Aribitration Squabble Breaks Out At Kaiser

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San Francisco Chronicle

An arbitrator selected to settle a patient’s dispute with Kaiser is angry that the HMO’s attorney disqualified him after he insisted that the case begin with a face-to-face meeting, leading him to question the fairness of this private dispute resolution process.

“I would have expected the claimants attorneys to disqualify me in view of my background,” said Clifford Hirsch, a Walnut Creek attorney who generally defends insurance companies. “Arbitration is supposed to be fair and this didn’t strike me as getting there.”

Sharon Lybeck Hartmann, the independent attorney who runs Kaiser‘s arbitration system, said Hirsch was inexperienced with the rules governing arbitrations and has been the only arbitrator to question a system which handled about 560 cases last year.

Although Hirsh aired his grievance in February, after he was removed as an arbitrator, his complaint was revived last week on the eve of a crucial floor vote in the California assembly on a bill that would curtail mandatory arbitration as a means of settling health care claims.

California HMOs currently require their members to agree to arbitrate disputes instead of going to court. Assemblywoman Sheila Kuehl, D-Encino, has sponsored a bill, AB 1751, to give patients the choice of going to court, where the awards can be bigger, or opting for arbitration, which promises speedier settlements.

HMOs, led by Kaiser, oppose the bill. Consumer groups and trial lawyers have been trying to drum up support for the measure, which must come to a vote by tomorrow or die. Even if it passes the assembly, the bill would have to muster a majority in the state senate and get the governor’s signature.

Kaiser recently pressed its case against the bill when Hartmann released a 91-page report detailing the first year of the independent arbitration system she runs for Kaiser.

Hartmann set up the independent system after Kaiser lost a 1997 California Supreme Court case brought by the family of Wilfredo Engalla. The Hayward man died of cancer while awaiting an arbitration hearing over allegations that the HMO had misdiagnosed his condition.

In the Engalla ruling, the Supreme Court noted that it took Kaiser an average of two years to choose arbiters, not the 60 days it promised its members.

Hartmann created a pool of 323 potential arbiters, lawyers and retired judges, split between Northern and Southern California. When an arbitration begins, each party is offered a choice of several candidates, who disclose their past legal backgrounds.

Her report said that in the first year, of roughly 600 cases that entered into arbitration, the arbitrator had been chosen in an average of 43 days – compared with the 647 days before the Engalla decision.

“The system has written rules which are close to state of the art,” Hartmann said.

But arbitration opponent Jamie Court, with Consumers for Quality Care in Santa Monica, said the report shows that arbitration still had problems. For instance, 29 percent of claimants enter arbitration without an attorney at their side — a far higher percentage than civil cases — because arbitration awards are often too small to pay for legal help.

“Patients may be getting to hearings quicker but they may still be at a disadvantage” to the HMO, which has legal representation in every case, Court said.

Court said Hirsch’s complaint shows that even arbitrators question the fairness of the system.

“There is no greater condemnation of a purportedly independent system when the people agreed upon as neutral say there is an impropriety,” Court said.

Hirsch’s dispute hinges on the interpretation of a state law governing the removal of arbitrators.

On January 5 Hirsch was chosen as an arbitrator. He disclosed his experience as a pro-defense attorney. Neither party objected at first. But on January 12, the Kaiser attorney asked that the case management conference be held by phone. Hirsch said he wanted an in-person meeting with each side submitting a legal memo in advance. The Kaiser attorney then disqualified Hirsch.

Hirsch believes that after he made that procedural ruling on the need for an in-person conference to start the proceeding, he was in charge of the case and could not be removed.

Hartmann disagreed. She said her system follows a state law on removal of arbitrators which she interprets as giving either party the right to remove an arbitrator, for any reason at all, so long as it takes place within a certain time.

She said that only 26 arbitrators have been challenged under these same rules, and of these 17 have been removed by claimants, while Kaiser has exercised the option nine times.

Hirsch’s interpretation is supported by David Rand, the attorney who represented the Engalla family in the Supreme Court case that overturned Kaiser‘s old arbitration system.

Rand said Hirsch’s procedural ruling signalled he would take a serious view of the case, and once he made that seemingly minor decision, the Kaiser side should not have been able to remove him.

It was Rand who brought Hirsch’s complaint to Court, who has used it to attack Kaiser‘s system in hopes of drumming up support for the bill.

For its part, Kaiser continues to tout the integrity of its system and maintain that arbitration is the best way to settle legal disputes over health care. Kaiser spokesman Jim Anderson said the mandatory arbitration clauses in health care contracts are no different than the language in mortgage agreements and other legal documents in which the parties agree to arbitrate all disputes.

“Arbitration is a fast, efficient and fair dispute resolution process,” Anderson said.

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