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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.

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