Sending a malpractice case back to a lower court, the California Supreme Court ruled 6-1 last month that there is evidence Kaiser Permanente may have engaged in fraudulent conduct in delaying an arbitration procedure.
The trial court will determine whether Kaiser delayed the arbitration procedure for its own benefit.
Although the ruling was hailed by HMO critics, it fell short of invalidating Kaiser's policy-shared by many HMOs-that requires enrollees to submit complaints to binding arbitration rather than filing suit.
The plaintiffs are members of the family of Wilfredo Engalla, a former Kaiser enrollee who was diagnosed with lung cancer in 1991 after Permanente doctors and other healthcare professionals allegedly treated his respiratory difficulty for five years as colds and allergies.
In May 1991, Engalla and family members demanded that Kaiser arbitrate their claim that doctors had misdiagnosed his ailments. The Engallas' attorney requested a speedy arbitration because of Engalla's illness.
In the Kaiser system, each party picks an arbitrator and then a third or neutral arbitrator is selected. That process took five months, and Engalla died the day after the third arbitrator was chosen.
His family withdrew from arbitration and filed suit in Alameda Superior Court in February 1992, charging not only malpractice but also that Kaiser deliberately delayed the arbitration until Engalla's death in order to reduce any potential damages. The lower court agreed with the Engallas, but an appeals court ruled the case should return to arbitration.
In their ruling, the state Supreme Court justices said "there is indeed evidence to support the trial court's initial findings that Kaiser engaged in fraudulent conduct."
The ruling said that although Kaiser assured enrollees of a speedy arbitration process, it takes an average of almost two years to appoint a neutral arbitrator after an enrollee's demand for arbitration.
Tom Debley, a Kaiser spokesman, said, "We're confident the evidence will show we did not purposely delay the arbitration procedure." Debley also said Kaiser has made changes in the procedure, which "was moving slower than we were happy with."