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'Kaiser Justice' System's Fairness Is Questioned : Health: HMO says arbitration is speedier, cheaper than courts. Critics claim that the deck is stacked.

THE HEALTH CARE REVOLUTION. Remaking Medicine in California . One in a series

August 30, 1995|MICHAEL A. HILTZIK and DAVID R. OLMOS | TIMES STAFF WRITERS

The family of Wilfredo Engalla says Kaiser medicine doomed him to death from inoperable lung cancer. Then, they say, "Kaiser justice" made matters worse.

That's what Engalla's widow and four children allege happened when they tried to press a malpractice claim against Kaiser Foundation Health Plan, the nation's largest health maintenance organization.

For his family members, the tragedy of Engalla's death was deepened by their encounter with the mandatory system of binding arbitration through which Kaiser deals with malpractice claims and coverage disputes that arise among its 4.5 million members in California.

The HMO's officials say the system--which bars members from suing it in court--has been designed to be fair, as well as cheaper and faster than bringing lawsuits.

The Engallas disagree. In their experience, "Kaiser justice," as the system is called by lawyers up and down the state, is dominated and manipulated by the giant health plan with the aim of obstructing fair settlements. In Engalla's case, the family contends, Kaiser lawyers delayed the process long enough to ensure that Engalla would die before a hearing could be held on his claim.

After listening to the family's story and Kaiser's defense, Alameda County Superior Court Judge Joanne C. Parrilli declared the HMO's arbitration system fraudulent, "unconscionable" and "corrupt . . . in general."

The case began on May 31, 1991, when the Engalla family filed a claim charging that Kaiser doctors for five years had misdiagnosed Wilfredo's shortness of breath and coughing as symptoms of colds and allergies. By the time Kaiser recognized his illness as lung cancer, the 51-year-old Filipino immigrant, an accountant for a Hayward tire company and father of four children, was terminally ill.

"Mr. Engalla has very little time left in his life," family lawyer David S. Rand noted in his filing, making a special appeal for Kaiser to comply with the requirement in its service contract that a three-member panel of arbitrators be appointed within 60 days.

For the next 4 1/2 months, the family later charged in court, Kaiser's attorneys stalled. The reason, they say, is that by law the family's damages would be cut in half if Engalla was no longer alive when the case was heard.

As the appeals judges found, Kaiser's lawyers selected an arbitrator they knew would be unavailable to hear the case for at least six months. They were slow in answering Rand's letters. They dickered endlessly over minor issues. During one session to take Engalla's deposition, complains Aina Engalla, his eldest daughter, a Kaiser lawyer badgered her father relentlessly.

"The man was dying," she recalls. "It wasn't necessary to jump all over him. I was thinking, 'These people don't care. They want us to just go away.' "

Not until Oct. 22 did the parties reach an agreement on the arbitrators. By then, 144 days had passed since the claim had been filed--nearly three months beyond the contractual deadline.

Wilfredo Engalla died the next day.

'Don't Tolerate Delays'

Kaiser officials deny that the Engallas' experience is characteristic of how they conduct arbitrations. "I don't tolerate delays like that," said Pauline Fox, a senior Kaiser counsel who oversees arbitration cases in Northern California.

Fox assumed her responsibilities in November, long after the events alleged by the Engallas. She said she would review the record to determine if her lawyers acted improperly.

But interviews with lawyers and claimants and a review by The Times of thousands of pages of court records suggest that the obstacles, delays and difficulties faced by the Engallas are far from unusual in Kaiser arbitrations.

Nor are these problems surprising, given that the system--as a panel of state appeals court judges in Oakland concluded this month in reviewing the Engalla case--"is not only designed, written and mandated by Kaiser," but supervised by lawyers "obliged to act zealously and exclusively in [Kaiser's] best interests."

(Despite that, the Engallas lost their quest to overturn the arbitration clause when the appeals judges ruled that Kaiser's behavior only suggested "bad faith," which is not grounds for revoking arbitration rights and is not fraud.)

Kaiser officials staunchly defend mandatory arbitration as a useful method of keeping routine disputes out of the overburdened court system. Arbitration, they say, provides swift and inexpensive justice for the giant health plan, its patients and their families.

"I hear a lot of stories of six- or 12-week [jury] trials," said Trischa J. O'Hanlon, the senior staff counsel who heads the Oakland-based HMO's arbitration program. "In arbitration, we have three-day or five-day hearings. [The process] really can move at the speed the plaintiff wants it to move. You can't do that in court."

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