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.


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