* Biggest Calif. HMO Fine Ever In Individual Case

CBS Evening News

LOS ANGELES

CBS(CBS) Kaiser Permanente, California’s largest health insurer, was slapped with a $1 million fine for problems uncovered during an investigation of a patient’s death at a hospital the health insurer owns, CBS News Correspondent John Blackstone reports.

The state’s Corporations Department said on Monday it issued an order, including a $1 million penalty, against the Hayward, Calif., facility of Kaiser Foundation Health Plan Inc. for “systemic problems.”

The action against Kaiser, one of the nation’s largest nonprofit health maintenance organizations, follows an investigation into the 1996 death of Margaret Utterback, who died after being kept waiting for hours for treatment at the hospital.

Terry Preston, Utterback’s daughter, has been fighting for four years to prove that shoddy care cost her mother her life.

“She was incredibly healthy,” Preston recalled. “She lived life to the fullest. She had more energy than I do.”

One morning in January 1996, Margaret Utterback woke up feeling excruciating pain in her back and side. She phoned her doctor at the Kaiser Permanente HMO, but she was put on hold while she battled the pain

Preston said the pain her mother experienced was, “very sharp and intense’it was difficult for her to even wait on the phone.”

Over the next six hours, in repeated phone calls, she pleaded to see her doctor. But according to the report issued by the Department of Corporations, Utterback was put into voice mail, shuttled from receptionist to receptionist and offered pain medication instead of an appointment.

“Mrs. Utterback was exhibiting classic symptoms of the life-threatening condition for which her medical history made her a likely candidate,” the Department said in a press release. “She was unable to speak with her doctor, a nurse or other medical professional until she was actually seen eight hours later.”

Finally, in late afternoon, her doctor agreed to see her.

Utterback died a day and a half later at the hospital. She had experienced a ruptured abdominal aortic aneurysm.

The hefty fine against Kaiser Permanente–issued Friday along with a cease and desist order–is for a long list of failures and shortcomings by the HMO uncovered by the investigation.

Kaiser promises it will appeal.

“We will vigorously contest this case because we disagree with the departments findings and the allegations they’re making,” said Lila Petersen of Kaiser Permanente hospital.

Consumer advocates said the censure of Kaiser highlights the need for California’s recently created Department of Managed Care, a dedicated overseer of the state’s health plans that is scheduled to begin operating in July.

“You can hear ‘ka-ching, ka ching’ in Kaiser‘s bank account when patients are turned away from seeing doctors and from getting into a hospital and from being helped,” said Jamie Court, a spokesman for the Foundation for Taxpayers and Consumer Rights. “The state is sending a signal that any patient’s case could result in a million-dollar fine.”

The consumer group is pursuing its own class action lawsuit against Kaiser for falsely advertising that the HMO separated money issues from decisions on medical treatment.

Boasting systems in 11 states and the District of Columbia, Kaiser claims 5.9 million members in California.