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After reform, Kaiser still in spotlight

Other insurers move toward the company's arbitration model even as critics say its changes haven't gone far enough.

June 30, 2003|Daniel Costello | Special to The Times

The majority of arbitrators are retired judges and lawyers, and the income they earn from Kaiser arbitration cases can easily outstrip their earnings from other sources. By some estimates, arbitrators can earn several hundred thousand dollars annually by working on Kaiser cases alone.

According to the 2000 report by the state's independent auditor, about a third of the arbitration awards in the first 18 months after the reforms went into effect were decided by eight arbitrators, meaning each of them oversaw five or more arbitrations. In those cases, six of the arbitrators ruled in favor of Kaiser 80% of the time.

The OIA reports that, between 2002 and the reform program's launch in 1999, the 10 most active arbitrators had been involved in 500 of the approximately 3,000 Kaiser cases. The OIA report did not provide information about the outcomes of the cases.

"Even for those arbitrators who strive to be fair, it's hard not to believe that the idea of who is footing the bill doesn't enter into their mind," says David Rand, a Mill Valley, Calif., lawyer who represented Wilfredo Engalla's family.

Kaiser officials contend that the company does not exert any undue influence over the arbitration process. Lawyers for Kaiser and the plaintiff have an equal opportunity to select four potential arbitrators from a list provided by the OIA, which then randomly selects the final arbitrator. (Because of the expense, normally only one arbitrator is used, though patients can have up to three.)

"How can this be a problem if [plaintiffs' lawyers] can remove anyone they don't 100% believe will be impartial?" asks Michael Hawkins, a senior attorney for Kaiser.

But not everyone has a lawyer to rely on. Critics of the Kaiser system point to the high percentage of cases in which the HMO's members go through the process without legal representation (or pro pers, as it is known in legal jargon). In 2002, OIA records show that nearly one in four patients who arbitrate was not represented by an attorney; in 2001, one in three plaintiffs in Kaiser arbitrations had no lawyer. In comparison, about 1% to 4% of plaintiffs making similar medical malpractice claims in courtroom cases represent themselves, according to both plaintiff and defense attorneys.

Why the difference? Several plaintiffs' attorneys acknowledge that they are reluctant to take medical arbitration cases when the potential monetary awards are small. A California law that places a $250,000 cap on noneconomic damages in medical malpractice cases is another deterrent, they say.

Many people who represent themselves in arbitration hearings are overwhelmed by the process. Indeed, most make the perilous decision not to hire medical experts to support their cases. Such experts are expensive, often demanding fees of more than $1,000 a day. But without such experts, cases are frequently summarily dismissed.

For example, of the 12% of cases that are summarily dismissed, meaning the arbitrator didn't believe there was enough evidence to warrant a hearing, 70% are pro pers cases.

Hiram Ash, a 57-year-old South Gate paralegal, says his recent arbitration hearing went badly largely because he couldn't initially find a lawyer to take his case.

Three years ago, Ash says he was turned away from a Kaiser Permanente clinic for unknown reasons and later passed out in his car from the pain. He filed an arbitration claim, and began the case on his own. He quickly felt overwhelmed, he says. Eventually, Ash hired a lawyer for whom he once had worked, but he now believes that effort was too little too late. The arbitrator awarded Ash $2,700.

"I have a graduate degree and 20 years of legal experience. If I have a problem with this, imagine how bad it is for other people," he says.

Reform may be bubbling. Patient rights groups have advocated providing free medical experts for pro pers, although there is little agreement on who would pay for such a thing. Another proposal suggests putting a limit on the number of cases each arbitrator can take at one time.

One hurdle to reform is that public information about Kaiser's new arbitration system is somewhat limited. Kaiser reports information only on cases that are resolved in an arbitration hearing -- or about 15% of the total malpractice claims against the health plan. Similar to the outcomes of cases filed in public courts, the majority of Kaiser arbitrations are settled before they reach a hearing.

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Settlement follow-up

The state's Department of Managed Health Care has asked Kaiser for more information about settlements reached outside hearings, but has been unsuccessful in getting the HMO to provide such data. Kaiser officials say that such a request singles out the company, and that any resolution should be handled by the Legislature not that department.

"Right now, the way Kaiser is interpreting the reporting requirements, we don't have enough information to know if and where any systemic problems are," says Zingale, of the governor's office. "That isn't acceptable.

"I am confident we will get access to that information, whether Kaiser agrees to it or not."

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