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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

For years, Kaiser offered him to plaintiffs as a fair, experienced judge who had once practiced as a malpractice lawyer with a prominent Los Angeles plaintiffs' law firm.

What they did not say was that Drummond on at least five occasions had sat as Kaiser's own arbitrator--a business relationship that clearly suggested an ethical conflict.

"They slipped him past me," said James Marshall, the Orange County attorney, noting that he accepted Drummond as a neutral arbitrator before learning of his record.

For his part, Drummond regards himself as a paragon of evenhandedness. "You sit as a judge, and you call it the way you see it," he said in an interview. As a neutral arbitrator, he said, he probably has ruled "60-40 in favor of the claimant," or plaintiff.

But in at least three recent cases, state courts have overturned Drummond's pro-Kaiser rulings on grounds that he and Kaiser withheld disclosure of their relationship; one judge even commented from the bench that he was "shocked" by what he saw as a deliberate attempt by Kaiser's lawyers to mislead the plaintiff's side on the issue.

Arguably, those court rulings amounted to Pyrrhic victories for the plaintiffs; the decisions gave them only the right to start the arbitration process anew--at their own expense. Despite finding evidence of unfairness in the Kaiser system, state judges up to now have been unwilling to overturn its mandatory arbitration clause.

That was true even in the Engalla case.

After Judge Parrilli denied Kaiser's right to arbitrate the family's claim on grounds of fraud, Kaiser appealed.

A three-judge panel of the state Court of Appeal ruled Aug. 3 that it is "possible to infer" from the evidence that lawyers for Kaiser "attempted to delay" appointing a neutral arbitrator and took "full advantage of its dominant position." That behavior, the panel ruled, would be "morally reprehensible if undertaken by Kaiser and its attorneys simply to stall the litigation until the claimant died."

But because it falls short of "the stuff of which a claim of fraud is made," the appellate judges upheld Kaiser's right to compel the Engallas to arbitrate.

The Engallas say they will appeal the case to the California Supreme Court.

"It's blatantly inconsistent to allow one party's attorneys to write the rules and administer the system," attorney Rand said. "It's the fox guarding the henhouse."

About This Series:

SUNDAY: Medical care is being rationed in California. That's one of the keys to "managed care."

By imposing restrictive policies and erecting bureaucratic obstacles, health maintenance organizations have accumulated the power to override doctors' decisions and act determine the nature and extent of the care 17 million Californians receive.

HMOs fall short on some preventive care measures.

HMOs say they are more oriented toward preventive care than traditional fee-for-service medicine, noting that the healthier they keep their members, the more money they'll save. In fact, the fee structure of many HMOs has the effect of discouraging such basic preventive programs as child immunization. Moreover, many California HMOs score consistently low on measures of preventive care.

MONDAY: The state's HMOs are regulated by a toothless watchdog.

Although HMOs function as insurance companies and as health care providers, their primary regulator isn't the Department of Insurance or the Department of Health Services. Instead, they are overseen by the Department of Corporations, a notoriously weak agency whose other duties include regulating escrow companies and mortgage lenders. In 20 years, it has levied just one fine against an HMO.

TUESDAY: Key decisions about your medical care have been taken out of your doctors' hands.

Doctors across California feel they've been deprived of their role as patient advocates. That, compounded by a clamp-down on fees that has sharply reduced their income, has some doctors fleeing the state or the profession.

TODAY: If something goes terribly wrong, you may not be able to sue.

Many HMOs require patients to pursue medical claims thorugh arbitration processes rather than the courts.

HMO cost-cutting transfers millions of dollars from medical care to corporate coffers.

The "upstreaming" of medical dollars to HMO shareholders has become an issue with the employers and governments that pay the medical bills.

Your HMO may not pay for your trip to the emergency room.

Emergency room physicians say HMOs impose obstacles to patients getting urgently needed care--and then resist paying for the care that's provided.

THURSDAY: The system can be improved.

Patient-care advocates and some HMO executives agree that much can be done to improve members' access to care and information. Among the proposals are creation of a statewide HMO ombudsman, improvement of patient surveys and increasing resources for state regulators.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Loyalty Quotient

Q. If you could change from the health care plan you currently have to another one, would you do so?

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