HMO Czar Called Upon To Sponsor Legislation To Correct Problems

California’s HMO regulator has denied a petition by the Foundation for Taxpayer and Consumer Rights to make public HMO binding arbitration records, claiming he does not possess the authority. In a written response, the consumer group called upon Department of Managed Health Care Director Daniel Zingale to co-sponsor legislation remedying the underlying problem.

“The HMO industry’s argument that binding arbitration’s secrecy serves the patient , who desires it, should be put to the test,” wrote Jamie Court, executive director of FTCR, to Zingale. ” I ask that you join our group in co-sponsoring legislation that gives the patient the option of choosing binding arbitration or going to court after a dispute arises. Patients should have the right to choose arbitration and its benefits, or the court system and its benefits. This principle is one that balances the patient’s need for privacy, the HMO’s expressed concern for protecting that privacy, and the public’s right to know.”

Court noted to Zingale that a joint commission of the American Bar Association, American Medical Association and American Arbitration Association already concluded that only voluntary arbitration is fair for patients.

“Patients should not be forced into binding arbitration simply as a condition of joining an HMO,” Court wrote. “The problems associated with the process are well known, and made even clearer by a recent California Research Bureau report’ The perils of the HMOs’ private justice system are exacerbated when secrecy shields from public view HMO quality of care violations uncovered in binding arbitration.”

Of the forced arbitration system’s vices, Court wrote, ” Arbitrators often depend on repeat business from HMOs and are more likely to rule in their favor. There is no jury of one’s peers, publicly accountable judge or media scrutiny. There is judicial review only in cases of outright fraud, not judicial error. For these reasons, in 1998, a joint commission of the American Bar Association, American Medical Association and American Bar Association concluded, ‘In disputes involving patients, binding forms of dispute resolution should be used only where parties agree to do so after a dispute arises.’ ”

The letter requested a written response.

March 21, 2001

Daniel Zingale

Director

California Department Of Managed Health Care

980 9th Street Ste 2450

Sacramento, CA 95814

Dear Mr. Zingale:

With much disappointment , I have received your response to our group’s petition seeking a new rule making public arbitration records of patient cases with HMOs. We firmly believe you do have the power to make such a change through a new rule under your broad powers under the Knox Keene Act, including the powers to:

o “study, investigate, research, and analyze matters affecting the interests of plans, subscribers,enrollees and the public” Health and Safety Code 1346(a)(4)

o “Conduct audits and examinations of the books and records of plans and other persons subject to this chapter, and may prescribe by rule or order…” Health and Safety Code 1346(a)6

o “Propose, develop, conduct and assist in educational programs for the public, subscribers, enrollees and licensees” Health and Safety Code 1346(a)8

o direct the Patient Advocate to compile an annual publication, to be made available on the department’s Internet web site, of a “quality of care report card” for health care service plans. Health and Safety Code 1368.02(c)(3)(B)

A broad reading of your powers under these sections would entitle you and the public to these records. However, it is clear from the HMO industry’s retrenched response to the petition that it would have fought you in court every step of the way should you have taken such an action. (Ironically, HMOs still retain the right to go to court when their interests are at stake, despite denying that fundamental Seventh Amendment right to the patients they serve.)

I have no choice but to respect, reluctantly, your narrow reading of the statute , with one proviso, that you join me in sponsoring legislation to remedy the underlying problem.

Patients should not be forced into binding arbitration simply as a condition of joining an HMO. The problems associated with the process are well known, and made even clearer by a recent California Research Bureau report. Arbitrators often depend on repeat business from HMOs and are more likely to rule in their favor. There is no jury of one’s peers, publicly accountable judge or media scrutiny. There is judicial review only in cases of outright fraud, not judicial error. For these reasons, in 1998, a joint commission of the American Bar Association, American Medical Association and American Arbitration Association concluded, “In disputes involving patients, binding forms of dispute resolution should be used only where parties agree to do so after a dispute arises.” In other words, voluntary arbitration makes good sense, forced arbitration in the HMO context, where health and life can be at stake, is unfair.

The perils of the HMOs’ private justice system are exacerbated when secrecy shields from public view HMO quality of care violations uncovered in binding arbitration.

The Los Angeles Times correctly editorialized in asking you to adopt the proposed rule, “No one except the HMO benefits from the secrecy that now shrouds information involved in arbitration, ranging from depositions and discovery documents to records of settlements and civil penalties.”

The Sacramento Bee’s similarly opined, “It would be against the public interest to allow a rogue health plan to seal the records of settlements that show a pattern of denying benefits that are clearly covered. This fundamental public interest in disclosure is why the state Judicial Council has made it more difficult to hush plaintiffs in civil lawsuits who settle their cases. The same should be true for arbitrations.” The Bee editorial board also discussed the issue of patient choice. “Californians who value privacy may prefer to take a dispute to private arbitration rather than a public courtroom. The Legislature must keep this in mind as it balances this right to privacy with the public value of disclosure.”

It’s clear the HMOs will continue to object to making public arbitration records, and even keep information in those records from your view, based on the red-herring of a claim that they do not wish to violate patient privacy. Patient privacy can be protected under a sunshine law. It is corporate secrecy that the HMOs are most concerned about, a principle which they will fight for until the bitter end. There is, however, a reasonable solution.

The industry’s argument that arbitration’s confidentiality serves the patient, who desires it, should be put to the test. I ask that you join our group in co-sponsoring legislation that gives the patient the option of choosing binding arbitration or going to court after a dispute arises. HMO patients today have no choice, because, for nearly nine out of ten patients, if they want health care they must waive their right to court and to avail themselves of its public forum.

Patients should have the right to choose arbitration and its benefits, or the court system and its benefits. This principle is one that balances the patient’s need for privacy, the HMO’s expressed concern for protecting that privacy, and the public’s right to know. We hope you will join us in legislation to make this principle a reality for California patients.

While there have been few HMO cases to date, more are likely to be filed under the new HMO liability law that took effect January 1st. It is vital that patients who avail themselves of this law have a choice to go to court.

I look forward to your reply, and would appreciate a written response to this request within the next couple of weeks.

Sincerely,

Jamie Court