Battle over HMO penalty challenges state's authority
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home / healthcare / in the media

San Jose Mercury News
Dec 10, 2001

by BARBARA FEDER

Battle over HMO penalty challenges state's authority

Critics say Kaiser is trying to intimidate the state's top healthcare official. The company questions the use of a Medicare case to justify a $1.1 million fine
An arcane legal battle playing out in California is raising pivotal consumer health issues that could affect patient protections for millions of California seniors -- and, some fear, compromise the ability of the state's top HMO regulator to do his job.

In the midst of a court case appealing a $1.1 million fine levied by the California Department of Managed Health Care, Kaiser Permanente has brought contempt charges against state HMO chief Daniel Zingale that could lead to fines or jail time.

That legal strategy, critics charge, is a thinly veiled attempt to intimidate Zingale and restrict his ability to enforce California's HMO patient protection laws.

``This is a power struggle, and Kaiser's picking a stupid fight,'' said consumer health advocate Jamie Court of the Foundation for Taxpayer and Consumer Rights. The watchdog group has sued Kaiser for false advertising regarding access to healthcare; the case is pending.

Kaiser maintains that a quirk in the California state constitution required it to file federal contempt charges against Zingale in order to get a judge to address new concerns in the case. The fine is the largest state regulators have ever issued against an HMO.

``It's been characterized as `We're trying to get him thrown in jail,' '' Kaiser spokesman Tom Debley said. ``That's not what we're after. Contempt charges were the only mechanism to get this in front of the judge.''

Zingale is scheduled to appear today before a federal judge on the contempt charges in Los Angeles.

At issue is whether Zingale can use the experiences of California's 4.1 million Medicare patients to build enforcement cases against the state's HMOs.

State lawmakers in July 2000 opened the Department of Managed Health Care -- the first such entity in the country -- to oversee California's 108 HMOs and protect the rights of their 23 million patients.

Since then, Zingale, a former AIDS activist, has issued a number of costly, high-profile fines against HMOs for denying care to patients and other deficiencies, rankling HMOs previously accustomed to gentler treatment from state regulatory agencies.

The department also has taken over day-to-day management of a large, financially troubled HMO and set up a 24-hour hotline to help consumers resolve HMO conflicts.


Medicare off-limits


But the agency's hands are tied when it comes to helping Medicare patients.

In August, the state's health insurance industry obtained a court order from a federal judge that prevented Zingale's agency from serving Medicare patients. Because Medicare is a federal, not a state, program, federal oversight supersedes state oversight, the judge said, providing a victory for insurers who had protested having to operate under both state and federal regulations.

Zingale said he respects that ruling, although he notes that California's patient bill of rights provides stronger consumer protections than federal law.

But when he used the experience of Medicare patient Wolfgang Spunbarg to strengthen his $1.1 million case against Kaiser, the HMO cried foul.

The case against Kaiser involved three patients, including Spunbarg, who had died of ruptured abdominal aortic aneurysm while under the care of Kaiser physicians. The condition is characterized by an abnormal widening of the abdominal portion of the aorta, the major artery from the heart. A ruptured aneurysm can cause massive internal bleeding and is considered a medical emergency requiring immediate surgery. The agency fined Kaiser for systemic problems with its emergency system that led to the deaths.

``Kaiser's emergency response system has not served patients with serious conditions well,'' Zingale said. ``To make that case and to hopefully improve Kaiser's system, we used three examples. One of them is a Medicare patient. I'm not willing to ignore the experience of Medicare patients in California in trying to reform the system.''

Zingale described Kaiser's strategy of filing contempt charges against him as ``a creative and unusual move to limit patient rights protections by a state.''

``I'm not intimidated by it,'' Zingale said. ``I'm not changing my course of action.''

Kaiser maintains that including evidence from Medicare patients should not be allowed, because to do so would put Kaiser under two masters, state and federal -- a scenario the federal judge's order forbids.

``We certainly should be held accountable and we are held accountable, through federal regulators,'' Kaiser spokesman Debley said.

Zingale counters that he is not seeking to regulate HMO treatment of Medicare patients.

But he does argue he should be able to use their experiences to build cases against HMOs that will result in better protection for consumers. HMOs don't differentiate between Medicare and non-Medicare patients when providing healthcare, Zingale said.

``It doesn't make any sense to shut the Medicare patients out,'' he said.


Second strategy


Kaiser also is pursuing another strategy to appeal the $1.1 million fine, arguing that the issues raised in the case are primarily malpractice issues that already have been addressed by the California Medical Board. Those court proceedings are taking place in Oakland.

State HMO regulators only have authority over Kaiser's health insurance division, not its medical division, Debley said. ``They're overstepping their bounds,'' he said.

In a hearing last week, a state lawyer charged that Kaiser is trying to stop the agency from doing its job -- which is to enforce an HMO's responsibilities based on patient experiences.

Kaiser's aggressive legal battles with the Department of Managed Health Care have drawn criticism from healthcare unions, consumer advocates and state lawmakers.

``If Kaiser triumphs here, the state laws regulating HMOs will mean nothing,'' said consumer advocate Court. ``It's a huge case and it's utter arrogance for Kaiser to say that patients who die under its care have no remedy when the HMO has applied for a license. Basically, they're claiming they're a simple fiscal organization. It's outrageous.''

Added state Sen. Sheila Kuehl, D-Los Angeles, herself a Kaiser member:

``I'm very disappointed that they'd put forward the claim that Zingale is in contempt of court for including a Medicare story in a case,'' Kuehl said. ``I see a very heightened interest from legislators in why health providers don't want this information to come out.''





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