Undergoing Examination : Kaiser Forms a ‘Blue Ribbon’ Panel to Study Arbitration

For the last two years, Kaiser Foundation Health Plan’s mandatory system for arbitrating legal disputes with its members has been the focus of news media scrutiny, complaints from lawyers, legislators and consumer groups, and, last month, a stinging rebuke from the California Supreme Court.

The Supreme Court, in a 6-1 decision, ruled that there is substantial evidence that Kaiser committed fraud and deliberately delayed arbitrating the case of a patient, Wilfredo Engalla, who later died of cancer. The court also found that Kaiser manipulated its self-administered arbitration system for its own benefit, while publicly portraying it as fair and efficient.

Kaiser Chairman David Lawrence’s response: form a “blue ribbon” committee to study the problem.

Lawrence named three members: Eugene F. Lynch, a retired federal judge in Northern California; Dr. Sandra Hernandez, director of health for the city and county of San Francisco; and Phil Isenberg, a former California legislator who practices law in Sacramento.

Kaiser says the panel will study the essential fairness of its arbitration system and consider alternatives, including hiring a private arbitration company to handle member disputes.

“I think it’s taken all of this time to understand, and have it really sink in, that there are people who have expressed concerns about the process,” says Beverly Hayon, a Kaiser spokeswoman. “We finally have heard it, to the full extent.”

Further impetus comes from several pieces of proposed state legislation.

The Assembly Judiciary Committee has scheduled a hearing on Kaiser’s arbitration system for Aug. 14 in downtown Los Angeles.

Merger Mania

The latest evidence of the “big is beautiful” theory in health care comes in the recently announced merger of two San Fernando Valley medical groups, Lakeside Health Services and Keystone Medical Groups.

The deal creates a network of 200 primary care physicians and 500 affiliated specialists. To be operated under the Lakeside name, the group would have HMO contracts covering 100,000 residents in the San Fernando and Antelope valleys, and Santa Clarita.

The merger proposal, which requires approval by regulators and the groups’ physician owners, comes as many Southern California medical groups are feeling a profit squeeze from employers and tightfisted HMOs clamping down on medical costs.

“Our company is essentially break-even, but had lost money last year,” says Dr. Keith Richman, Keystone’s chief executive. “Lakeside is making some profit.” Richman would become chairman of the new firm, while Dr. Francesco Federico would continue as Lakeside’s president and chief executive.

Duel in the Sun

The folks at L.A. Care Health Plan were startled a few days ago when they saw the spiffy new corporate logo of their much-larger rival, Foundation Health Systems.

Foundation’s new logo includes a drawing of a sun. L.A. Care’s logo--unveiled last year--has a similar sun.

Foundation’s logo “has the same number of sun rays [eight] and is similar in design,” says Keith Malone, a spokesman for L.A. Care, a consortium of six public and one private health plan.

But Foundation spokesman Kurt Davis says the sun logo is identical to one used since the mid-1980s by Health Systems International, an HMO that Foundation acquired earlier this year.

“I guess the question arises,” Davis says, “who’s copying whom?”

L.A. Care and Foundation are competing head-to-head to enroll members in Los Angeles County under the state’s Medi-Cal managed-care program for the poor.

Whatever the case, L.A. Care can always claim that its logo has something at its center that Foundation’s logo lacks: a little heart.

Times staff writer David Olmos can be reached by e-mail at [email protected] or by fax at (213) 237-7837.