ABLEnews Extra

                         Cheap Justice?

          On August 27 through August 31, the Los Angeles Times
          reported on its seven-month investigation of California
          HMOs. Excerpts from the series of particular interest to
          persons concerned with the impact of managed care on patient
          care are provided below. (Ellipses have been omitted to
          facilitate reading.)

          [N.B. The entire series may be ordered by calling Times on
          Demand at 800-788-8804. The following file may be freq'd as
          MC50829.* from 1:275/14; and other BBSs that carry the
          ABLEFiles Distribution Network (AFDN) and ftp'd from
          ftp.icdi.wvu.edu on the Internet. Please allow a few days
          for processing.]
               
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 HMOs say the system--which bars members from suing in court--has
been designed to be fair, as well as cheaper and faster.

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 May 31, 1991, when the Engalla family filed a claim
charging that Kaisers' 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, 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  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 appeal 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.

Not until October 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.

Kaiser officials deny that the Engallas' experience is characteristic
of how they conduct arbitrations.

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 interest."

Adversaries say the HMO--a nonprofit company with $12.2 billion in
revenues last year--is fully aware that while it stretches out routine
proceedings over months, even years, medical and legal bills for the
injured may be climbing relentlessly higher.

"Time is on Kaiser's side," said Nathaniel Friedman, a Los Angeles
lawyer who has battled Kaiser in dozens of cases.

Even plaintiffs who prevail in Kaiser arbitrations can count on
smaller checks than they might have won in a court of law; arbitration
awards in malpractice cases generally run from 20% to 50% less than
jury awards in comparable cases, according to lawyers on both sides of
the issue. And injured parties generally cannot recover their legal
costs, as they often can in court.

Those costs are often higher than conventional arbitration. The
reason: Kaiser's contract requires the appointment of three
arbitrators.

Each side pays its own arbitrator and half of the third judge's fee.
Since arbitrators charge as much as $500 an hour, "that represents an
ante of thousands of dollars on every claimant," said Rand, the
Engallas' lawyer. Yet in all but the most trivial cases, Kaiser has
rebuffed efforts to dispense with the costly party arbitrators.

Harry T. Shafer, a retired Los Angeles County Superior Court judge,
often selected as a plaintiff's arbitrator in Kaiser cases, said: "I
tell plaintiffs it's very difficult to win against Kaiser. You've got
to be prepared to spend $25,000 and upward for experts. It's intended
as a stacked deck, and the unwary get caught in it."

The appeals court in the Engalla case found that typical Kaiser
arbitrations often take longer than equivalent cases in state court.

A statistical survey of 196 Kaiser Northern California
arbitrations--entered into evidence in the Engalla case--found that in
only 1% was a neutral arbitrator appointed within the 60 days
specified by the arbitration agreement. On average, that step took 677
days, or more than 22 months, according to the survey.
 
Reaching a final resolution of these claims, the study found, took an
average of 863 days, or nearly 29 months.

These sorts of delays, complain patients and family members who have
arbitrated against Kaiser, only magnify the grief they have already
suffered from botched treatment.

Kaiser's handling of patient disputes raises many issues beyond
whether its patients get swift and efficient justice.

One is the HMO's domination of the very infrastructure of private
arbitration in California; according to some estimates, Kaiser is the
largest single user of the arbitration process in California.

Critics say fear of retribution by Kaiser chills the entire process
because Kaiser arbitrations can account for as much as half the annual
income of an active arbitrator. (Even a part-time arbitrator can earn
close to $200,000 in annual fees, according to those familiar with the
system.)

In fact, Kaiser and its network of outside lawyers keep close tabs on
the records of arbitrators who have sat on their cases, according to
attorneys who have worked for the health plan.

"If you don't see it the way Kaiser's attorneys do, there's a good
chance you won't be chosen again," said a prominent retired judge
whose Kaiser-related business dried up after he hit the organization
with several large awards--including one in the case of a young girl
whose cancer was missed by physicians who misread her pap smear.

The volume of Kaiser's repeat business is evident from a sheaf of
questionnaires assembled by James S. Marshall, an Orange County
attorney representing a child who lost two fingers and a foot when a
Kaiser doctor allegedly misdiagnosed a serious viral infection.

Most of the retired judges proposed by Kaiser had participated in
scores of arbitrations in which it was the defendant. One, Arthur K.
Marshall, of Los Angeles, said he had served as a neutral arbitrator
inn "over 100 cases against Kaiser and Cigna" and once as Kaiser's own
party arbitrator.

"You have to be smart enough to say  no' to the first few names they
send you," James Marshall remarked. "You know these guys are in their
stable."

Another issue raised by Kaiser's ironclad arbitration clause is the
public's access to important information about medical practices and
quality.

Patient advocates and consumer activists say the spread of arbitration
had the potential to restrict public access to information about HMOs,
doctors, and hospitals. Arbitration rulings are private, and unlike
trial and appeal court rulings, are never published. The result is
that less can be learned via the court system about medical quality at
Kaiser than about almost any other major medical institution in
California, critics say. As long as Kaiser refuses to disclose how
many arbitrations it participates in, no on can fix the number of
malpractice claims filed by its members, much less their nature.

Where Kaiser goes other institutions often follow. Mandatory
arbitration clauses are now appearing in other HMO contracts,
including those of Cigna, the state's sixth largest HMO. Many medical
groups and individual physicians now routinely ask new patients to
sign a form giving up their right to a jury trial for malpractice
claims.

"Because people in HMOs lack access to the courts, we've lost one
check on medical quality," said Geraldine Dallek, executive director
of the Los Angeles-based Center for Health Care Rights.

That is especially important because by giving up much of their
freedom to choose individual doctors and hospitals, HMO patients have
less opportunity to address problems with their medical care by
switching doctors.

Many lawyers say that the real danger from Kaiser's conduct in
arbitration lies in its potential for undermining the system's
integrity.

In several recent cases, state appeals courts have overturned
decisions in Kaiser arbitrations after discovering the plan's lawyers
concealed an arbitrator's conflict of interest.

"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 chicken house."

[Kaiser Justice' System's Fairness Is Questioned, Michael Hiltzik and
David Olmos, Los Angeles Times, August 30, 1995]

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