The Recorder

SACRAMENTO — Californians who receive botched health care may be able to take their HMO to court if a bill, which passed the Senate last week, continues on its current path.

SB 458, which was approved by a vote of 21-14 Tuesday, would make it illegal for health care providers to force patients into mandatory arbitration contracts as a condition of treatment. If passed, the law would affect one health care provider in particular: Kaiser Foundation Health Plan, which has by far the largest in-house arbitration system of any HMO in the state.

The bill has been sent to the Assembly where it will ironically be jockeyed by Tom Calderon of Montebello, a moderate Democrat who has opposed broader arbitration bills in the past.

Jamie Court of the Foundation for Taxpayer and Consumer Rights — the bill’s chief backer — said Calderon should be able to convince his fellow moderates to go along with the bill. “It’s a tough house, but I think because we have Calderon as a co-author, it highlights that this is a moderate bill that should get signed by the governor,” Court said.

Still, Gov. Gray Davis has frequently flip-flopped on his views of mandatory arbitration, and last year Davis received just under $175,000 from Physicians for the Group Practice of Medicine, the political action committee for the Permanente Medical Group — Kaiser‘s partnership of physicians.

Davis vetoed a bill last year that would have required managers of mobile home parks to make arbitration agreements voluntary and separate from the rental agreement, saying arbitration is a good alternative to the court system. But a year before, when Davis signed health-care reform legislation, he said, “no one is required to sign a document limiting their rights to arbitration.” He added, “no one is under an obligation to sign away their opportunity to sue.”

The bill’s author, Sen. Martha Escutia, D-Montebello, said she has no idea how Davis might react to the legislation if it lands on his desk. Court said he believes the bill is narrowly tailored enough that Davis could very well sign it into law.

Although patients were granted the right to sue their health care provider in 1999, existing law does not specify the venue, and proponents of the legislation say 80 percent of Californians are still forced to enter into mandatory arbitration contracts.

The bill would clarify that law to give patients a choice between going to court or arbitration, the sponsors say. California is the only right-to-sue state in which patients must have their grievances handled by an arbitrator.

Proponents say a law will act as a deterrent to HMO abuses and will force health care providers to more readily approve necessary medical care. The Foundation for Taxpayer and Consumer Rights points out that in Texas, which has had a similar statute in place for four years, only six suits have been filed against HMOs since 1997.

So far the bill’s main opponent has been Kaiser, which claims it is being singled out by the bill. Because Kaiser is self-insured, it must deal with every claim filed against the HMO — as opposed to sending it to its insurer. That fact gives Kaiser the lion’s share of medical-related arbitration in the state.

Kaiser says SB 458 will destroy its ability to use arbitration for health plan claims and jeopardize the use of arbitration for professional liability claims against its physicians.

“It’s aimed at Kaiser and has the most dramatic effect on Kaiser,” said Michael Hawkins, Kaiser‘s legal counsel and in-house lobbyist. He said having to go to court on every medical malpractice claim would only serve to increase the cost of health care in California because the law will repeal protections granted under the Medical Injury Compensation Reform Act, or MICRA.

That act allows health plans like Kaiser to resolve disputes through mandatory arbitration and caps economic damages at $250,000. “This is a very clever and sinister way around MICRA,” Hawkins said.

Kaiser says the issue was already ironed out when SB 21 — right-to-sue statute — went into effect in January and kept arbitration in place. Hawkins added that there isn’t enough information to show that the health provider’s arbitration system isn’t working.

Kaiser, which boasts 6 million members in California and commands close to one quarter of the health care market, was heavily criticized by the California Supreme Court in 1997 for maintaining a flawed arbitration system that purposely delayed hearings in order to better Kaiser‘s chances of defending claims.

Since the decision in _Engalla v. Kaiser Permanente_, 15 Cal. 4<+>th<+> 951, Kaiser, which runs 29 hospitals, has appointed an independent system operator to oversee its arbitration system and now claims to run a system that is fair, efficient and more consumer-friendly than taking a claim to the courts.

“Our position is: look, if we’re going to be criticized, tell us what the problem is and we’ll fix it,” Hawkins said.

Hawkins also disputes findings made in December by the California Research Bureau, which found that Kaiser‘s arbitration system was one-sided.

The report found that Kaiser‘s summary judgment rate was 12 percent, and Kaiser was 20 times more likely to obtain a dismissal of a claim in arbitration compared to the general rate of summary judgment dismissals in civil court.

That report also found that in 1999, eight repeat arbitrators decided 30 percent of Kaiser‘s claims. Six of those arbitrators ruled in Kaiser‘s favor 80 percent of the time.

Hawkins said much of the information contained in the report was wrong and incomplete and the report was done without Kaiser‘s input. He said the report also failed to mention specific protections put in place by the HMO — namely that Kaiser pays the full cost of the arbitrator and allows consumers to choose from an independent pool of neutrals.

“That report shouldn’t be used to say SB 458 is necessary,” he said.