Judge backs state in $1.1 million fine of Kaiser Permanente

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Court rules it was OK to cite case of Medicare patient

San Diego Union Tribune

A federal judge ruled yesterday that the state can use the case of a Medicare recipient in levying a $1.1 million fine against Kaiser Permanente, despite arguments from the health plan that an earlier court ruling precludes the state from enforcing Medicare rules.

U.S. District Judge Ronald Lew in Los Angeles ruled that Department of Managed Health Care Director Daniel Zingale was not in contempt of court for using evidence in the case of Wolfgang Spunbarg, a 72-year-old enrollee of Kaiser‘s Medicare HMO when he died in April 2000.

The state had hit Kaiser, one of the nation’s largest health maintenance organizations, with the $1.1 million fine in February for systemically failing to provide adequate care in its hospitals.

The fine is the largest ever issued by the state against an HMO.

“This is a great victory for all California HMO enrollees who depend on comprehensive enforcement of our state’s aggressive patient-protection laws,” Gov. Gray Davis said in a written statement.

In its case, the state cited the deaths of three patients, including Spunbarg, who died of an aortic aneurysm after arriving at Kaiser‘s Woodland Hills hospital.

The Department of Corporations, which had regulatory power over managed-care organizations until July 2000, had found that Kaiser contributed to the death of the patient at the center of the case, Margaret Utterback of San Leandro.

When the Department of Managed Health Care assumed regulatory control over HMOs, Zingale added Spunbarg’s case and the case of James West, a Walnut Creek man who died while under Kaiser‘s care, in issuing its fine.

But after Zingale levied the fine, Lew, in a separate case, issued an order against the department saying that only the federal government can enforce Medicare rules. Kaiser claimed that that decision rendered the $1.1 million fine illegal, and in pursuing the fine, Zingale had gone against Lew’s decision.

Zingale, however, said that the state was not trying to enforce Medicare law or pre-empt federal law. Instead, it was only incidental that Spunbarg was a Medicare HMO enrollee, and a health plan has a duty to provide adequate care to its members regardless of their insurer.

“What’s really at stake is our effort to reform Kaiser‘s emergency response for patients with serious conditions,” Zingale said. “That’s what these three cases are examples of, the HMO’s failure to respond appropriately in an emergency for patients with serious conditions.”

Kaiser is also trying to get the $1.1 million fine reversed in state court. In administrative hearings that began last week, the health plan is arguing that its health plan operations, over which Zingale has regulatory control, are separate from its hospital and medical group operations that Kaiser says are under the purview of the California Medical Board, which oversees malpractice issues.

Tom Debley, a spokesman for Kaiser, downplayed yesterday’s decision.

“The much bigger issue is whether the department has reached beyond (its regulatory powers) by trying to regulate medical practice, not health plans,” Debley said.

He added that Kaiser may refile a petition in federal court after the hearings in state court are finished.

One consumer advocate and longtime critic of managed care applauded yesterday’s decision, saying that it affirmed the state’s ability to police the managed-care industry.

“It’s basically harassment,” said Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights in Santa Monica. “It’s a tactic against the department to keep them from doing what they need to do.”

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