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The California Supreme Court heard arguments in Los Angeles last week over Kaiser Permanente’s use of binding arbitration as a way of settling disputes with disgruntled patients. Kaiser is the state’s largest managed care company, with more than 5 million members.

The case, Engalla vs. Permanente Medical Group, pits the managed care giant against the family of Wilfredo Engalla. The family contends that Kaiser delayed assigning an arbitrator to a dispute between Engalla and the company, in the hope that Engalla would die and his case would unravel.

In its member policies, Kaiser stipulates that plan members must resolve malpractice and other claims against Kaiser through arbitration, not through a jury trial.

Engalla, a San Francisco accountant, charged that Kaiser physicians failed over a period of five years to diagnose his lung cancer. He filed an arbitration claim in 1991, and, according to the family, asked Kaiser to fast-track the request so the case could be heard before Engalla died.

Engalla’s family further claims Kaiser waited five months to assign the case, and soon after it was assigned, Engalla died.

Kaiser denies it dragged its feet in the matter, but Alameda County Superior Court Judge Joanne Parrilli said that because of the delay, Kaiser forfeited its right to the arbitration process. She described the Kaiser system at the time to be “corrupt in general.” The Court of Appeals overturned that ruling.

The Supreme Court is expected to issue a ruling within 90 days that clarifies how and under what circumstances binding arbitration can be used in the health care industry.

“In general, arbitration has been a very successful way to resolve disputes and helps keep health care costs down,” said Kaiser spokesman Jim Anderson. Among other things, he said, “it keeps those dollars spent on litigation going to litigants instead of to attorneys.”

Two patient advocacy groups supporting the Engalla family with an amicus brief contend that Kaiser’s system amounts to a “death row” for terminally ill HMO members. “HMO lawyers have time and money on their side,” said Jamie Court, director of Consumers for Quality Care.

“Kaiser patients in need of treatment must wait years for justice, paying thousands of dollars to have their claims heard and resolved,” said Amy Bach, an attorney for United Policyholders.

Kaiser contends that the arbitration process is equitable to all parties involved because a third-party ultimately decides disputes and determines when cases are heard.

Race-based care

A study out of UCLA’s School of Medicine suggests that racism is alive and well at Los Angeles HMOs.

The study of 100,000 people treated in L.A. County hospitals for heart ailments found that African Americans and Latinos who belonged to HMOs were less likely to undergo expensive procedures such as bypass surgeries than were white patients in similar health plans.

African Americans were about 20 percent less likely than whites to receive coronary angiography, a procedure for X-raying blood vessels, 35 percent less likely to undergo bypass surgery and 40 percent less likely to receive angioplasty. The difference was less dramatic for Latinos, who were, for example, 24 percent less likely than whites to undergo angiography.

The differences between ethnic groups was not seen in patients who had traditional indemnity insurance, the study found.

“We found the exact opposite of what we expected to see,” said Dr. David Carlisle, an internist who headed the study. “Because HMOs lower the costs to patients and establish specific criteria for expensive treatments, we suspected there would be no differences between ethnic groups.”

Alan Tomiyama, a spokesman with the California Association of Health Maintenance Organizations, said his group had not seen the study but that if the findings were true, “Physicians in concert with their health plan need to be more culturally sensitive to the needs of their patients.”

Support for schizophrenics

The Mental Health Association of California has come out in support of legislation proposed by Assemblyman Gary Miller, R-Diamond Bar, that would end a so-called “two strikes” requirement for schizophrenic Medi-Cal patients.

AB 659 would end current state policy which requires that Medi-Cal patients diagnosed with schizophrenia fail to respond to at least two older and less expensive medications before newer antipsychotics medications can be prescribed.

A study by the USC School of Pharmacy found that the average annual cost of treating a Medi-Cal patient with schizophrenia is $19,000. The study found that 56 percent of patients using older antipsychotic medications switched at least once from their initial medication. The switch typically raises the treatment cost by several thousand dollars, the study found, as many people need to be hospitalized during the transition from one medication to another.

Miller’s bill aims to let physicians leap-frog over older medications, and prescribe new, more expensive and effective ones right from the outset. The new medicines cost about $200 per month, compared to about $10 per month for the 1950s-era medicines.

“These newer medications may cost more per pill, but the savings far outweigh the initial costs,” said Rusty Selix, executive director for the Mental Health Association. “Study after study have shown that the state’s current system is penny-wise and pound-foolish” by initially saving money on the cost of medication, but ultimately spending more due to hospitalization costs often incurred when patients are switched from one medicine to another.

Smoke up, ugly

Anyone can tell you smoking increases the risk of cancer and heart disease. But it hasn’t stopped millions of Americans from lighting up. Researchers at Loma Linda University say they’ve got another warning that may hit closer to home: Smoking makes you ugly.

Smoking causes the skin to age prematurely, the face to wrinkle, the fingernails to discolor and the scalp to itch from psoriasis, according to Dr. Jeffrey Smith, who reported the findings at the annual meeting of the American Academy of Dermatology last month. So-called “Smokers face” is characterized by prominent lines and wrinkles, gaunt facial features, grey-appearing skin and sometimes an abundance of red or purple skin pigmentation, he said.

Ben Sullivan is a reporter for the Los Angeles Business Journal and covers the health care industry.