Just when the folks at Kaiser Permanente were starting to feel good about life again, the California Supreme Court slapped the nation's largest HMO back to reality last week.

Kaiser got a hearty endorsement from President Clinton last month following the HMO's announcement that it will dedicate $100 million over the next five years toward providing care to California's uninsured children.

Yes, Kaiser is required to do such things to keep its tax-free status. And no, the commitment doesn't represent any actual new money, but is a reshuffling of Kaiser's existing budget for charitable causes.

Still, the seemingly heartfelt commitment to one of the state's worthiest causes moved Clinton on a swing through the Golden State to single Kaiser out as an example for the managed care industry to follow.

All the more ironic, then, that the state Supreme Court last week ruled against the nonprofit HMO in a case that centered on the touchy issue of binding arbitration, and in the process essentially accused Kaiser of toying with a patient's life.

The 6-1 decision by the court found that Kaiser had inaccurately portrayed its arbitration system as efficient and fair when it was in fact fundamentally flawed, to the disadvantage of patients.

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

Kaiser officials have steadfastly denied those accusations.

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

Engalla's family claimed Kaiser waited five months to assign the case, and soon after it was assigned, Engalla died. His death reduced the amount of damages the family could potentially recover from $500,000 to $250,000.

In its ruling, the state's highest court said it takes, on average, two and a half years for patients filing malpractice claims against Kaiser to get a hearing. In its literature, however, Kaiser claims that such cases will be assigned to an arbitrator within 60 days. In fact, the court said, that only happens about 1 percent of the time.

The court's ruling allows the Engalla family's damages case to be heard in a lower court.

The advantage of arbitration, in which both sides make their cases before a professional third-party arbiter, is that it is often less costly and quicker than a trial. But it leaves consumers little room for appeal if the arbiter finds against them.

Also, arbitration hearings are almost always held behind closed doors, and findings are kept under wraps. So if a health care or insurance company is found to be in the wrong, the public is generally not made aware of it.

The Engalla-Kaiser case prompted California Insurance Commissioner Chuck Quackenbush earlier this spring to call a series of his own hearings on the role of binding arbitration in settling health care complaint disputes.

Results of those hearings are still pending.

HMO bites the bullet

Another HMO, Western Dental Services Inc., agreed last week to pony up $1.7 million to settle charges brought against it by the California Department of Corporations for an alleged history of safety violations and a "contemptuous disregard for patients' welfare."

The settlement keeps Western Dental out of receivership, which the department had sought, but requires it to take more than 20 specific steps to clean up its act.

An independent monitor will evaluate the company's compliance.

As part of the settlement, which includes a $600,000 fine and payment of the state's legal expenses, Western Dental will donate $500,000 to the state for the creation of a program to study quality issues in managed care.

Western Dental runs dental clinics in predominantly low-income neighborhoods throughout California. The company was accused of unsafe dental practices and of encouraging its dentists to generate high billings through bonuses.

"We believe we would have prevailed in court," Western Dental President Robert Schur said in a statement. "However, a negotiated settlement with the department avoids the expense and disruptions of a protracted legal fight."

Company officials said they considered the department's decision to not put Western Dental into receivership a victory.

State's women uninsured

A study just released by the UCLA Center for Health Policy Research found California women are far more likely to be without health insurance than women in other parts of the country.

About 2.1 million California women, or 22 percent of the state's non-elderly adult female population, do not have health insurance. By comparison, 16 percent of women nationwide are uninsured. Most of California's uninsured women are poor (living at or below the poverty level) or near poor, the study found, and Latina women are the most likely to be uncovered.

Indeed, 53 percent of poor Latinas, and 46 percent of near-poor Latinas, are without insurance, the study found.

"Poor Latina women in California bear the burden of a health insurance system that does not do enough to help people who do not have job-based medical coverage," said Roberta Wyn, associate director of the UCLA center, and the report's primary author.

"Most of these women are from families where people work, but they do not have jobs that provide health coverage," Wyn said. "Unfortunately, they earn too little to be able to purchase medical insurance on their own."

Doctors buy hospital

A group of 21 physicians will purchase Lincoln Community Medical Corp., which operates Bellwood General Hospital and Medical Center in Bellflower.

The physicians group will purchase the 85-bed acute care facility from Paracelsus Healthcare Corp. for an undisclosed sum.

Staff reporter Ben Sullivan covers the health care industry for the Los Angeles Business Journal .

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