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home / healthcare / press releases

NEWS RELEASE
Mar 16, 1999


CONTACT: Jamie Court - 310-392-0522 x327

Kaiser Sued For Fraud Over Mass-Market Advertising; Consumer Group Seeks To Take T.V. Advertisements Off Air

Doctors Not In Charge Of Care, As Ads Contend
A first-of-its-kind lawsuit filed today by the Foundation for Taxpayer and Consumer Rights on behalf of Kaiser Permanente patients alleges that a $60 million per-year, mass-market advertising campaign by the HMO has recruited nearly one half million new members through wide-spread fraud.

The lawsuit, filed jointly by the Foundation and the law firm of Milberg Weiss Bershad Hynes & Lerach LLP, seeks monetary and injunctive relief, including an order to remove the television ads from the air and to implement a corrective advertising campaign.

According to the complaint, the HMO advertises that only doctors, not administrators, make decisions at the HMO and that only medical need and independent medical judgment, not financial concerns, determine a patient's care at the company.

Among Kaiser's core advertising claims are "We don't have insurance administrators telling your physicians how to treat you. And there are no financial pressures to prevent your physician from giving you the medical care you need; No one but you and your doctor decides what's right for you; we don't have insurance administrators to stand in the way of giving our members the finest medical care available."

The lawsuit alleges that Kaiser, contrary to its advertising claims, has implemented systemic policies and practices based on monetary and profitability concerns that interfere with the unfettered medical judgment of Kaiser doctors. These policies include:
  • drastically reducing Kaiser's medical budget (over its physicians' bitter complaints) while also adding hundreds of thousand of new members through its $60 million per-year advertising blitz;

  • applying arbitrary business quotas for doctors to reduce the number of patients that can be hospitalized regardless of medical need;

  • shifting medical procedures from physicians to less trained medical staff;

  • tying a significant portion of their physicians' pay to meeting business quotas for limitations on medical services;

  • wide-spread use of policies, suggested by consulting firm Milliman & Robertson, which "standardize" discharge times and other procedures in order to attain Kaiser's fiscal goals;

  • applying, as Kaiser executive John Vogt said in a taped speech for other utilization mangers, a "bottom line" mentality that included a corporate culture where arbitrary targets are based upon financial goals rather than medical necessity -- "The first thing that ever comes out of a Kaiser CEO now is what's the bottom line. I'm trained to do that now almost automatically…anytime you have to balance the budget, how do you do it? You cut utilization. Drop referral rate, drop your hospital utilization. The budget balances."
"According to this lawsuit, Kaiser believes that it can't both get patients and tell the full truth about how it treats those patients," said Ed Howard, lead attorney on the case for the Foundation for Taxpayer and Consumer Rights. "This chasm between what HMOs advertise and what they actually do is a confession that their true practices can't stand up to public scrutiny."

"This case should put every HMO around the nation on notice that they must do what they advertise and advertise what they do," said Jamie Court, advocacy director for the Foundation and director of the Foundation's Consumers For Quality Care project. "When an HMO recruits one half million members through outrageous claims that do not comport with its practices, the company must be held accountable."

The Foundation for Taxpayer and Consumer Rights is a tax-exempt, nonprofit, nonpartisan organization dedicated to advancing and protecting the interests of consumers and taxpayers.

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