Lawsuit Disputes Truth of Kaiser Permanente Ads

Published on

San Francisco Chronicle

The long-running advertisements by Kaiser Permanente claimed medical decisions were “in the hands of doctors.”

But a consumer group says it will introduce documents during an impending trial that show those decisions were not only in the hands of the Kaiser administrators, but also in the hands of an accounting firm.

The documents, specifically a guideline to care and hospital length of stays created specifically for the Oakland health maintenance organization by the actuarial and consulting firm Milliman & Robertson Inc., will be used to support a false-advertising lawsuit scheduled to go to trial this fall.

The consumer group argues that the existence of such guidelines flies in the face of Kaiser‘s ad campaign, which helped draw thousands of new members to a plan that already covers about a third of California’s insured.

“Clearly, there is a cookbook for medicine at Kaiser that was concealed from the public,” said Jamie Court, executive director of the consumer group, which is based in Santa Monica.

Kaiser Permanente, the nation’s largest not-for-profit HMO, has been a pioneer in cutting health care costs, with its emphasis on preventative care, standardized tests and staffing efficiencies. The trial will be significant because Kaiser will undergo scrutiny to determine how much weight, if any, business considerations play a part in the decisions of its medical staff.

The complaint says Kaiser‘s advertising campaign deceived members by leading them to believe all medical decisions were made by their doctors. At the same time, court documents say Kaiser portrayed itself as a system unencumbered by “bean counters” or insurance administrators.

Kaiser officials deny the claims and say they plan to vigorously contest them during the trial, which is scheduled to begin Nov. 4. “The physicians make decisions at Kaiser Permanente about medical care,” said Kaiser spokesman Tom Debley.

The timing of the ads is under dispute: Kaiser contends the “in the hands of doctors” campaign is confined to a 13-week period in 1998, while the consumer groups says ads that portray doctors as in control of medical decisions independent of administrative interference went back to at least 1994 and still continue.

The suit contends the state’s largest HMO encouraged cost-cutting behavior by physicians through bonuses and other means, such as withholding up to 30 percent of a physician’s salary if cost targets were not met.

Court said other HMOs may use length-of-stay guidelines, but they didn’t make the claim of allowing doctors to call the shots. “What we’re seeing is a system that is anything but doctor-driven,” Court said. “The documents show Kaiser all along knew it was presenting an image it could not live up to.”

Debley said Medicare and the National Committee on Quality Assurance require HMOs to use nationally recognized utilization management guidelines or risk losing their accreditation and the ability to treat Medicare patients.

While not a clinical guideline, Kaiser‘s thick, customized book provides treatment and hospital length-of-stay suggestions for various medical conditions and procedures — from heart failure to surgical procedures — and suggests the length of hospital stay and how the patient would progress under optimal conditions.

Officials at the Centers for Medicare and Medicaid Services, the federal agency that oversees the Medicare program, said they have loosely defined rules that require health plans to have policies and procedures in place to justify such decisions as a hospital stay.

“Milliman & Robertson has always been the bible so it’s often used. But those aren’t only guidelines,” said Dr. Barry M. Straube, chief medical officer for Medicare offices in San Francisco that oversee several western states.

As part of the lawsuit, the consumer group is also relying on internal e- mail messages that it contends will show that Kaiser officials involved in designing the campaign had second thoughts about the message.

“The tag line may offer more than we are able to deliver, and I would appreciate hearing your thoughts on how the tag line was arrived at and how we intend to prevent the misconception that all care is in the hands of physicians,” wrote one official, Cecilia Runkle, to several colleagues.

In the missive, dated Sept. 2, 1998, Runkle expressed concern that “this tag line seems to be a form of false advertising” because decisions are often made in the form of a team approach that includes people other than the patient’s doctor.

Debley confirmed the veracity of the memo but said it does not reflect the ultimate decision that was reached. “The memo reflects the kind of vigorous internal give-and-take that’s part of decision-making at Kaiser,” he said.

Those supporting Kaiser‘s position say the lawsuit is bogus and brought by a group closely allied with and partly funded by trial lawyers.

“The taxpayer suit is one of these let’s-go-get-’em type of suits . . . on the part of extreme left-wing people. They don’t understand business imperatives and don’t think they should exist,” said Wanda Jones, an industry analyst with New Century Healthcare Institute in San Francisco.

“They’re (Kaiser) not alleging there is no economic framework in which a physician has to work. Every provider needs to work in an economic framework. What they’re saying is when a physician is diagnosing patients, they get to do it (i.e., make the necessary medical decisions without interference).”

Just how closely Kaiser doctors were encouraged to adhere to the Milliman guidelines is unclear.

Dr. Charles Phillips, who worked at Kaiser‘s Fresno hospital as a contract employee rather than a full-time staff member in the emergency room, described the pressures of adhering to Kaiser‘s rules as “extraordinary.”

Phillips began working at Kaiser in 1997 but has not had a shift since 1999,

which he believes is a result of his outspoken frustrations with management. Phillips, who is involved in a separate lawsuit against Kaiser, said the Milliman guidelines contradict the spirit of the ads.

Phillips said the ads are deceptive because they suggest these decisions are in the hands of the patient’s doctor. “Everyone knows internally Kaiser is watching everything you do — every referral, every medication you write,” Phillips said.

Kaiser‘s Debley said the HMO does not track physicians individually to determine how closely they follow the guidelines’ recommendations.

He said that physician bonuses are tied to patient satisfaction and internal quality measures rather than cost-cutting goals and that doctors are not penalized for not meeting financial goals. He also said Kaiser does not withhold any portion of the physician’s salary for failing to meet any goals.

“There are goals around managing the overall budgets of our medical centers . . . but nothing that would put pressure on a physician to compromise care decisions,” Debley said.

Debley insisted that they are simply a tool to help guide physicians and that doctors are not monitored in their use of the guidelines. “Does it (the guidelines) substitute for decision-making by the doctor or not? In our case, it’s a tool that brings individual physicians information, but the decision- making is by them,” he said.

Dr. Jeffrey S. Harman, assistant professor of psychiatry at the University of Pittsburgh’s School of Medicine, is disturbed by what he sees as the increasing use of such guidelines.

“Milliman & Robertson won’t say exactly how they developed the guidelines —

it’s proprietary information — but based on our research . . . it doesn’t look like they are using actual data from hospitals,” said Harman, primary author of “Pediatric Length of Stay Guidelines and Routine Practices: The Case of Milliman and Robertson,” a report published in August.

“It seems like what they did was have a bunch of people sitting around the table and saying, ‘Under the best of circumstances, how soon could people be discharged under these conditions?’ ” he said.

In his paper, Harman compared Milliman length-of-stay suggestions with Pennsylvania hospital data. For example, Milliman suggests a four-day stay for an adult with bacterial meningitis, while the average stay is more than 11 days, according to the Pennsylvania data.

Harman’s research focused on Milliman guidelines, but did not include Milliman’s customized Kaiser guidelines.

Debley said the discrepancies show why Kaiser considers the guidelines simply a tool. “You bring these in as information for physicians,” he said. “But the context should be that utilization decisions are based on the physician’s training and knowledge.”



(In Days)


. . . . . . . . . . . . . . . . . . . . . . .Kaiser‘s suggested . . .Average

Procedure . . . . . . . . . . . . . . . . . . . .LOS(a) . . . . . . LOS(b) . . .Difference

Appendectomy (uncomplicated) . . . . . 1 . . . . . . . . . . . 5 . . . . . . . . .-4


(w/common duct exploration) . . . . . . .3 . . . . . . . . . . . 3.5 . . . . . . . -0.5

Partial colectomy . . . . . . . . . . . . . . . . 4 . . . . . . . . . . . .6 . . . . . . . . . -2

Total hip replacement . . . . . . . . . . . . 3 . . . . . . . . . . . 4.5. . . . . . . .-1.5

Total knee replacement . . . . . . . . . . . 3. . . . . . . . . . . 4.5 . . . . . . . -1.5

Total hysterectomy (abdominal) . . . . . 2. . . . . . . . . . . 3.5. . . . . . . . -1.5

Vaginal hysterectomy . . . . . . . . . . . . . .1. . . . . . . . . . . 3. . . . . . . . . . -2

(a) – From Kaiser Permanente’s customized Milliman & Robertson guidelines, Northern California region, 1996

(b) – From the American College of Surgeons; referenced from a study by Robert E. Rutledge M.D., FACS; “An Analysis of 25 Milliman & Robertson Guidelines for Surgery,” Annals of Surgery, 1998.

Note: Cholecystectomy is non-laparoscopic gall-bladder surgery. A colectomy is the partial removal of the colon.

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

Latest Videos

Latest Releases

In The News

Latest Report

Support Consumer Watchdog

Subscribe to our newsletter

To be updated with all the latest news, press releases and special reports.

More Releases