Kaiser’s request for finding him in contempt is denied

The San Francisco Chronicle

A federal judge ruled yesterday that the state HMO czar was not in contempt for using the experience of a Medicare patient to justify a record-setting $1.1 million fine against Kaiser Permanente.

Kaiser, in the middle of its appeal of the fine in an Oakland courtroom, asked U.S. District Court Judge Ronald Lew in Los Angeles to charge the head of the state Department of Managed Health Care with contempt for violating a previous order he issued concerning members of Medicare-Plus-Choice, a Medicare HMO program.

Although Lew had ruled in August that federal law supersedes state law when it comes to those Medicare members, his ruling yesterday found that the regulator’s actions did not warrant contempt charges.

“It’s a victory for anyone who considers the experience of California Medicare patients to be valid and important,” said Daniel Zingale, head of the Department of Managed Health Care, shortly after leaving the courtroom.

The convoluted legal battle stems from the department’s decision last year to fine Kaiser Foundation Health Plan Inc. $1 million for systemic problems in its emergency care system based on the 1996 death Margaret Utterback, of San Leandro, of an aortic aneurysm in Kaiser‘s Hayward hospital.

In February, the department, which regulates the state’s health maintenance organizations, bumped the fine up to $1.1 million and added to its case against Kaiser the experiences of two other patients who died of aortic aneurysms.

One of those patients, Wolfgang Spunbarg, was a member of Kaiser‘s Medicare-Plus-Choice plan. In Kaiser‘s appeal of the fine, the HMO turned to the August ruling by Lew, in which he found federal law pre-empts state authority over Medicare patients, to challenge the state’s regulatory authority.

Consumer advocates have charged that Kaiser is using the threat of contempt to slash away at the department’s powers and intimidate the top HMO regulator, who could have faced jail if held in contempt.

“This is basically harassment. It’s legal, but it’s immoral,” said Jamie Court, head of the Foundation for Taxpayer and Consumer Rights. “Kaiser is doing everything it can to save face rather than save patients.”

Kaiser officials deny the HMO giant was trying to strong-arm the state regulator. “They (state HMO regulators) are testing waters outside what we believe is their regulatory boundaries,” said Kaiser spokesman Tom Debley, who attended yesterday’s federal hearing.

Still, he said, Kaiser is satisfied with the judge’s decision. “He did it without prejudice, so as we proceed, if we feel the Department of Managed Health Care goes into areas covered by the federal order, we can go back for additional federal review.”

Kaiser‘s appeal is set to proceed today in the state Office of Administrative Law in Oakland. The appeal is expected to continue into January.

With yesterday’s ruling, the state HMO regulators can continue using the experiences of all the patients, including Spunbarg, who died in Kaiser‘s Woodland Hills hospital in April 2000.

In the appeal, Kaiser lawyers are arguing the state agency is treading into medical malpractice territory when it has the right to regulate only health plans.

The department has never appealed the federal ruling concerning Medicare patients. But the regulators contend using the experiences of Medicare patients to justify enforcement actions is within their regulatory rights.

Zingale said he was relieved by the contempt ruling. “More importantly, I’m pleased about what this means for patients’ rights,” he said.