Health Care Squabble : HMO Denies Engaging in Deceptive Sales Practices

Last November, Edward Ivy, 68, stopped to talk to two men who had set up a table in the lobby of his government-subsidized apartment building in San Francisco.

Ivy says the two men--sales representatives for Foundation Health Corp.--told him that he could avoid “cuts in Medi-Cal” and keep his favorite doctor and pharmacist if he signed up for Foundation’s health plan for low-income people. So he signed up.

A few weeks later, Ivy, who suffers from diabetes and high blood pressure, went to his pharmacy to get a prescription filled. He was told his Medi-Cal prescription coverage had been canceled because he had joined the Foundation Health program. And his longtime doctor told him he could no longer treat him for the same reason.

Ivy’s story is part of a lawsuit filed Thursday by him and five other plaintiffs accusing Foundation Health, one of the state’s largest health maintenance organizations, of “deceptive and abusive marketing practices” in connection with door-to-door sales of its health plan for Medi-Cal recipients.

Foundation Health officials said the company has complied with all state guidelines on the marketing of such programs.

The lawsuit, filed by two public interest groups and a law firm in San Francisco, also names as a defendant the state Department of Health Services, which is accused of knowing about the alleged marketing practices but failing to stop them.

“We’ve got outrageous marketing practices here, and we have the Department of Health Services not taking adequate steps to stop the practices,” said Judith Bell, co-director of the Consumer Union’s office in San Francisco.

Consumer advocates say that complaints about HMO marketing practices targeting Medi-Cal recipients have risen sharply as insurers have rushed to compete for a slice of a market worth billions of dollars annually. Gov. Pete Wilson wants to move some 2.5 million low-income Californians--most of them poor women and children enrolled in Aid to Families with Dependent Children (AFDC)--into managed care plans by the end of 1996.

The suit against Rancho Cordova-based Foundation Health involves the company’s marketing activities in the San Francisco area, although most of the firm’s 86,000 Medi-Cal members are in Southern California.

But complaints about the tactics of several HMOs have also risen in Los Angeles.

“The complaints have gotten worse as everybody scrambles to line up patients,” said Lynn Kersey, director of the Children’s Advocacy Institute in Los Angeles. HMO sales agents “are going to WIC (Women, Infants and Children supplemental food program) agencies, food stamp offices, county hospitals and homeless shelters, anywhere they can think of” to recruit Medi-Cal recipients, she said.

But Foundation spokesman Kurt Davis blamed entrenched interests for the flap.

“This is not a bad company, and we are very careful to guard our reputation and our relationship with regulators . . . ,” said Kurt Davis, a Foundation spokesman. “We believe we are acting responsibly in carrying out this program appropriately.”

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Davis suggested that some county officials in San Francisco--who have proposed their own managed care program and are fearful of competition from big HMOs--have helped to fuel the controversy.

“We feel quite strongly that this is growing out of the introduction of a new managed care program to a community where there are strongly entrenched interests that would rather not have a program like this competing for Medi-Cal business in their marketplace,” Davis said.

Nevertheless, Foundation concedes that the controversy will likely hurt its marketing efforts for its Medi-Cal program and might raise eyebrows among investors.

Michael Keys, an attorney with the San Francisco Neighborhood Legal Assistance Foundation, said the agency has received more than 60 complaints from Foundation members who claim that company sales representatives lied to them about the plan’s coverage.

The lawsuit, filed in Superior Court in San Francisco, seeks to block Foundation from door-to-door marketing of its program. It also asks the court to order the Department of Health Services to enforce its prohibitions on such tactics.