Pressure Is Mounting for Better Oversight of HMOs : Health: Several legislative measures are pending. Activists seek ombudsman, swift handling of grievances.

Here’s what happened when Kaiser Foundation Health Plan and other managed care companies started discharging mothers from the hospital as early as eight hours after childbirth.

Legislators in Congress and in at least three states, including California, introduced bills to regulate how many days of hospital care after delivery insurance companies had to cover. The American College of Obstetricians and Gynecologists decried early discharge programs as “uninformed” and called for a moratorium on such changes.

At Kaiser, which began a voluntary eight-hour discharge program at its Sunset Boulevard medical facility in April, officials said that a 1994 study of 19,000 births at Kaiser facilities found no difference in the rate of readmission for babies discharged before 24 hours. But they acknowledged that they had little or no clinical data on how the earlier discharges affected such phenomena as maternal bonding, breast-feeding rates or patient satisfaction.

The result of this contretemps, many medical professionals complain, was the worst of all possible worlds: lawmakers trying to legislate medical practice because the medical insurers appeared to be changing policy largely to save money. (A bill requiring insurers to pay for at least 48 hours of postnatal hospital care is still wending its way through the California Legislature.)

But the episode also underscores much of what needs to be fixed in the California HMO industry.

Pressure to minimize costs and increase earnings is growing far faster than clinical data showing how changes in policy will affect patients. The HMO industry’s state regulatory agency, the Department of Corporations, is regarded as so ineffectual that legislators step into the breach to micro-manage health care.

Meanwhile, patients face proliferating obstacles when they try to exercise control over how they are cared for--by bringing official complaints, appealing HMO denials of care, or suing in court.

In short, there is scant oversight of how the HMOs--most of which are publicly held companies--handle their self-proclaimed mandate to reduce medical costs for American society as a whole.

“You don’t want these kinds of [medical] decisions made by a company staring at its bottom line,” said Judith Bell, co-chairwoman of the San Francisco office of Consumers Union. “To the extent that we’re making them as a society, they should be made by public policy-makers, not by insurance executives.”

For their part, HMOs say it is the doctors who make the medical decisions, not insurance executives. However, when disputes arise over treatments and coverage, the health plan often has the final authority to determine what is “medically necessary” and what is not.

Patient care advocates, consumer protection experts and even some HMO officials list these as critical elements of a program to bring HMO decision-making out into the sunshine in California and level the playing field between the health plans and their patients:

Create an Ombudsman

Bell proposes the creation of a state office of consumer advocacy staffed by trained advocates representing consumers and reporting on results over time.

Health care is “different from going out to buy any other service because there is a big imbalance in knowledge,” she said. “The patient really has to rely on doctors [because] consumers are not used to having to advocate for themselves, as they have to in managed care.”

HMOs have long resisted such third-party review on grounds that outsiders are likely to be tainted by the same “empowerment” philosophy that leads to medical overuse and demands by patients for unnecessary and costly treatment.

“We don’t have outsiders review claims [by patients] unless and until it goes to court,” Kaiser Foundation Chairman David Lawrence said this summer in an interview with The Times, “because nobody knows how to practice [medicine] the way we do.”

California law requires that every HMO licensed under the Knox-Keene Act of 1975--the legislation governing most managed care in the state--establish an internal system to address formal complaints by members.

Neither the law nor regulations sets forth how those systems should work.

Except in limited cases, the law provides no deadlines ensuring speedy consideration of grievances by the HMO or medical group.

Patient advocates say California should follow the lead of other states with tighter standards. Minnesota, North Carolina, Wisconsin and West Virginia give HMOs two to three working days to respond to grievances where denial of care could lead to serious harm to the patient. Others require responses to all grievances within specified time frames, and many require written explanations of grievance rulings.

A bill that would require HMOs to respond to enrollee grievances within 30 days and to emergency cases within five days is pending in Sacramento. The HMO industry recently dropped its opposition to that bill.

Spread Information

When the HMO system’s constraint on a patient’s choice of physician is compounded by constraints on information, the potential for abuse is multiplied. Today, most California medical consumers have access to virtually no useful data allowing them to choose among the scores of health plans offering managed care services. Some large employer groups, such as the California Public Employees’ Retirement System and the Pacific Business Group on Health, do publish annual surveys to help members evaluate health plans.

After legislation was passed in 1994, the Department of Corporations this year began for the first time to collect annual figures on grievances, categorized by the type of complaint and disposition. Legislation pending in Sacramento would require public summaries of HMO medical surveys and fuller public disclosure of deficiencies found by regulators.

Health care professionals say HMOs should be forced to make their policies on treatment coverage--especially coverage for esoteric or “experimental” procedures--public and consistent. As it is now, many California HMOs delegate those decisions to the individual medical groups with which they contract to treat patients. The result is often arbitrary denials of treatment by medical groups.

HMO critics have long pro posed that the state sponsor a standardized survey of patient satisfaction rates among all HMOs. The HMOs argue that statewide surveys will overlook subtle differences in practices among health plans, unfairly skewing the results in favor of one type of HMO or another.

The plans and some employer groups, however, constantly conduct their own surveys, widely advertising results that ostensibly demonstrate high patient satisfaction. Professionals say such informal surveys are untrustworthy for three reasons: Their methodology cannot be confirmed; they are overly influenced by subjective elements with no bearing on medical quality, such as pleasant waiting rooms and amiable receptionists, and they are easily manipulated.

Even some HMO executives agree. “I am always suspicious of surveys and focus groups because they can be very selective,” said Robert Gumbiner, a founder and former chairman of FHP.

Critics say HMOs dominate their relationship with doctors--and therefore the doctor-patient relationship. Doctors fearful of losing HMO contracts may not forcefully advocate on patients’ behalf. Even those inclined to be outspoken are often limited by “gag rules” in their service contracts that prohibit them from publicly criticizing the HMO.

Public interest groups say such provisions should be prohibited. Moreover, they argue that HMOs should be prevented from summarily terminating doctors from their service rosters, a maneuver that generates numerous complaints from patients who sometimes discover in mid-treatment that visits to their preferred doctor will no longer be covered.

Limit Mandatory Arbitration

Public interest representatives say binding arbitration can be an effective way of settling malpractice claims and other disputes, but only if both sides enter the process as equals. That does not happen when arbitration is a contractual condition of signing with an HMO, as it is with Kaiser Foundation and some other plans. In those cases the member may not even be aware of the arbitration requirements because the contract may have been signed only by an employer or labor union official.

Particularly troublesome are systems such as Kaiser’s that are managed by the HMO itself, rather than an independent firm.

Arbitration “is supposed to be faster and to allow consumers to resolve their problem with greater speed and lower cost,” said Consumers Union’s Bell. “The way it’s been put into practice, it does neither.”

A generation of neglectful leadership has reduced the Department of Corporations’ health care unit to one of the most poorly financed and little-known regulatory agencies. Its resource crunch could get even worse this year when it initiates a long-awaited toll-free 800 line to take complaints.

Why the starvation diet? One reason is that the agency is financed directly by a per-member assessment on HMOs, which consequently make their voices heard on the size of the levy and how it is spent. The HMO industry has frequently lobbied to limit the agency’s authority. However, amid intense scrutiny and criticism in recent months, the California industry’s trade group has dropped its opposition to legislation that would increase the agency’s funding to pay for the 800 number and other measures aimed at enhancing its oversight.

Many of the agency’s problems, however, arise from poor management. Department of Corporations record-keeping is chaotic, say public interest groups and some department staffers. The agency has long sided with HMOs in their attempts to withhold information from the public.

That approach backfired this month when PacifiCare sued the agency to block it from obtaining patient complaints and other documents in PacifiCare files. (The agency alleges that the HMO sued because it knows the documents at issue are “damaging”; a hearing is scheduled for Sept. 27.)

“They’ve been taken by surprise by the tidal wave of change in the marketplace,” Bell said. “But some state regulatory agency needs to have the mandate, resources and desire to regulate the marketplace and protect 16 million Californians who get health care from managed care plans.”

About This Series:

SUNDAY: Medical care is being rationed in California. That’s one of the keys to “managed care.”

By imposing restrictive policies and erecting bureaucratic obstacles, health maintenance organizations have accumulated the power to override doctors’ decisions and act determine the nature and extent of the care 17 million Californians receive.

HMOs fall short on some preventive care measures.

HMOs say they are more oriented toward preventive care than traditional fee-for-service medicine, noting that the healthier they keep their members, the more money they’ll save. In fact, the fee structure of many HMOs has the effect of discouraging such basic preventive programs as child immunization. Moreover, many California HMOs score consistently low on measures of preventive care.

MONDAY: The state’s HMOs are regulated by a toothless watchdog.

Although HMOs function as insurance companies and as health care providers, their primary regulator isn’t the Department of Insurance or the Department of Health Services. Instead, they are overseen by the Department of Corporations, a notoriously weak agency whose other duties include regulating escrow companies and mortgage lenders. In 20 years, it has levied just one fine against an HMO.

TUESDAY: Key decisions about your medical care have been taken out of your doctors’ hands.

Doctors across California feel they’ve been deprived of their role as patient advocates. That, compounded by a clamp-down on fees that has sharply reduced their income, has some doctors fleeing the state or the profession.

WEDNESDAY: If something goes terribly wrong, you may not be able to sue.

Many HMOs require patients to pursue medical claims thorugh arbitration processes rather than the courts.

HMO cost-cutting transfers millions of dollars from medical care to corporate coffers.

The “upstreaming” of medical dollars to HMO shareholders has become an issue with the employers and governments that pay the medical bills.

Your HMO may not pay for your trip to the emergency room.

Emergency room physicians say HMOs impose obstacles to patients getting urgently needed care--and then resist paying for the care that’s provided.

TODAY: The system can be improved.

Patient-care advocates and some HMO executives agree that much can be done to improve members’ access to care and information. Among the proposals are creation of a statewide HMO ombudsman, improvement of patient surveys and increasing resources for state regulators.

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Resources for Health Care Consumers

PUBLICATIONS

* “Health Care Choices for Today’s Consumers” (Living Planet Press, $14.95). Published by Families USA, a Washington-based consumer group active in health policy issues. Includes practical tips on what questions to ask a doctor, how to pick a health plan or hospital and sections on elder care, long-term care and alternative health care.

* “How to Find the Best Doctors, Hospitals and HMOs For Your and Your Family” (Castle Connolly Medical Ltd., $9.95). The pocket guide has detailed advice on how to choose a doctor, hospital or HMO. It also includes tips on how to reduce your medical costs, spot billing errors and get insurers to pay for services. Specials sections on health needs of women, children and older adults.

* “Consumers’ Guide to Health Plans” (Center for the Study of Services, 52 Sylvan Way, Oakland 94610-1051, $12). A nonprofit consumer group’s ratings of many of the nation’s biggest health plans, including most California HMOs, along with advice on choosing a plan.

REGULATORS

* Los Angeles County Department of Health Services, Office of Health Services Licensing, 600 S. Commonwealth Ave., Suite 800, Los Angeles 90005. (213) 851-8200. Compaints related to hospitals, health care facilities.

* California Department of Health Services, 2150 Town Center Place, Suite 210, Anaheim 92806. (714) 456-0630. Complaints about hospitals and health care facilities in other Southern California counties.

* California Department of Corporations, 3700 Wilshire Blvd., Los Angeles 90010. (213) 736-2741. Consumer complaints about HMOs.

* California Department of Insurance, 300 S. Spring St., 6th floor, South Tower, Los Angeles 90013. (213) 897-8921. Outside Los Angeles, (800) 927-4357. Regulates non-HMO health insurance plans.

* California Medical Board. For complaints about physicians, (800) 633-2322. For otherinformation, (916) 263-2382.

* U.S. Health Care Financing Administration. (415) 744-3617. For complaints about Medicare and Medi-Cal programs.

ADVOCACY GROUPS

* Consumers Union, 1535 Mission Street, San Francisco 94103. (415) 431-6747. General health care issues.

* Center for Health Care Rights, 520 S. Lafeyette Park Pl. Suite 214, Los Angeles 90057. (213) 383-4519. From Los Angeles County only, (800) 824-0780. Medicare and health insurance issues.

* Consumers for Quality Care, 10951 W. Pico Blvd., 3rd Flr., Los Angeles 90064. (310)475-0883. Health policy.

* Health Insurance Counseling and Advocacy Program (Hicap). Program of the California Departments of Aging and Insurance specializing in consumer advocacy for senior citizens. 24 local offices. Statewide consumer hotline, (800) 434-0222.