Prompted in part by a California Supreme Court hearing held in Los Angeles in April, state Insurance Commissioner Chuck Quackenbush is holding his own investigatory hearings on the use of binding arbitration to settle disputes over health care coverage.

According to Quackenbush, the hearings arise out of growing complaints from consumers that insurance and managed care companies include binding arbitration provisions in their contracts to keep enrollees from suing. Those suits are usually filed by consumers seeking medical coverage they feel is justified but which the HMO refuses to pay for.

"In some circumstances, consumers may be forced to deplete their savings or mortgage their homes to pay for treatment that may be essential to keep them alive while waiting for their cases to be settled," Quackenbush said. "Arbitration may even be delayed so long that it is too late to save the consumer's life by the time the dispute is decided."

The case for arbitration, in which both sides make their case before a professional third-party arbiter, is that it can be less costly and quicker than a trial hearing. 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 their 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.

Quackenbush's hearings are timely in that the California Supreme Court heard arguments in April over Kaiser Permanente's use of binding arbitration as a way to settle 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, pitted the managed care company against the family of Wilfredo Engalla. The family contends that Kaiser dragged its feet in agreeing on an arbiter to hear a dispute between Engalla and the company, in hopes that Engalla would die and his case would unravel.

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 says Kaiser waited five months before acknowledging the case. Soon after the case was assigned to an arbiter, Engalla died. An initial finding against Kaiser was overturned by an appellate court, and a ruling by the Supreme Court is now pending.

Kaiser, for its part, stands by the use of binding arbitration. "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 (that otherwise would have been) spent on litigation going to litigants instead of to attorneys."

Skinning the cat

Embattled Long Beach-based HMO Molina Medical Centers Inc. says it wants to transfer the lucrative Medi-Cal contracts that it has pending in Riverside, San Bernardino and Sacramento counties to L.A.-based Maxicare Health Plans.

Under the proposal, sent to the state Department of Health Services last week, Maxicare would administer the Medi-Cal contracts Molina tentatively holds with the three counties, and Molina would deliver the actual care.

The contracts, valued at more than $1 billion over five years, are part of the statewide two-model plan to shift Medi-Cal patients into managed care.

The HMO was notified by the federal Health Care Financing Administration in April that, because it had less than 25 percent private, non-Medi-Cal patients, it would be ineligible to serve as a full-scale Medi-Cal managed care service provider.

The proposed shift of contracts to Maxicare would be a way around the ban, the company said. The state has not yet responded to Molina's request.

Shopping spree

Chatsworth-based COHR Inc. bought two Florida-based medical equipment service companies for an undisclosed sum last month.

COHR purchased Compass Medical Group Inc., which maintains and repairs machines that break up calcium deposits in the bladder, and FastServe Medical of Central Florida Inc., which repairs biomedical equipment.

Compass had 1996 revenues of $2.5 million, while tiny FastServe took in just $293,000 last year.

COHR officials said the purchases will help the company serve its new Tenet Healthcare System hospitals in Florida. COHR has been on a buying spree of late, acquiring 21 smaller medical equipment service companies over the last three years. COHR makes its money contracting with hospitals and other health care provider organizations to keep their medical equipment in tip-top shape.

Pru goes online

In the first major use of the Internet to help enrollees wend their way through often-complex managed care benefits packages, Prudential HealthCare and Netscape Communications Corp. have launched a so-called "extra-net" to give Prudential enrollees access to their benefits.

The system lets members change their primary care physician, look up participating doctors and dentists, find out the status of a particular claim, request claims forms, request ID cards and even get directions to their doctor's office over the Internet.

Technology, ya gotta love it.

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

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