Former California health regulator agrees to a fine for helping Kaiser


A former top regulator for the state who was involved in an audit of Kaiser Permanente before going to work for the HMO has admitted she acted improperly and has agreed to pay a fine, according to documents released Monday.

Marcella Faye Gallagher was supervising attorney for the state’s Department of Managed Health Care while it audited Kaiser to make sure the HMO’s mental health plan complied with state law by providing timely access to services.

During the six months she worked on the Kaiser audit in 2012, Gallagher “helped pick” the audit team, developed the scope of work, counseled the audit analysts, “advised on documents to be requested from Kaiser,” and reviewed and edited the preliminary audit report, according to the state Fair Political Practices Commission.


The FPPC said that after Gallagher left her state job and went to work for Kaiser, she helped the firm defend itself against the audit findings. She has agreed to pay a $3,000 administrative fine to the FPPC for violating a ban on state administrators taking pay to assist firms in the same audit proceedings in which they participated before leaving their state job.

Gallagher said she complied with rules prohibiting her from appearing before her former state agency for one year, but FPPC officials said she violated a separate ban on assisting Kaiser in its dealings with the state agency. Gallagher did not respond to requests for comment Monday.

“I was very mindful of the restrictions once leaving state service and I believed that I was in full compliance with the law,” Gallagher said in a statement Monday. “But I respect the regulatory process and have agreed to this settlement to resolve this matter.”

The case stems from a complaint filed by Sal Rosselli, president of the National Union of Healthcare Workers, which represents 4,500 Kaiser workers.

“Ms. Gallagher’s switching of sides not only causes an appearance of impropriety, it appears to constitute serious legal violations and a severe breach of the public’s trust given that it undermines a regulatory enforcement matter affecting millions of California consumers enrolled in California’s largest HMO,” Rosselli wrote in the formal complaint.

The Kaiser audit found serious problems, including Kaiser failing to make sure patients received mental health appointments within 10 business days of a request, as the state requires. Kaiser was fined $4 million by the state.


“Gallagher started with Kaiser in July of 2012,” the report said. “While working for Kaiser, she provided both verbal and written feedback on the corrective action plans (CAPs) that other Kaiser employees were developing in response to the DMHC’s preliminary report.”

The state Political Reform Act Gallagher flouted is meant to ensure public officials “perform their duties in an impartial manner, free from bias caused by their own financial interests,” according to the investigative report released Monday by the commission’s enforcement division.

In audits, the state creates a preliminary report that identifies any deficiencies found by the investigation. The draft is looked at by the state’s legal team, which has final say over whether certain facts should be considered deficiencies. Kaiser was then given 45 days to provide CAPs to address deficiencies; the state’s attorneys decide whether the problems were corrected.

The commission will meet next week to consider approving the fine. The report noted the fine is lower than the $5,000 maximum penalty because Gallagher cooperated with the investigation and does not have a history of violations.

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