KAISER PERMANENTE: CALIFORNIA COURT ALLEGES UNFAIR PRACTICE
"In a major blow" to Kaiser Permanente, the "CaliforniaThis is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
Supreme Court ruled Monday that there is substantial evidence
that Kaiser Permanente committed fraud and deliberately delayed
arbitrating the case of a patient dying of lung cancer to save
hundreds of thousands of dollars" (La Ganga, Los Angeles Times,
7/1). "In a victory for consumers, the California Supreme Court
ruled yesterday that companies can be sued if they fail to live
up to their promise of fast and fair arbitration," San Francisco
Chronicle reports. Justice Stanley Mosk wrote, "There is
evidence that Kaiser established a self-administered arbitration
system in which delay for its own benefit and convenience was an
inherent part" (Chiang, 7/1). In a concurring opinion, Justice
Joyce Kennard "said that it takes almost two years on average for
a Kaiser member to set an arbitration date, compared with the two
months that the HMO claims in promotional literature" (Wall
Street Journal, 7/1).
Kaiser officials contend "that the decision -- which sends a
malpractice case brought by the lung cancer patient's family back
to a lower court -- actually upholds the value of arbitration and
will allow the lower court to decide whether there was fraud in
the case." Tom Debly, Northern California spokesperson for
Kaiser, said, "We believe the facts when they're presented would
show that we didn't do anything to intentionally delay
arbitration in this case." Times reports that the decision
"comes at a difficult time for Kaiser, which is facing
increasing criticism nationwide that patients are being harmed by
its efforts to cut costs." Most notably, in April, "authorities
in Texas threatened to shut down the HMO's operations there" (see
AHL 4/18) (7/1).
Consumer advocates said that the ruling "could have a broad
impact on HMOs, insurance companies, banks and other businesses
that rely upon out-of-court arbitration to resolve disputes and
save the high costs of going to trial" (Chronicle, 7/1). Times
reports that the decision also "could affect millions of
Californians relying on HMOs for medical care, [and] may raise
the basic standards for all arbitration in California" (7/1).
The ruling was issued in the case of a Hayward, CA, family
who claimed that Kaiser "deliberately delayed its arbitration of
a medical malpractice claim until after the patient died."
Wilfredo Engalla "complained that Kaiser misdiagnosed his lung
cancer for five years." By the time the cancer was discovered,
it "had become inoperable." Chronicle reports that Engalla and
his family requested arbitration on their malpractice claim
against Kaiser in May 1991. Under the arbitration agreement, a
neutral arbitrator should have been provided within 60 days.
However, Engalla said that Kaiser "delayed and stalled for months
in agreeing to an arbitrator." Both Engalla and his wife sought
$250,000 in damages; however, when Engalla died in October 1991,
only his wife's claim was left pending. The family then withdrew
from arbitration and filed suit in Alameda County Superior Court,
where a judge ruled in favor of the family. But a state appeals
court overturned that decision.
The court noted yesterday that "there are delays in 99% of
Kaiser medical malpractice arbitrations." According to
statistics, instead of the 60 days allotted for selecting an
arbitrator, "it takes almost two years for a neutral arbitrator
to be picked" and it takes two and a half years "to reach a
hearing in a Kaiser arbitration," Chronicle reports. In addition,
the court said that Kaiser "failed to inform members that it
designed and administers the arbitration program." Judge Mosk
said that "there is strong evidence that Kaiser fraudulently
misrepresented its arbitration process to members and at the very
least failed to act in good faith in living up to its promises"