Dire Prognosis

Buyer of four Tenet Hospitals leaves doctors fearful for Countys health-care future

Illustration by Bob AulDr. 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."

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