Judge Upholds State Authority to Fine HMOs

A federal judge in Los Angeles ruled Monday that the state’s HMO czar, Daniel Zingale, should not be held in contempt of court for fining Kaiser Permanente $1.1 million based on alleged lapses in patient care.

The ruling by U.S. District Judge Ronald Lew was a victory for Zingale in a larger fight over the state’s ability to fine HMOs. If it had gone the other way, the ruling would have markedly narrowed his power.

Kaiser had asked Lew to rebuke Zingale because he relied on the death of a Kaiser Medicare member to demonstrate what he called systemic problems within the health maintenance organization. Kaiser lawyers said Medicare members are subject to federal law, not oversight from the state Department of Managed Health Care.

Zingale, the department’s director, said he feels vindicated by the ruling, which came during a five-minute hearing.

“Obviously I’m relieved and I’m pleased with the ruling,” he said. “What I’ve been through pales in comparison to what the family members have been through.”

Kaiser lawyers said that they viewed the ruling as a “procedural victory” for the state and that they may return to Lew with more evidence.

In a separate legal action in Oakland, Kaiser is trying to persuade a state administrative law judge to overturn the $1.1-million fine. In that action, Kaiser has argued that Zingale lacks the authority to impose fines on the HMO based on the behavior of its doctors and hospitals, which are regulated by other state agencies.

With 5 million members in California, Kaiser is the state’s largest HMO.

Fine Based on 3 Deaths

The Department of Managed Health Care based its fine on the deaths of three members from 1996 through 2000. The Medicare enrollee, Wolfgang Spunbarg, 72, died at Kaiser’s Woodland Hills hospital while seeking care for an abdominal aortic aneurysm.

Zingale has said that Spunbarg’s death demonstrates inadequate staffing and emergency procedures at the Woodland Hills hospital and throughout Kaiser’s system. Kaiser maintains that overcrowding at its emergency rooms are typical of nearly all hospitals in Los Angeles County.

Also attending the hearing was Terry Preston, whose mother’s 1996 death was the impetus for the $1.1-million fine. Margaret Utterback, 74, made numerous efforts to see her doctor Jan. 26, 1996, but an aortic aneurysm ruptured and killed her while she sought treatment.

“Kaiser is not prepared for a state regulatory agency to tell them what to do,” Preston said at a news conference before the hearing. “It’s about image. It’s about power. It’s about market share.”

Before the hearing, Zingale said he would not be “intimidated by any legal tactics by the HMO.”

“We’re not going to let the HMO lobby get in the way of our enforcement actions,” he said.

Steven Madison, a lawyer representing Kaiser, said the HMO is not trying to intimidate Zingale but to clarify the bounds of the law. “I’m sorry if he really feels that way,” Madison said. “We have enormous respect for the director and the department.”