A controversial medical entrepreneur, once accused of leaving 300,000 patients without care, has gained control of four Orange County hospitals by purchasing their debt at a courtroom auction, The Orange County Register reported Saturday.
Backed by hedge fund Silver Point Partners, Kali P. Chaudhuri now controls the Western Medical Center in Anaheim and Santa Ana, Coastal Communities Hospital in Santa Ana, and Chapman Medical Center in Orange, according to the paper. The hospitals are owned by the financially- troubled Integrated Health Care Holdings, Inc., which Chaudhuri now owns.
The orthopedist from Hemet and his partners offered $70 million to pay off high-interest loans with a face value of $73.6 million in a bid accepted by U.S. District Judge David O. Carter. An earlier bid of $55 million was called a "windfall'' and ``unwholesome,'' by the judge, the newspaper reported.
A doctor who was once the medical chief of staff for the hospital chain called the purchase "a black day for health care in Orange County,'' the newspaper reported.
Chaudhuri has been a controversial figure in California medicine since the October, 2000 bankruptcy of his company, KPC Medical Management. Its failure left 300,000 patients without care, and in many cases, without their medical records.
As a part of the purchase, Chaudhuri and Silver Point agreed to extend the loans for three years, until October 2013, giving IHHI time to refinance at a lower interest rate. They also will pump in $7 million to $10 million in
cash, IHHI attorney David Robinson told the Register.
Chaudhuri said he had invested $15 million into IHHI before Friday's loan purchase, telling the Register that it "is my incentive to save the hospitals. When you fail, people say things. But they'll also appreciate it when I succeed.''
The federal Securities and Exchange Commission is reportedly investigating the loans that got the hospitals in trouble, the Register reported. They were made by Tustin-based Medical Capital Holdings, which has been sued for fraud by the SEC and is being investigated for criminal charges, the newspaper said.