Kaiser Fine Rejected but Soon Reinstated

A state administrative law judge has struck down a landmark $1.1-million fine against Kaiser Permanente over alleged lapses in patient care. But the state official who regulates HMOs quickly overruled the decision Thursday.

Judge Michael C. Cohn ruled that the Department of Managed Health Care overstepped its authority when it penalized Kaiser.

The state alleged that Kaiser did not assess or treat ill patients in a timely manner, which regulators say contributed to the deaths of three people. Kaiser denied the charges.

Cohn said that a 1975 state law allows HMO regulators to oversee health plan finances but not the quality of medical care that patients receive.

The act was never intended “to grant the department authority to micromanage the systems a health-care plan puts into place,” Cohn wrote in his May 15 decision, which was made public Thursday.

Cohn also ruled that the state had not proved that Kaiser and its physicians had provided inappropriate care.

He did levy a $25,000 fine against the health maintenance organization for not following a grievance process established by the state.

The state’s HMO czar, Daniel Zingale, said Cohn’s ruling, if allowed to stand, would gut the state’s patient protection laws. Kaiser, the state’s largest HMO, should begin addressing the concerns raised about the care it provides, Zingale said, instead of attacking the state’s authority to fine the HMO.

State law gives Zingale the power to reject the decision. Kaiser can now make one final appeal to the Department of Managed Health Care before the HMO can file suit in Superior Court, where a decision could not be overturned by Zingale.

“I don’t want to in any way understate the gravity of the threat that would have been posed by that decision,” Zingale said. “That really was aimed at the core of patient protection.”

Dick Pettingill, president of the California division of the Kaiser Foundation Health Plan, said he was disappointed in Zingale’s decision although committed to working cooperatively with the state agency.

Asked whether Kaiser would appeal, he said, “We will continue to explore our options.”

Pettingill said Kaiser wants to work with Zingale to develop quality standards that would apply to all California health plans uniformly. He said the department has no such formal guidelines.

The now-nullified ruling was the latest in a string of defeats for the Department of Managed Health Care in the last year.

Superior Court judges have twice ruled that the agency can’t force a health maintenance organization to provide specific prescription drugs--Viagra for impotence and Xenical for weight loss--to members. And another Superior Court judge blocked the release of information on doctor group finances after the California Medical Assn. filed suit.

The regulatory agency resolves most matters out of court. Just last week, Kaiser agreed to pay $110,000 to settle a complaint by Zingale’s agency that the HMO had failed to send a young man with muscular dystrophy to a specialist. Initially, in November, the department had sought to fine Kaiser $500,000.

In settling the matter, Kaiser did not admit wrongdoing, but agreed to improve its educational programs.

The $1.1-million fine dates back to the 1996 death of Margaret Utterback, 74, of San Leandro, who suffered a fatal aneurysm. Utterback made numerous efforts to see her doctor Jan. 26, 1996, the day the aneurysm ruptured.

In May 2000, the state Department of Corporations, which previously regulated HMOs, found that Kaiser’s lapses contributed to her death. Zingale’s agency increased the fine in February 2001, citing the deaths of two other members who also died of undiagnosed aneurysms.

Utterback’s daughter, Terry Preston of Hayward, said she was surprised and disappointed by Cohn’s decision because she sat through the testimony and believed the state made compelling arguments.

“All I wanted out of this process was to know that human life mattered,” she said. “And Kaiser made it very clear throughout the entire process that that was not their priority.”

Zingale’s decision to overrule the decision “gives me hope that the state feels so strongly about this that they’re going to continue to fight,” Preston said.

Kaiser officials say Cohn’s ruling, and similar findings by the California Medical Board, vindicate Kaiser personnel.

“I understand the pain and the anguish that losing a parent brings,” said Dr. Robert Pearl, chief executive of the Permanente Medical Group, the Kaiser-affiliated physician group that treats Northern California patients.

“I also understand the pain and suffering of the physicians, nurses and staff who feel they have been inappropriately and unfairly criticized. This decision affirms that the care they provided is appropriate.”