State HMO regulators lose round in dispute with Kaiser

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Associated Press

SACRAMENTO: An administrative law judge sided with Kaiser Foundation Health Plan Thursday in a dispute with the state Department of Managed Health Care that tests the authority of the 3-year-old department.

The state rejected the ruling, said Director Daniel Zingale, and will
appoint an independent hearing officer within the department to determine if it can order an HMO to provide better patient care.

The state’s complaint against Kaiser stems from the 1996 death of Margaret Utterback, who died from a ruptured aortic aneurysm. The DMHC, which regulates HMOs in California, fined Kaiser $1.1 million for failing to provide Utterback with access to care and continuity of care.

The administrative law judge reduced the fine to $25,000 and stated that the Legislature’s purpose in enacting HMO oversight was “fiscal regulation of health plans” and not patient care.

The DMHC “overstepped its authority” by fining the health plan for the quality of medical care, said Dick Pettingill, the president of the
California division of Kaiser Foundation Health Plan and Hospitals. Physicians’ are overseen by the state Medical Board, which determined that Utterback’s care was appropriate.

“We don’t disagree,” said Zingale. “Physician conduct isn’t within our purview. The problem was (Utterback) couldn’t get to a physician. By all accounts, once she saw her doctor, he did a good job.”

Since the state rejected the ruling, the $1.1 million fine still stands,
Zingale said.

If Kaiser isn’t satisfied with the DMHC hearing, the company can next take the issue to court.

Zingale said the administrative law judge was incorrect in his argument that the law wasn’t intended to guarantee patients’ access to health care, but was about financial solvency of the HMOs.

“The original law certainly had intent language about both financial
solvency and health care,” he said. “The judge overlooks the fact that that’s why the Legislature created us. That mystifies me.”

Consumer advocate Jamie Court said the department was right to set aside the judge’s decision because Kaiser had a “systemic problem” that didn’t give enrollees adequate access to care.

The original 1976 Knox-Keene Act, which established oversight of HMOs, was intended largely for fiscal oversight, Court said.

“That may have been true in the mid-1970s, but certainly not true after 1999” when the state Legislature created the DMHC, he said.

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