The Kaiser
Permanente Arbitration
System:
A Review and
Recommendations for
Improvement
submitted by
The Blue Ribbon Advisory Panel on
Kaiser Permanente
Arbitration
Hon. Eugene F.
Lynch (ret.)
Sandra R,
Hernandez, M.D.
Phillip L. Isenberg. Esq.
January 5, 1998
Table of
Contents
|
Executive
Summary................................................................................................ |
1 |
| I.
Introduction................................................................................................... |
3 |
|
II. Kaiser Permanente: A Unique Health.
Plan
................................................... | 5 |
| III.
Background on Kaiser Permanente and Arbitration
....................................... | 6 |
A. Why was binding arbitration
adopted? ......................................................
| 7 |
|
B. How much arbitration occurs at
Kaiser Permanente? ................................. | 9 |
C. How does Kaiser Permanente's
arbitration compare
to other health plans?
................................................................................ |
11 |
|
D. Current research on medical
malpractice arbitration in California ................ | 12 |
E. Does other information suggest
problems with Kaiser Permanente's
arbitration?
............................................................................................... |
12 |
(1) The California Department of Corporations
Complaint Program:
a regulatory view
........................................................................... |
13 |
|
(2) PERS Report
Card: an employer-purchasers view........................... |
13 |
|
(3) Kaiser
Permanente surveys: members' views
.................................. | 14 |
|
(4) Recent
public opinion polls
............................................................. |
15 |
|
IV. The Kaiser Permanente Dispute Resolution System
(Before arbitration) ........... | 17 |
|
A. Conversation with the provider of
care
...................................................... | 18 |
B. Conversation with higher levels of
local health providers or local
administrators
............................................................................................ |
18 |
|
C. Customer Service or Patient
Assistance...................................................... |
19 |
|
D. Review steps at the local level
.................................................................... |
19 |
|
E. Review steps at the regional
level
.............................................................. |
20 |
F. Related
matters..........................................................................................
| 20 |
|
V. The Kaiser Permanente Arbitration
System ..................................................... |
21 |
|
A. Demand for arbitration and
$150................................................................ |
21 |
|
B. Confirmation of receipt of the
Demand
...................................................... | 22 |
|
C. Selection of the party arbitrators
and the neutral arbitrator ........................... | 22 |
|
(1)
Arbitration for cases of $200,000 or less
....................................... | 23 |
|
(2)
Arbitration for cases involving more than $200,000
....................... | 23 |
|
D. Controlling the progress of the
case ............................................................ |
24 |
|
E. Discovery
.................................................................................................. |
25 |
|
F. The arbitration
hearing ............................................................................... |
25 |
|
G. Arbitration awards and reports to
government agencies. ............................. | 26 |
|
VI. The Legal Culture
........................................................................................... |
26 |
VII. Arbitration and the Duty of Kaiser Permanente
................................................
|
28 |
|
VIII. Recommendations
.......................................................................................... |
31 |
|
A. Independent Administration.
....................................................................... |
31 |
|
B. Advisory Committee
.................................................................................. |
32 |
|
C. Goals of a Revised Kaiser
Permanente Arbitration System .......................... | 33 |
|
Time frame for resolution..
............................................................ |
33 |
|
Documentation and availability of
procedures.................................. | 35 |
|
Establishing a list of qualified arbitrators
......................................... | 35 |
|
Prompt selection of the neutral arbitrator
....................................... | 36 |
|
Arbitration
management ............................................................... |
38 |
|
Disclosures by potential arbitrators
............................................... | 38 |
|
Written decisions
.......................................................................... |
39 |
|
Protection of privacy
..................................................................... |
40 |
|
Enhancement of settlement opportunities
........................................ | 41 |
|
Encouraging use of the sole arbitrator
............................................ | 41 |
|
Oversight and monitoring
............................................................... |
42 |
|
D. Improvement of the Pre-arbitration
System .................................................. | 43 |
|
E. Cases Not Involving Medical
Malpractice .................................................... |
44 |
|
F. Speed of
Implementation
........................................................................... |
45 |
| Appendix
A - Background/Engalla Case/The Panel/The
Charge................................ | 46 |
| Appendix
B - Recommendations Considered but Not Adopted by the Panel............. |
47 |
| Appendix
C- Memorandum - Re: Post-Nov 1994 Process
Changes........................ | 49 |
| Appendix
D - Letter to David M. Lawrence, M.D. from the Blue Ribbon Panel........ |
50 |
| Appendix
E -
Participants........................................................................................ |
53 |
| Appendix
F - Disclosures and Biographical Information about the
Panel.................... | 61 |
In July of 1997, Dr. David
Lawrence, Chairman and Chief Executive Officer
of Kaiser Foundation Health Plan, Inc. and Kaiser Foundation Hospitals,
assembled
a three-member Blue Ribbon Panel to advise him on how to improve the
Kaiser
Permanente system of medical malpractice arbitration. This request came
immediately after a decision of the California Supreme Court that was
extremely
critical of the Kaiser Permanente system.
The Panel analyzed the Kaiser
Permanente arbitration system and attempted
to compare that system to those used by other health care providers.
The Panel also
sought to understand how arbitration was being used in the health care
industry
today. The Panel conducted numerous discussions with interested parties
and
organizations in an effort to understand how the medical malpractice
arbitration
system actually works.
These recommendations seek to
improve the Kaiser Permanente arbitration
system for all participants. However, the Panel believes that any
system which is
designed to resolve disputes about the quality and practice of medicine
must, first
and foremost, assure a fair approach to protecting the rights of
members to adequate
compensation in the event of medical malpractice.
Ultimately, the Panel
sought to identify the goals of the Kaiser Permanente
arbitration program and make recommendations that would align its
structure,
processes and operations in order to achieve those goals. Kaiser
Permanente has
told its members and physicians that arbitration guarantees fairness,
timely
resolution, a less costly process, relative informality, privacy,
definite awards, and
protection of the rights of individuals to adequate compensation in the
event of
malpractice or other legitimate claims. As the sponsor of a mandatory
system of
arbitration. Kaiser Permanente must assure a fair system to their
members,
physicians and staff.
The Panel has proposed
recommendations which may be grouped into the
following general categories:
*
An Independent Administrator to supervise the medical
malpractice
arbitration system. (Recommendations 1 to 3)
* A permanent Advisory Committee to assist in this
independent
administration. (Recommendation 4 )
* A clear statement of the goals of arbitration
and communication of
these goals to members, physicians and employer-purchasers.
(Recommendations
8 and 32)
* An expedited,
efficient and fair process for arbitration. (Recommendations
5 to 24 and 33)
* Encouragement of early settlement discussions.
(Recommendations 25 and
26)
*
Incentives to promote the use of single arbitrators.
(Recommendation 27)
* Methods to audit and monitor the progress of the
Independent
Administrator and to conduct research and evaluate the fairness and
effectiveness of
the arbitration system. (Recommendations 28 to 30)
* Creation
of an ombudsperson program to assist members in navigating the
system of dispute resolution. (Recommendation 31)
* A short
time period to accomplish the major changes. (Recommendations
34 to 36)
Many
of the Panel's recommendations would put Kaiser Permanente, once
again, at the forefront of change in American health care. The Panel
sees this as a
positive result, one fully consistent with the history and philosophy
of the
organization. Kaiser Permanente has led in the field of health care for
many years;
there is no reason it should not do the same in the area of arbitration.
Page 2.
1.
Introduction
In July of 1997, David M.
Lawrence, M.D., Chairman and Chief Executive
Officer of the Kaiser Foundation Health Plan, Inc. and Kaiser
Foundation Hospitals,
assembled this Blue Ribbon Advisory Panel on Arbitration. Our mandate
was to
''. . . evaluate the arbitration
process and to recommend improvements to that
process. "1
The genesis of this
Advisory Panel was the decision of the California
Supreme Court in Engalla
vs. Permanente.2 In harsh terms,
the court criticized the
Kaiser Permanente3
arbitration plan for failing to guarantee the rapid appointment of
a neutral arbitrator. The Court also observed that the average time
taken to
conclude most arbitrations was too long and inconsistent with Kaiser
Permanente's
promise to its members of a speedy process.
Since our appointment we have
conducted weekly meetings, and held
discussions with Kaiser Permanente physicians, staff, in-house and
retained
attorneys and management of the organization. In addition, we have met
with
1A copy of our mandate from
Kaiser Permanente is attached as Exhibit A.
2Engalla v. Permanente Medical
Group, 64 Cal.Rptr.2d 843 (1997). This case has been
remanded to Superior Court for further proceedings.
3The health care institution
commonly known as "Kaiser" is actually a combination of
organizations. First, the Kaiser Foundation
Health Plan, Inc. is a California nonprofit health
benefit corporation, and a federally qualified HMO. The
Health Plan arranges for medical benefit:
by
contracting exclusively with The Permanente Medical Group, Inc.
(Northern California) and
the
Southern California Permanente Medical Group. Hospital services are
provided by contract
with Kaiser
Foundation Hospitals, another California nonprofit public benefit
corporation.
The Health Plan,
Kaiser Foundation Hospitals and the Medical Groups work
collaboratively as the Kaiser Permanente
Medical Care Program or 'Kaiser Permanente."
Throughout
our report we have used the description "Kaiser Permanente". Although
perhaps not
legally accurate in
every case, we find that designation important. We have learned that
the joint
efforts of the Kaiser
administration and the physician medical groups have a long history. We
view the relations as a collaborative effort, for the
benefit of members. Thus, our use of this joint
name.
Page
3
attorneys
for Kaiser Permanente members, consumer advocates, academics and
researchers, state agencies and state
legislators4
and have attempted to understand
the
available research relating to arbitration. We have also reviewed court
decisions, statutes, academic research and
various public agency reports. In
addition,
we have studied material submitted by Kaiser Permanente. 5
This
report contains our conclusions and recommendations to Kaiser
Permanente. However, we wish to
make note of what we have not
done.
First, we
have not attempted to resolve the question of whether the arbitration
of medical malpractice disputes
is a desirable or undesirable option - whether
viewed from the position of Kaiser Permanente,
the members of that health plan, or
the general public. That is, surely, a worthy
question, but beyond the scope of our
activity.
Second,
we have not attempted to re-evaluate the Engalla decision. We
believe, however, many of the
concerns raised by the Court are addressed by our
recommendations.
Third,
we deliberately did not pursue the question of the cost of arbitration
for
Kaiser
Permanente, its members, physicians or employer-purchasers. Cost is
important, but our mandate was to recommend
needed change, not to weigh
financial
considerations against the need for such change.
Fourth,
in the limited time available we were only able to examine the Kaiser
Permanente arbitration system in
California. Whether any of these recommendations
are applicable elsewhere in the nation
was a question we lacked the time to answer
Our
recommendations therefore assume that Kaiser would continue some
form of arbitration of
malpractice and other disputes. Our mandate was to study the
present system and suggest changes.
4Panel
member Phil lsenberg has not participated in meetings or conversations
with legislators
or legislative staff. As a former legislator, the "revolving door"
provisions of state law
covered
him for one year after leaving office.
5A
list of the individuals, groups and organizations that provided us with
information is
attached. We express our deep
appreciation to all of those who participated in our discussions.
Page 4
II.
Kaiser
Permanente: A Unique Health Plan
As
the largest HMO in America, and the trend setter for the managed care
revolution in this country.
Kaiser Permanente is unique. It started as an experiment
in prepaid health care for American workers, first at Grand Coulee Dam,
then for
the hundreds of thousands of workers who came to the shipyards and
factories of
Kaiser during World War II. Some suggest that the creation of an
employment-
based health system was a hardheaded calculation by Henry J. and Edgar
Kaiser
that good health for workers was good for business. Whatever the
reason. Kaiser
Permanente is, in many ways, the prototype of the modem American health
system.6
Today,
Kaiser Permanente operates in 19 states and the District of Columbia.
As of September 1997 it served
8,840,936 members who were provided benefits
through 86,499 different employers. Kaiser Permanente employs
approximately
90,000 people; over 10,000 physicians provide care to Kaiser Permanente
members.
The combined assets of the organization are $12.4 billion.7
Sixty percent of all
Kaiser Permanente members are in California.
Kaiser
Permanente has always been at the cutting edge of the health care
industry. For decades, organized
medicine resisted the presence of prepaid health
plans, preferring the traditional fee-for-service system.8
Elements of this
controversy continue today. It appears to us that much of the current
debate about
managed care and medical malpractice focuses on the problems that exist
in the
delivery of quality health care in America,9 not
just within Kaiser Permanente.
During
this process, we were also drawn into a brief examination of the ways
in which medical malpractice
might be avoided and how dispute resolution
6Mark
S. Foster, Henry J.
Kaiser: Builder in the Modern American West (1989),
University of Texas
Press, Austin, Texas. See pp. 211-231.
7Kaiser Permanente Statistics for
October 1997, Communications Department, Kaiser
Permanente.
8Paul Starr,
The Social Transformation of American Medicine (1982), Basic Books,
Inc., New York, NY,
pp. 320-327.
9Mark
R. Chassin. "Assessing Strategics for Quality Improvement," Health
Affairs,
May/June 1997, pp. 151-161.
Page 5.
procedures affect quality assurance in the medical setting. While not
part of our
mandate, we were impressed with some of the work in this field.10 The approach
is
based on the notion that the traditional fault-finding method of our
court system and
traditional arbitration might not be the best way to prevent the
occurrence of
medical malpractice. Those interested in this field suggest that an
alternative is to
develop an environment where blame is avoided, the duty to report
mistakes is taken
for granted and ways are found to change the medical system to avoid
the mistakes
in the future.
It
would be of immense value if Kaiser Permanente would expand its efforts
in this area.
III.
Background
on Kaiser Permanente and Arbitration
Kaiser Permanente is
California's single biggest HMO user of binding
arbitration to resolve malpractice claims.11
This practice started in 1971 and its use
today is the universal form of required dispute resolution for Kaiser
Permanente.
Even more singular, the Health Plan contracts to defend and indemnify
the
physicians and Permanente Medical Groups for medical malpractice. Given
the
current national and California efforts to impose health plan
liability, it is worth
noting that Kaiser Permanente already assumes that contractual
obligation.
The
Kaiser Permanente arbitration system is used for a variety of disputes
between patients, family members and the Kaiser system itself. Although
modified
over the years, the current language on binding arbitration provides
that a claim
must arise from or be related
. . . to an alleged
violation of any duty incident to or arising out of or
relating to this Agreement,
including any claim for medical or
hospital malpractice, for
premises liability, or relating to the
10A fascinating discussion
is found in Lisa Belkin's article, How
Can We Save the Next
Victim? The New
York Times Magazine. June 15, 1997.
11 Testimony of the
California Association of Health Plans (formerly CAHMO),Assembly
Judiciary Committee hearing on
"HMO Malpractice; Engalla, ERISA and Protecting Patients
Rights," August 14,1997.
Page 6
coverage for. or delivery of,
services or items pursuant to this Agreement, irrespective of the
legal theories upon which the claim is asserted. 12
Although arbitration is available
for medical malpractice cases, it is also used
for premises liability and coverage disputes. We were told that
approximately 90%
of all arbitration cases allege medical malpractice. We note a concern
expressed by
some that the system might face increasing complaints relating to
benefits or
coverage. While an intriguing possibility, we were unable to address
that question
for lack of evidence. However, we do suggest that the unique
characteristics of
coverage or benefit cases may demand a far more speedy system than one
designed
for medical malpractice - though all arbitration should be speedy in
our view.
During
our investigation we were also interested to learn that the California
Public Employees Retirement System (CalPERS or PERS) and apparently
other
employers, have an independent course of adjudication for their members
with
benefit and coverage disputes. PERS members, for example, are advised
that for
these purposes they ". . . can
choose to appeal to CalPERS rather than going
through binding arbitration."13 Likewise,
PERS members who receive Medicare
benefits, but supplement them through Kaiser Permanente, have
alternative means of
resolving benefit and coverage matters. We asked about the number of
PERS
members who were choosing this alternative over arbitration, but the
information
was not available.14
A. Why
was binding arbitration adopted?
When Kaiser Permanente adopted
its system of arbitration, a number of
benefits were suggested to its members:
12Group Medical and Hospital
Service Agreement (Northern California Region) 1997,
8A(3),p.l5.
13Health Care Service Plan
Decision Guide (1998), CalPERS, p. 19.
14Discussion with PERS
representatives Margaret T. Stanley, Assistant Executive Officer,
Health Benefit Services; Fred
Steinmetz.. Division
Chief, Health Plan Administration Division and Laura Rosenthal, Legal
Department, November 4, 1997
Page 7
* Arbitration
was asserted to be faster
than the traditional court system.
*
Arbitration was asserted to be less
expensive than the traditional court
system.
* Arbitration
was asserted to be better
able to protect the privacy of the
health plan enrollees as well as
the physicians involved than the traditional court
system.
* Arbitration
was believed to be more
flexible and better able to
accommodate the schedules of
parties and expert witnesses, than the court system.
* Arbitration
was alleged to be both more
fair and sound in decisions and
awards than the court system.
* Arbitration,
or at least binding arbitration, was final and not
subject to court
review
except in limited circumstances
* Arbitration was able to provide a fair approach to protecting the rights of
individuals to adequate
compensation in the event of medical malpractice.15
We
discuss later in this report whether these original assertions still
apply
today.
We have
previously noted that Kaiser is California's primary user of
arbitration to resolve medical
malpractice claims. It is unclear why the rest of the
health care system in California is not also using arbitration for
malpractice cases.
However, many suggest, and we agree with this assessment, that the
passage of The
Medical Injury Compensation Reform Act of 1975 (MICRA) may be the
reason.
Certainly, the limitation of attorney fees and pain and suffering
awards imposed by
MICRA makes it less likely that medical malpractice litigation or
arbitration is
started. In addition, beginning in 1987 the courts of California have
been engaged
in an experiment designed to expedite the court process.
Called "Fast Track," this
legislatively mandated effort has achieved some notable success in
reducing the
delay in civil cases.
15Planning
for Health, Winter, 1975, Kaiser Foundation Health Plan, Inc.
Page 8
B. How
much arbitration occurs at Kaiser Permanente?
To
put this issue into context we asked Kaiser Permanente for information
on
arbitrations filed in recent years. From 1992 to September 1997 there
were a total
of 5,313 Demands for Arbitration filed (including some court-filed
Summons and
Complaints). The charts provided to us follow.
Arbitration Statistics -
California Division
Professional Liability
Clams by Calendar Year
Chart 1:
Number of Demands
for Arbitration and
Summons & Complaints | 1992 | 1993 | 1994 | 1995 | 1996 | 1997* | |
855 |
822 | 819 | 886 | 958 |
973 |
Chart 2:
|
1992 | !993 | 1994 | 1995 | 1996 | 1997* |
| No. of Settlements | 306 |
302 |
315 |
249 |
304 |
264 |
No. of Abandonment/
Dismissals | 227 | 476 | 502 | 512 | 490 | 635 | | No
of Arbitrations | 88 | 126 | 134 |
117 |
151 |
105 |
*For data ending September 30, 1997.
Chart 2 reflects activity in each of the listed categories for a given
calendar year an
includes activity in cases that were commenced in prior years.
Page 9.
Kaiser
Permanente advises us that these figures are not totally reliable. The
Northern and Southern divisions have merged this year. Prior to that
time each
division kept its statistics independently, apparently with different
formats and
characterization of issues and outcome. This chart represents the best
estimate of
Kaiser Permanente staff at this time.
An examination of the figures
suggests the following:
* The actual number of
Demands for Arbitration (or court filed Complaints,
most of which end in arbitration) began to rise in 1995.
* The proportion
of Kaiser Permanente members actually filing a Demand for
Arbitration is quite small, approximately two hundredths of one percent
(.02%) of
the annual membership in 1996.16
* Both the
number of settlements and the number of Demands which are
abandoned or dismissed appears consistent. However, we did note the
high number
of abandoned or dismissed Demands for 1997. We are advised that the
reason for
the increase is the higher level of attention now paid to expediting
these cases,
undoubtedly attributable to increased activity after the Engalla decision.
In other
words. Kaiser Permanente appears to be clearing a backlog of cases.
17
*
Figures for 1992 appear to be low in the number of
abandonments or
dismissals. However, this may be attributable to poor data systems.
Although some
attorneys representing Kaiser Permanente members have
suggested to us that the relatively high rate of abandoned or dismissed
claims proves
the existence of a problem - either too high costs for arbitration, or
the belief that the
system is weighted in favor of Kaiser Permanente - we do not believe
that
conclusion can be reached without more information. As the next few
sections of
this report indicate, needed additional information is m short supply.
Nonetheless,
many of our recommendations are directed at the assertion that the
system is too
16In 1996, the Kaiser
Permanente membership was 4,987,289. That year 958 Demands
for Arbitration (or Summons &
Complaints) were filed.
17A
memorandum describing some of the changes in administration of the
Kaiser Permanente
arbitration system since November of 1994 is attached as Appendix C to
this report.
Page 10.
heavily weighted in favor of Kaiser Permanente. Whether the charge of
unfairness
is real or perceived makes little difference - any changed system must
be fair to all
parties.
One of
the encouraging steps taken by Kaiser Permanente immediately prior
to this study has been the merger
of the legal departments of their Northern and
Southern California Regions. We believe this will assist in a number of
ways: 1)
more consistent record-keeping processes and data systems, 2)
monitoring of time
deadlines and the progress of cases and 3) hopefully a greater use of
settlement
tools in an effort to expedite and resolve these matters.
C.
How
does Kaiser Permanente's arbitration compare to other health
plans?
We
attempted to determine whether the facts we had, standing alone, suggest
the presence of any major problem
in the Kaiser Permanente arbitration system. We
sought comparisons that might exist with other systems of arbitration.
For example,
is Kaiser Permanente's system slower than others? It is more
or less costly? Is
there a higher level of member satisfaction with other systems? These
and many
other questions are ways to determine if this arbitration system works.
Additionally,
we were looking for a prototype of the ideal system of
arbitration for medical
malpractice. Unfortunately, we found none. Our discussions
with arbitration providers, attorneys for plaintiffs and for Kaiser
Permanente,
academics and consumer groups has made one thing quite clear: there is no body of
information available which
allows us to meaningfully compare the Kaiser
Permanente system of arbitration
to systems run by other health plans or to
the civil court system.
Likewise,
there is nothing like the recommended court case processing
standards developed and advocated
by the American Bar Association and
incorporated into California's Fast Track judicial rules. As previously
noted, the
California Association of Health Plans (formerly CAHMO) reported that
virtually no
other health plan in California has a party-administered or
self-executing arbitration
system. So, in some sense, no real comparison can be found in
California.
Page 11
Whatever else this report leads to, we
hope it promotes the development of
information, research and evaluation which can answer some of the
questions that
stymied us. We believe that Kaiser Permanente is able to promote such
research
and benefit from the results.
D. Current
research on medical malpractice arbitration in California
The most current information on health care
arbitration in California comes from
a pending study by the RAND Institute for Civil Justice (RAND) 18
RAND generously
discussed with us their findings, as well as prior research on court-
supervised arbitration.
RAND requested we not release the details of their
new study until it is
published.
However, we are able to discuss the general conclusions of the report.
These conclusions surprised us.
* RAND found that the use of arbitration in health care is
not common.
*RAND found that even though used infrequently, it is far
more common for HMOs
to use arbitration than for individual physicians, hospitals or other
forms of health
organizations.
*RAND found that even among HMOs that use arbitration, only a
few (including
Kaiser), use it for medical malpractice cases.
Finally, RAND found that there is little information
available upon which to judge
the performance of any particular arbitration system. Nothing we found
during our work suggests conclusions different
from those of RAND.
E. Does
other information suggest problems with
Kaiser Permanente's arbitration?
18
Elizabeth A. Rolph, Erik Moller and John E. Rolph, Arbitration Agreements in Health
Care:
Myths and Reality.
Law and
Contemporary Problems, forthcoming.
Page 12
(1) The
California Department of Corporations Complaint
Program: a regulatory view
In
search of other information that might give us some indication of
whether
or not a significant
problem exists in the Kaiser Permanente arbitration system, we
reviewed the Health Care Service Plan Enrollees Complaint Data reports
for 1995
and 1996.19
These reports are based on a toll-free 800 number program established
on October 10, 1995. The Commissioner of Corporations notifies all
health plan
members in California that this service is available. In addition,
health plans are
required to regularly advertise the availability of such a complaint
system.
The
Complaint Data reports use a complicated set of thirty-two (32)
complaint
categories ("Requests for Assistance" in the vernacular of the
Department.) These complaints are grouped in four generic areas:
Accessibility,
Benefits/Coverage, Claims and Quality of Care. Since the program is
relatively
new, it is difficult to determine whether the information is
statistically significant.20
In general, it appears
to show no significant problems associated with Kaiser
Permanente. This survey does not, however, directly focus on dispute
resolution.
(2)
PERS
Report Card: an employer-purchasers view
A
significant number of Kaiser Permanente members in California are also
members
of the California Public Employees Retirement System (PERS). On a
regular basis, PERS surveys its members to identify any quality of care
concerns
with their HMOs and PPOs. This information, in the form of a quality of
care report
card, is regularly made available to PERS members. The most recent
survey was
published in September 1997.21
19Health
Care Service Plan Enrollee Complaint Data, California Department of
Corporations, 1995
and 1996.
20In
1995 only 1,964 enrollee Requests for Assistance were received (from
over 17,000,000
members of 3 9 HMOs); in 1996 the Requests for Assistance increased to
2,321 (from
over 19,000,000 enrollees.) The Department of Corporations expects this
total to expand as
knowledge of the program grows.
21Health
Care Plan Decision Guide, pp. 4-10.
Page 13
According
to the latest report. Kaiser Permanente ranks among the highest
performing HMOs, based on
preventive medical care (childhood immunizations,
cholesterol screening, prenatal care, cervical cancer screening, breast
cancer
screening, diabetic eye examinations, etc.) Although important and
relevant to
population-based health outcomes and the quality of Kaiser Permanente
health care,
the studies provide no direct information on arbitration or dispute
resolution.
PERS also surveyed their members to determine general levels of
satisfaction
with
health plans, whether HMOs or PPOs. PERS members were asked about
satisfaction with their physician, the health plan itself, ability to
be referred to
specialists, and their view of their own specialists. In this
comparison Kaiser was
rated highly in every category.
Finally, when asked the question of whether a member "Would Recommend
My Health Plan To A Friend?"
Kaiser members said yes by a substantial margin -
93% to 95% for the Basic Plan members; 97 to 98% for the Medicare Plan
members.
(3) Kaiser
Permanente surveys: members' views
We
also reviewed some member satisfaction surveys conducted by Kaiser
Permanente. Unfortunately, a 1991
survey of Southern California members was the
only Kaiser Permanente survey which directly addressed the subject of
dispute
resolution:22
* When
asked if a "serious problem" had occurred during the study period,
fourteen percent (14%) of Kaiser
Permanente members surveyed said yes; eighty-six
percent (86%) said no.
*Only
sixty-two percent (62%) of the complaining members (8.7% of the
total members surveyed) even
contacted Kaiser Permanente to discuss the problem.
*Twenty-five
percent (25%) of those with a problem spoke to their
physician; another sixteen
percent (16%) to a nurse or other staff; seventeen percent
22Inter-Regional
Member Services Conference. Complaint Resolution Survey (1991),
Southern California
Region
Page 14
(17%) spoke to Member Services; five percent
(5%) spoke to Patient Assistance;
fifteen percent (15%) spoke to "other health plans" and twenty-two
percent (22%)
gave other responses or just didn't know with whom they spoke.
*Sixty-one
percent (61%) of complaints referred to something other than
physician
care. Thirty-four percent (34%) complained about making appointments;
sixteen percent (16%) had a complaint about Administration; seven
percent (7%)
had some general service issue and four percent (4%) complained about
staff care
and services. (Complainants for non-medical care represented 5.3% of
the total
members surveyed.)
* Thirty-nine
percent (39%) of the Kaiser Permanente members who
complained
(representing 3.39% of the members surveyed) did so about a physician.
Unfortunately, there was no information available that would help us
discover the
precise nature of the complaint, nor whether an allegation of medical
malpractice
was involved.
*There
is no information on how many of these complaints ever resulted in a
Demand
for Arbitration.
4) Recent public
opinion polls
As
this report was being completed a series of new public opinion surveys
were
published. In one form or another the surveys asked about member
satisfaction with managed care health plans. None of the studies
directly dealt with
Kaiser Permanente. They included national, state and regional surveys
of managed
care in general. Nonetheless, they generated a great deal of press
attention and we
briefly examined the reports23
23Preliminary
Findings: Survey of Consumer Experiences in Managed Care, prepared
The Lewin Group for
the Kaiser Family Foundation, the Sierra Health Foundation and the
California Wellness Foundation (November 1997); Kaiser/Harvard National
Survey of
Americans' View of Managed Care, Kaiser-Harvard Program on the Public
and Health/Social
Policy, conducted by the Princeton Survey Research Associates (December
1997); Preliminary
Findings of 1997 Survey of Californians' Experiences with Managed Care,
conducted for
California's Managed Health Care Improvement Task Force by the Field
Research Corporation
(November 1997) and a news report in the Los Angeles Times December 5,
1997 p. Dl .
Page 15
We
sought in: vain for information on medical malpractice arbitration. The
recent
federal study of Medicare recipient dropout rates from managed care, for
example, seemed to show California in a favorable light. The Los Angeles Times
reported that thirteen percent (13%) of Medicare recipients left their
HMO in 1996.
For California the overall figure was 10.6%. In addition the
"disenrollment" rate for
Kaiser Permanente was extremely low at 2.6% in Northern California and
3.8% in
Southern California.
The
more pertinent of the surveys involved a study of managed care members
in the
Sacramento region. Titled "Preliminary
Findings: Survey of Consumer
Experiences in Managed Care,
"24
this report focused on the prevalence of
difficulties that members have had with health plans. The report found
that
twenty-seven percent (27%) of all those surveyed had some problem with
their
managed care plan in the last twelve months. Those insured by Medicaid
reported
the highest level of problems at forty-two percent (42%) and those
insured by
Medicare reported the lowest at seventeen percent (17%.) Almost thirty
percent
(30%) of those with complaints took no action on their complaint.
However, the
report did find that sixty-nine percent (69%) of those with complaints
had no loss of
income associated with the problem; sixty-eight percent (68%) had no
loss of time
from work, school or other major activities and sixty-one percent (61%)
said there
was no potential for physical injury associated with their complaint.
The
types of difficulties reported were delay or denial of coverage (42%),
difficulty
getting a physician (32%), inappropriate care (11%), customer
service issues (9%), enrollment or eligibility problems (7%) and billing
questions (5%).
Focusing
on complaint resolution, the survey also showed that forty-five
percent
(45%) of those who complained were satisfied with the outcome; nineteen
percent (19%) were dissatisfied and thirty-five percent (35%) bad not
yet resolved
the problem. Part of the focus of the study was to determine whether
managed care
patients would have appreciated more assistance in resolving their
complaints, and
sixty-six percent (66%) said yes.
24Supra note
22.
Page 16
Individuals
with fee-for-service medical coverage and those with no
insurance
protection
whatsoever were excluded from the survey. As a result, it is quite
difficult to make comparisons between types of health care systems,
their problems
and the ways of resolving those problems.
These
reports add to a growing body of information about managed care and
Americans'
views of health care in general. Unfortunately, none is directed at
medical malpractice arbitration and, with limited exceptions, the study
of specific
dispute resolution methods is in short supply.
Regretfully,
we have concluded that until better information is available, few
arguments
about arbitration will be resolved by reference to facts and evidence.
IV. The
Kaiser Permanente Dispute Resolution System (Before arbitration)
Long
before any individual chooses to file a Demand for Arbitration there is
a
formal and informal
dispute resolution structure within the Kaiser Permanente
system. The following summary is largely taken from a variety of Kaiser
documents made available to members.25
While
we have summarized the dispute resolution process as we understand
it, we
have found the grievance process difficult to understand, in
spite of what
would appear to be a good faith attempt to explain the system, and
provide printed
information to members, we were left with no clear view of the process.
We are informed that in 1997, the two California Health Plan
organizations
began to consolidate into a single organization. We believe much of the
confusion
in understanding the process stems from differences between the
pre-existing.
25Group
Medical and Hospital Service Agreement (1997), Kaiser Foundation Health
Plan
Inc.,
Northern California Region; Member
Rights and Responsibilities (1997), Kaiser
Permanente, Your Plan
Coverage: Disclosure
Plan & Evidence of Coverage (1997), Kaiser
Permanente, Senior Advantage,
Services & Benefits: Disclosure Form &
Evidence of Coverage
(1998), Kaiser Permanente; The
Guidebook to Kaiser Permanente Services (1997), Kaiser
Permanente, Southern California Region; Combined Evidence of Coverage
& Disclosure Form,
Basic Plan & Managed
Medicare Plan, CalPERS and Kaiser Permanente (1998),
Discussions
with Lisa Kolton and
Leslie King, Regulatory' Services & Member Services, Kaiser
Permanente.
Page 17
organizations. While not a major part of our recommendations, there is
a need to
better explain the grievance procedure to members.
A.
Conversation
with the provider of care
The
Kaiser Permanente system encourages members to first discuss their
clinical
complaints with the treating physician. In addition, it appears that
members
are also encouraged to register their complaints with other medical
employees, if
appropriate.
We
noted with interest a new Service Guarantee Program in Northern
California
which offers to refund up to $25 of a co-payment if the member is not
satisfied with the services rendered. For those members who do not have
a co-
payment, a $5 voucher for over-the-counter pharmaceuticals is
available. A similar
program is now underway in San Diego.26
B.
Conversation
with higher levels of local health providers or local
administrators
Additional
steps are also available - talking to the next level of medical
professionals
or facility managers. In this case, the member can talk to the Chief of
Service, the physician in charge of the unit or department where the
care was
provided. A nurse or lay administrator is also available for
conversations. There is
also the possibility of talking to the Medical Group Administrator or
the Hospital
Director of Services (if care in a hospital is at issue).
Having
briefly described the possible informal avenues of discussion we
cannot
help but note that the public information available to members only
gives
passing reference to these options. We have no doubt that they exist
and suspect
that many members talk to their health care providers directly about
perceived
problems. However, this does not appear to the be a formal part of the
dispute
resolution system.
26Planning for Health:
San Diego Member News,
1997, p. 4.
Page 18
C.
Customer
Service or Patient Assistance
The
first formal contact is with a Customer
or Member Service
Representative (for
the health plan) or a Patient
Assistance Coordinator (for the
medical group). These officials receive complaints both orally and in
writing and,
we are told, the complaints cover a wide range of subjects, from
increased parking
rates, to delays in answering telephone calls, to more serious matters.27
There
is also a Customer
Service Call Center (1.800.464.4000 in English
and 1.800.788.0616 in Spanish)
available in the Kaiser Permanente system.
Although more focused on cost and coverage questions, this call system
is another
point for members to request assistance on problems they have with
Kaiser
Permanente.
As
complaints are processed through the system they are often resolved or
abandoned
by the member, according to the report of Kaiser Permanente staff.
Unfortunately, there is no hard evidence about the entire universe of
complaints -
although limited information suggests that cost, coverage and service
questions are
far more common than complaints of inadequate medical care.
D.
Review
steps at the local level
The
member may submit a grievance to the facility Customer/Member
Service
Representative. Receipt is to be acknowledged in writing within five (5)
business days. A Member/Patient
Grievance Committee will make a decision
within thirty (30) days of receipt of the grievance, although an
extension to sixty
(60) days can be allowed if additional information is required.28
270n
occasion, some Kaiser Permanente printed material also refers people to
a Members
Services office, which we assume
is the same as the mentioned Representative or Coordinator. To
further complicate things, CalPERS information refers to Customer
Service in Northern
California, Member Services in Southern California and a Regional
Reconsideration Committee.
We are advised that within the last thirty days an attempt to
standardize the Kaiser Permanente
lexicon is in progress.
28A
somewhat confusing process follows. Apparently, the member may request
reconsideration of a
decision, although it is not clear whether the reconsideration is with
the
Grievance Committee or the Grievance Appeal Committee.
Page 19
E.
Review
steps at the regional level
If
the member objects to the decision of the Grievance Committee, an appeal
can be filed with the Regional
Grievance Appeals Committee. It appears that at
least sixty (60) days are allowed for filing an appeal. However; we did
not have the
opportunity to examine any of the individual contracts for health care
services
signed by Kaiser Permanente and purchasers, nor did we attempt to
understand the
different rules imposed by the California Department of Corporations
and the
federal government, under the Medicare program. We are told by Kaiser
Permanente legal staff that there are varying deadlines for some of
these categories.
We highlight this point only to suggest that a clear explanation of the
precise
process is necessary.
The
appeal will be resolved by a written decision mailed to the member
within thirty (30) days of the
receipt of the notice of appeal.
The
member may attend both the Grievance Committee and the Appeals
Committee hearing, although a
confusing mention of the Member/Patient Initial
Grievance Committee
remains unexplained.
As part
of the regional review process there are expedited reviews of out-of-
Plan emergency matters, appeals
of Medicare members, some involvement in out-
of-area case management, and a relatively new Ombudsman Program,
which is
limited to the review of new technology for experimental procedures.
Naturally,
there are also reviews ordered by the senior executives of Kaiser
Permanente, any
number of whom may receive complaints from Kaiser Permanente members.
Additional
points of review and contact deserve mention. For example, there
is a special process for Medicare
beneficiaries focusing on the permitted length of
patient stay and quality of care in hospitals. In addition, there are
the normal,
longstanding Kaiser Foundation Health Plan quality review process
and Permanente
Medical Group peer
review process.
The
exhaustion of these informal and formal grievance procedures leaves a
dissatisfied member with only one
option: demanding arbitration.
Page 20
V.
The
Kaiser Permanente Arbitration System
The formal
Kaiser Permanente arbitration system is a complex and involved
process. Once it begins, both sides gear up with a host of attorneys,
expert
witnesses, medical personnel and arbitrators. We have spoken to many
who fill
these positions. Without exception they appear to be rational and
reasonable
individuals, concerned with reaching a fair result in arbitration.
However, we
are also struck with how easily all participants fall into
traditional litigation patterns. Once formal arbitration begins they
all develop their
arbitration plans, read records, conduct discovery, prepare testimony
and behave as
if a court trial were the end result.
This is not unexpected. However,
the original goals of arbitration seem to
fade into the background, to be replaced with the values of a legal
system that prizes
procedural formalism and winning over other virtues.
We believe the operation
of a system of arbitration should be consistent with
the values, purposes and goals set for it. At regular intervals Kaiser
Permanente, its
members and physicians should ask themselves whether their own goals
are being
met. We discuss later how and in what ways we believe the Kaiser
Permanente
system must be organized to be consistent with its articulated goals.
This brief
discussion of the procedural steps in arbitration describes the
current Kaiser Permanente practice, as we understand it. The system
has, of course,
changed in many ways in recent years - as the result of statutory
requirements, court
decisions and internal actions of Kaiser Permanente. 29
A.
Demand
for arbitration and $150
A member files a written
Demand for Arbitration. The preferred method is to
29There
are still many minor differences between the arbitration procedures
used in Northern
California and Southern California. We have not tried to describe most
of these
differences. It is our hope that the merger of the two
separate Kaiser Permanente Regions,
unification of the legal departments, and implementation of our
recommendations, will soon lead
to a single process throughout California.
Page 21
send the Demand to the legal office of the Kaiser Health Plan. Kaiser
Permanente
informed us that they will accept any form of written notification.
Simultaneously
with receipt of the Demand, the member is required to deposit
$150. This sum, together with a like amount from Kaiser Permanente, is
deposited
m a trust account (non-interest bearing, for some reason) and used to
cover the costs
of arbitration.30
All California
health plans utilizing arbitration to resolve member disputes are
required to assume a share of fees and expenses of arbitration except
". . . in cases
of extreme hardship."
The decision on the hardship application is made by a neutral
arbitrator selected by the parties, or by the Superior Court if they
cannot agree.31
B. Confirmation
of receipt of the Demand
The Legal Department
acknowledges receipt of the Demand within ten (10)
days. At approximately the same time an outside attorney for Kaiser
Permanente is
selected and the medical records are forwarded to that attorney. We
believe that at
the moment Kaiser Permanente's attorney receives these records, the
member's
attorney should receive them as well. As with most businesses retaining
outside
attorneys, Kaiser Permanente periodically provides information,
instructions and
rules of conduct for their attorneys.
C. Selection
of the party arbitrators and the neutral arbitrator
Although
many other things occur in the early stages of arbitration, the next
formal step is for the parties to select their party arbitrators, and
for the party
arbitrators to select a neutral arbitrator. This process is constrained
by a number of
California statutes that govern health plan arbitration.
The Kaiser Permanente
system does not utilize the services of any firm that
provides neutral arbitrators. Instead, the party arbitrators trade
lists of names that
30Services & Benefits:
Disclosure Form and Evidence of Coverage (1998), Kaiser
Permanente, p. 37
31California
Health & Safety Code Section 1373.20 (c).
Page 22
are deemed acceptable. Eventually a neutral arbitrator is appointed by
agreement.
However, there is no appointment unless one side, usually the member's
attorney,
demands the appointment. As a result of the Engalla case. Kaiser
Permanente has
started to demand the appointment of the neutral arbitrator at an early
stage in the
proceeding.
Other
than participating in the selection of the neutral arbitrator, and
attending
the actual arbitration hearing, the party arbitrators apparently play
no other role in
the process. Attorneys for Kaiser Permanente and the members handle the
rest of
the arbitration.
(1) Arbitration
for cases of $200,000 or less
Under California law,
effective January 1, 1997, any dispute where claims do
not exceed $200,000 shall be heard by a single neutral arbitrator,
unless the parties
agree to the contrary in writing. Because Kaiser Permanente does not
currently
utilize an independent dispute resolution service, should the parties
not be able to
agree upon a neutral arbitrator, any party can immediately request the
Superior
Court to appoint the neutral arbitrator.32
(2)
Arbitration
for cases involving more than S200,000
When cases involve more
than $200,000, a three-person arbitration panel is
standard (although the parties can agree to a single neutral
arbitrator). The three-
person panel is composed of one neutral arbitrator and two party
arbitrators. Each
party selects one of the party arbitrators to represent their views.
The neutral
arbitrator is selected by the party arbitrators within 30 days after
service of a written
demand for selection by either party.33
32California
Health & Safety Code Section 1373.19. See California
Code of Civil Procedure
Section 1281.6 for the method of request and selection.
33Combined
Evidence of Coverage & Disclosure Form, Basic Plan &
Managed Medicare: Plan,
Kaiser Permanente, for CalPERS (1998), p. 34, California Health
& Safety Code Section
1373 20
Page 23
If
the party arbitrators cannot agree on a neutral arbitrator, then my
party can
petition the Superior Court to make the appointment.34 Under
California Code of
Civil Procedure Section 1373.19, inability to select a neutral
arbitrator creates a
conclusive presumption that the Superior Court may act to make the
appointment.
However, it should be noted that involvement of the Superior Court,
under
California Code of Civil Procedure Section 1281.6, is not automatic.
One of the
parties must petition the court to appoint the neutral arbitrator.
To answer one
question raised repeatedly by attorneys for members: Yes,
Kaiser Permanente does maintain a list of acceptable party arbitrators
(at least in
Southern California).35
We saw no such list for neutral arbitrators and are advised
by Kaiser Permanente staff that no such list exists. However, we have
no doubt that
Kaiser Permanente has a very good idea of the particular neutral
arbitrators they
would prefer handle their cases. We also have no doubt they act on that
preference.
And,
yes, attorneys for members apparently also have access to background
and rating analysis of arbitrators, which provides similar but not
identical
information.36
We have no doubt that the attorneys for members also act to achieve
their preferences.
D. Controlling
the progress of the case
Once the neutral
arbitrator is selected, he or she decides all motions relating
to discovery and makes other judgments appropriate under statute.
Our
discussions with attorneys, arbitrators and Kaiser Permanente
administrators left us with the strong impression that unless the
member's attorney
or the neutral arbitrator pushes a case forward, little may happen. In
many cases
attorneys for either side may not be interested in pushing for a speedy
resolution.
These decisions to delay may be for good and proper tactical reasons.
However, the
35Southern California Litigation
Manual, Revised February 1997, p. II.
36Arbitrators, Paralegal. Legal
Secretary Publications, Consumer Attorneys Association
of
Los Angeles (CAALA), 1996. (101-page book in
which arbitrators are rated by CAALA
members. Includes ratings and comments.)
Page 24
Engalla
court thought the long average duration of Kaiser Permanente arbitration
cases troubling. We agree and suggest the absence of independent
administration of
the system may explain much of this delay.
Discovery
is conducted in arbitration as in court, under the provisions of
California Code of Civil Procedure Sections 1283.05, et seq.. Apparently
production of medical records is accomplished fairly promptly in most
cases (we
believe that should be a standard for all cases). We are told
that depositions of
complaining members are often done at an early stage of the proceeding.
Our
discussions with practitioners, however, suggest that both parties tend
to
delay the depositions of expert witnesses until late in the arbitration
process. We
suspect that some of the delay in case processing is attributable to
this delay in
aggressively pursuing discovery. Delaying depositions of expert
witnesses is
common in court litigation and is generally caused by the high cost of
deposing such
experts.
F.
The
arbitration hearing
The final formal step in
arbitration is the hearing itself. There is no deadline
for holding the hearing. Some neutral arbitrators, we are told,
aggressively move
the case forward, even over the objections of attorneys for the
parties. This does
not appear to be the ordinary practice. A common refrain among the
attorneys and
neutral arbitrators to whom we spoke is the difficulty of scheduling
hearings to meet
the convenience of attorneys, expert witnesses, the parties, both party
arbitrators
and the neutral arbitrator. Just listing the number of people involved
suggests the
scheduling complexity.
Once a hearing is commenced it is
usually resolved in no more than three (3)
days, although no statistical information exists to prove this claim.
However, that
was represented to be the average time for hearing by both attorneys
for members
and attorneys for Kaiser Permanente.
Page 25
One complaint registered by some is that, on occasion, a hearing will be
discontinuous; part of the hearing on one day, the rest some time
later. If true, this
seems to us a troublesome fact.
G. Arbitration
awards and reports to government agencies
At the end of
the arbitration the neutral arbitrator will make a decision. The
party arbitrators sit in during the actual hearing or, in some cases,
meet together
with the neutral arbitrator to talk about the case. It seems to be
commonly
recognized that the neutral arbitrator actually makes the decision and
one or the
other party arbitrator goes along with that decision.
Usually the decision is a
brief statement of the award, although some neutral
arbitrators prepare a more formal document. There is no requirement in
the Kaiser
Permanente system for a written award including reasoning for the
decision.
Whatever written award is given is provided to the parties and is not
otherwise
available.
Closing
the case involves more than writing a settlement check. Perhaps as
important are the mandatory reporting requirements of state and federal
law. In
California, reports of arbitration awards or settlements of more than
$30,000 are
required to be reported to appropriate medical regulatory boards ". . .
for damages
for death or personal injury
caused by that person's negligence, error, or omission
in practice, or rendering of
unauthorized professional services. "37
There are also
federal reporting requirements under the Health Care Quality
Improvement Act of
1986, PL 99-660.
One
striking feature of the Kaiser Permanente arbitration system -
replicated
in other arbitration systems in the United States - is the strong
presence of attorneys
and the legal culture they bring with them. The able attorneys who
represent Kaiser
Permanente members, and the equally competent attorneys who represent
Kaiser
Permanente and their physicians, dominate arbitration. Likewise, the
presence of
party
arbitrators, who are almost always attorneys, and neutral arbitrators,
who
37California
Business & Professions Code Sections 800, et seq.
Page 26
are commonly retired judges, strongly affects the system we have been
asked to
study.
Earlier
in this report we listed the benefits of arbitration asserted by Kaiser
Permanente. It is clear those claims assumed arbitration was always
better than the
traditional California court system. To us, the Kaiser Permanente
arbitration we
studied seems to be becoming more and more like the court process. While
arbitration is somewhat more low-keyed than a court trial, it is as
adversarial and
does not necessarily process cases any more rapidly. The evidence is
unclear on the
comparative costs of arbitration versus court, but many have suggested
to us that the
hard dollar costs may be roughly equal. The Kaiser Permanente
arbitration system
is clearly run to meet the schedules and competing demands of the
attorneys who
are arbitrators and those attorneys who represent clients - as the
court system is run
by and for the procedural convenience of judges and attorneys.
Unfortunately,
it appears that the sum of individual arbitrations "managed" by
attorneys for members and attorneys for Kaiser Permanente does not
automatically
produce an overall system which is speedy, low cost and just. We then
asked
ourselves these questions: can the attorneys for the parties really
regulate and
control the Kaiser Permanente arbitration system? And even if they are
expected to
manage the system through their work on individual cases, can they do
so in the best
interests of the millions of Kaiser Permanente members, the physicians,
and the
organization itself?
We have concluded that the
present system is essentially unmanaged. And
we have come to believe it is unrealistic to expect individual
attorneys to be
responsible for managing .the Kaiser Permanente arbitration system.
That has led us
to at least one strong recommendation of this report: the selection of
an Independent
Administrator for the system.
Attorneys who represent clients
are under a clear ethical and legal duty to
represent their clients and to pursue their interests before any other.38
They have no
choice in the matter and in the American system of civil justice we
would have it no
other way.
38ABA
Model Rules of Professional Conduct, Preamble, paragraph 2; Rule 3-300,
Rules
of Professional Conduct of the
State Bar of California and Discussion.
Page 27
We also believe that complicated medical malpractice, benefit and
coverage
cases require the presence of legal counsel. It would be an
extraordinary person, or
someone quite unrealistic, who would alone assume the duty of
evaluation,
collection of complicated medical evidence and understanding of the
legal system,
all without an attorney. We are concerned, however, that
talented practitioners in
the court system might unconsciously bring with them some of the less
desirable
features of litigation - contrary to the goals of those who created the
Kaiser
Permanente system of arbitration.
There are consequences to a
system that so completely relies on attorneys.
And these consequences lead us to many of our recommendations.
VII.
Arbitration
and the Duty of Kaiser Permanente
It is clear to us that the
dispute about Kaiser Permanente's arbitration system
is more than just a discussion of an appropriate legal process, time
frame and
manner of decision. Imposing a mandatory arbitration system means that
Kaiser
Permanente is implicitly representing to its members that the system is
fair,
reasonable and just. We strongly believe that Kaiser Permanente must
honor this
representation.
Just as strongly, we believe that
the employers who contract with Kaiser
Permanente have an obligation to see that the medical malpractice
arbitration
system is fair to their employees.
An injured member may choose to
leave Kaiser Permanente and select
another health plan. However, the limited evidence available suggests
that many
Kaiser Permanente members stay with the system even after arbitration.
Many
members may have no realistic, economical alternative to continued
medical care
with Kaiser Permanente. In addition, their employers may offer no
additional
choices.39
Continuing to provide medical care to a member pursuing arbitration
39Sandra
Robinson and Mollyanne Brodie, 'Understanding The Quality Challenge for
Consumers: The Kaiser/AHCPR Survey," The Joint Commission Journal on
Quality
Improvement,
1997, Joel C. Cantor, Stephen H. Long and Susan Marquis, "Private
Employment-
Based Insurance in Ten States," Health
Affairs, Summer 1995, KPMG Peat Marwick, Health
Benefits in 1996 (Montvale,
NJ: 1996).
Page 28
imposes special strain and obligation on Kaiser Permanente.
It is not enough for
Kaiser Permanente to transfer responsibility for managing
arbitration to an independent party. It is essential that Kaiser
Permanente, and its
employer representatives, guarantee that the system established is a
fair and
reasonable one. The most effective way to do this is to specify exactly
what the
arbitration system is expected to deliver.
We suggest that Kaiser Permanente
owes a number of duties to its members
and physicians:
* A duty to publicly identify the
goals of a fair arbitration system;
* A duty to
inform their members and physicians of these goals;
* A
duty to guarantee the goals of a speedy arbitration process, low costs
and essential fairness;
* A
duty to select
a truly independent
administrator who will control the
process of arbitration in accord with these goals;
* A duty to
see that the Independent
Administrator guarantees the goals are
met;
* A
duty to establish regular
audits and reviews of the system to examine
whether the goals have been met;
* A
duty to provide Kaiser Permanente members and physicians with
enough information
and facts to allow them to understand the actual
operation of the arbitration system; and
* A
duty to develop a plan for research
and evaluation of the
arbitration system so that the assumptions upon which it is
based may be
judged, reviewed and, if necessary, changed in the future.
* A final
note: many of our recommendations would put Kaiser Permanente,
once again, at the forefront of change in American health
care. We see this as a
Page 29
positive result, one fully consistent with the history and philosophy
of the
organization. A certain risk is inherent in these recommendations, and
some will
suggest that noticing should be done "until every other health plan has
to do the same
thing." We reject that argument.
Kaiser Permanente has led in the
field of health care for many years; there is
no reason it should not do the same in the area of arbitration.
Page 30
A.
Independent
Administration 1) An
Independent Administrator should manage the Kaiser
Permanente Arbitration System 40 and the individual cases within
it. The
Kaiser Foundation Health Plan, Inc. should fund the Independent
Administrator.
2) The mission
of the Independent Administrator should be to
ensure that the Kaiser Permanente arbitration process is fair, speedy,
cost-
effective, and protects the privacy interests of the parties. These
goals should
be reflected in the contract with the Independent Administrator and made
available to all members and employer-purchasers.
3) The
Independent Administrator selected should not be a
provider of neutral arbitrators or mediators.
Rationale: The creation of an independent; accountable administrator
for the Kaiser
Permanente arbitration system is the Panel's starting recommendation.
The
perception of bias created by Kaiser Permanente's
"self-administration"-has been a
primary concern raised by the consumer representatives; members'
counsel;
legislators and academics who spoke with the Panel as well as by the
California
Supreme Court in the Engalla
case.
The
Panel concluded that the present arbitration system is not truly being
managed by anyone and is left, by default, to the control of the
attorneys, whose
legal and ethical responsibilities are to their respective clients. The
Panel feels that
Kaiser Permanente's arbitration cases must be actively managed by an
accountable
individual or organization rather than be left to the "management" of
adversarial
attorneys.
The
Independent Administrator should manage the arbitration program and
the individual arbitration cases in a way that will achieve the
program's goals-- to
40The phrase "Kaiser
Permanente Arbitration System" in these recommendations refers
only to cases within California., which was
the geographic scope of the Panel's inquiry.
Page 31
provide a fair, timely, low cost process that protects the privacy
interests of all
parties. The process must be fair first and foremost to the individual
Kaiser
Permanente member who has a valid claim and a right to adequate
compensation.
In addition, the system must be fair to physicians and other health
care providers.
The costs of the system should be sufficiently low as to enable
members, regardless
of income, to effectively assert valid claims and to allow Kaiser
Permanente to
effectively defend claims. These goals serve as the foundation for all
of the Panel's
recommendations.
One suggestion for independent
administration has been to select one,
existing arbitration organization to handle all Kaiser Permanente
cases. The Panel
considered and rejected this option for two reasons. Employment of
arbitrators
from only one organization creates the appearance of a "captive"
provider, who is
beholden to Kaiser Permanente for repeat business and therefore
perceived to favor
Kaiser Permanente. In addition, exclusive use of one arbitration panel
denies both
parties the benefit of the widest range of available, talented neutral
arbitrators.
4) Kaiser
Permanente should establish a small, on-going,
membership, Permanente Group physicians, Kaiser health care personnel,
employer-purchasers of Kaiser Permanente services, an appropriate
consumer
advocacy organization and the plaintiffs' and defense bar involved in
medical
malpractice in the Kaiser Permanente arbitration system. Kaiser
Permanente
should consult with the Advisory Committee prior to the selection of the
Independent Administrator and at other critical points described later
in this
report.
41Our recommendation in this
area benefited greatly from the work of Professor Thomas
B. Metzloff, Duke University School of Law,
Durham, N.C. and attorney Robert A. Stein, of
Washington D.C., who developed the "Model Grievance Procedure for
Planning Councils and
Grantees" under Title I of the Ryan White Care Act. In addition, our
Chair and Reporter had
independent experience with the Civil Justice Reform Act Advisory Group
for the United States
District Court, Northern District of California.
Page 32
Rationale: Although the Panel has made a number of recommendations on
ways to
improve the Kaiser Permanente arbitration system, there are many
specifics to be
resolved and adjusted based on experience.42 An Advisory
Committee comprised of
knowledgeable representatives of the affected parties will best be able
to work with
Kaiser Permanente and the Independent Administrator to design and
implement a
process that meets the program's goals in a way that will work
effectively for all
parties.
The
Panel anticipates that the Advisory Committee would have major input
prior to the selection of the Independent Administrator. However, it
will also play
an important ongoing role, assessing the evaluations of the arbitration
program and
identifying possible areas for improvement.
In order to function effectively,
the Advisory Committee should be as small
as possible, consistent with the goal of representing each of the
designated groups.
C.
Goals
of a Revised Kaiser Permanente Arbitration System
Time frame for
resolution
5) The
Independent Administrator, after consultation with Kaiser
Permanente and the Advisory Committee, should establish arbitration
process
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