Kansas City area medical practice falls into bankruptcy

A large Kansas City physicians practice tumbled into bankruptcy this week amid a nearly two-year courthouse battle over its financial dealings with doctors.

Kansas City Internal Medicine P.A., which has operated offices in Overland Park, Lee’s Summit and Kansas City, filed Wednesday for Chapter 11 bankruptcy reorganization.

Its website said the operation had 170 employees and handled 135,000 patient visits a year. Employment had fallen to 63 at the time of the bankruptcy filing.

Five of its physicians and 31 other employees have been hired by Statland Medical Group, which is part of HCA Midwest Physicians network in Kansas City. Statland is affiliated with Menorah Medical Center and HCA Midwest Health’s hospitals, according to its website.

HCA officials could not be reached.

David Wilt, the president of Kansas City Internal Medicine who signed the bankruptcy petition, is among the five doctors with employment agreements at Statland, a sale agreement filed in the bankruptcy case said.

Wilt was not available, but the attorney representing Kansas City Internal Medicine in the bankruptcy case said in an email that “patient care should not be damaged” by the bankruptcy.

Others now employed by Statland include doctors Theodore Whitaker, Amir Hemaya, Adam Maghrabi and Pandurang Chillal.

A filing in the bankruptcy case said Kansas City Internal Medicine had “decided that the continued operation of the medical treatment facilities was not profitable.” The document said that the practice has an agreement to sell its name and assets at its Nall Avenue location in Overland Park to Statland for $139,036.47 and that Statland will operate “an internal medicine clinic” there.

The agreement specifically excludes assets at Kansas City Internal Medicine’s other locations.

Colin Gotham, the bankruptcy attorney, said “additional asset sales to other parties” were likely.

The practice’s website included no information about the bankruptcy filing or the doctors’ move to Statland’s employment.

A recording at the office of one Kansas City Internal Medicine doctor who practices at Menorah Medical Center offered these directions to patients:

“Hello, Kansas City Internal Medicine has transitioned to become part of HCA Midwest Health Care. This portal has become inactive for communicating and updating records. If you’re remaining as a patient of Kansas City Internal Medicine, you will receive a link to our new portal at the time of your next office visit. We apologize for any inconvenience this may cause. If you have any questions do not hesitate to reach out to our office at 816-943-0706 Thank you for allowing us to be part of your health care.”

The bankruptcy filing comes after a Kansas judge last year dismissed Kansas City Internal Medicine’s claims against several doctors who left in late 2014 and early 2015. Other claims continue, and one former member of the practice filed counterclaims this year that include “corporate waste and malfeasance.”

The physicians practice group had been a unit of Signature Medical Group since the start of last year.

A Signature spokesman said Thursday that their relationship ended Oct. 31 but would not discuss the circumstances. Earlier, in an email, the spokesman said Kansas City Internal Medicine’s “bankruptcy filing has no impact on the Signature entities or their ability to deliver care to patients.”

Businesses typically file Chapter 11 petitions to remain in operation while reorganizing their finances under the protection of the bankruptcy court.

Arif Ahmed, an associate professor of health administration at the University of Missouri-Kansas City, said Thursday that he had not heard about Kansas City Internal Medicine’s bankruptcy. But he said it fits with the struggles of independent physician groups nationally.

Ahmed said hospitals are moving away from contracting with those groups and toward direct employment of doctors. That arrangement gives the hospitals more control over costs and quality of care, he said.

“It’s a matter of size, basically,” Ahmed said. “All the major players have been trying to consolidate.”

Kansas City Internal Medicine’s bankruptcy petition suggests that its finances have deteriorated severely.

The filing shows revenues essentially have dried up, totaling only $318,335 through 10 months of this year after reaching nearly $26.7 million in 2015. The filing lists a $1.4 million debt to McKesson Corp. as its largest unsecured claim. McKesson sells medical supplies and health care information systems.

Financial troubles have strained Kansas City Internal Medicine since at least 2014, according to the counterclaims made in court by Srilatha Konduri Gannavaram, a former member of the practice. She was among a group of seven doctors that Kansas City Internal Medicine sued in 2015 seeking $500,000 in what the lawsuit claimed were unpaid expenses.

Gannavaram’s filing describes several moves the medical practice undertook in recent years that she claims cost her financially while enriching the practice and others who served in executive positions there.

Gannavaram became a shareholder, along with other physicians, in 2014 with assurances that the practice “was financially viable and profitable,” her Aug. 16 court filing said.

But “behind the scenes,” it said, those in control were “committing acts of corporate waste and malfeasance” that included buying a suite for Kansas City Chiefs football games, “hiring friends or relatives,” adding management positions that drove up personnel costs and “taking out loans” for the practice and requiring doctors as shareholders to personally guarantee them.

According to the filing, executives told Gannavaram that the personal guarantee was “a mere formality” and that the bank wouldn’t seek to collect unless the practice “was insolvent, which was not a realistic possibility.”

As other doctors were resigning from the practice, Gannavaram agreed to a new employment agreement “under coercion, duress and undue influence,” the filing said. It said the practice failed to “accurately disclose the extent of KCIM’s (Kansas City Internal Medicine’s) deficit and the severity of its financial position.”

Attorneys representing Gannavaram or Kansas City Internal Medicine in the Johnson County District Court case either declined to comment or were not available.

This story was originally published November 11, 2017 at 7:00 AM with the headline "Kansas City area medical practice falls into bankruptcy."