilities for thousands of patients who need us to be here day in and day out. If a hospital folds, it’s not just another failed investment to write off and move on. It’s a real-life catastrophe for real, live people.”

“I’m only one man trying to do his part,” says Chaudhuri. “I’m not Gandhi, really.”

Press-Enterprise sues public hospital district for employee salary information

December 29, 2000

The Press-Enterprise filed suit against a Hemet-based public hospital district and its management services company, Valley Health Care Management Services, to obtain, under the California Public Records Act, a list of Valley Health Care Services’ employees and their salaries. Given the financial collapse of Dr. Kali Chaudhuri’s KPC Medical Management, which resulted in the closure of 38 clinics, the sought-after information would help the public access the district’s performance, actions, conduct and expenditures. The district’s lawyers argued that the list is not a matter of public record because Valley Health Care Management Services is a private corporation. Furthermore, the California Health and Safety Code exempts financial information from disclosure. The lawyers representing the newspaper are relying on case law that requires private companies contracting with a public agency to release financial information related to the agency’s decision-making process.