Wilfredo Engalla died of lung cancer one day after Kaiser Permanente appointed a neutral arbitrator for his malpractice claim against the HMO. Engalla had waited about five months for the arbitrator to be appointed, even though Kaiser promises a speedy arbitration process and the appointment of a neutral arbitrator within 60 days.
Engalla's family claimed Kaiser negligently failed to diagnose Wilfredo's cancer and fraudulently delayed the arbitration of his malpractice claim until after his death to gain advantages in arbitrator selection and reduce recoverable damages by $250,000.
In June the California Supreme Court found Kaiser had promoted and administered its own arbitration system for its own benefit. The court remanded the case to the trial court to determine whether Kaiser had forfeited the right to keep the case within its arbitration system, a result that would force Kaiser to face a jury.
But the court stopped short of prohibiting party-controlled arbitration programs such as Kaiser's.
So who won? The Engallas and Kaiser. Who lost? Kaiser's 9 million enrollees.
The absence of a fair process to settle disputes affects quality at all levels of managed care -- enrollees, providers and plans. An informed public will switch to plans that provide better, faster and cheaper processes for resolving claims. The key is in the process.
An effective process consists of a uniform grievance-mediation-arbitration system that is accessible, affordable, user-friendly, comprehensible and speedy. Whatever the outcome, the parties should depart assured that an independent, unbiased and competent professional has listened to them and responded with courtesy and sensitivity.
Evidence abounds that problems exist with many plans' grievance processes:
In a 1996 survey, members of the California Public Employees Retirement System cited "too much time to resolve claims issues" as among the factors why members switched plans.
This year California's Department of Corporations fined 80 plans almost $900,000 for not having advised their enrollees in 1996 of their grievance rights. Even without having been advised of those rights, enrollee complaints increased 18% in 1996 over 1995. And this year, after the public learned of the fines and its rights, complaints doubled.
A U.S. district judge in 1997 found that Medicare HMOs had denied beneficiaries their right to fair notice and hearing in contesting coverage issues. Judge Alfredo Marquez in Tucson, Ariz., ordered HCFA to assure that seniors are provided with 10 categories of information concerning grievancing, hearings and appeals.
I represented a Los Angeles medical group in a bitter legal battle with an HMO, Maxicare, in the 1980s. Although the group won a judgment of more than $10 million in arbitration, the diversion of financial and management resources wounded both parties. Maxicare drifted into bankruptcy; Hawthorne Community Medical Group was absorbed by MedPartners. Placed at risk were Maxicare's then 800,000 enrollees, including 120,000 served by the medical group.
Conflict is not going to disappear, but often it can be resolved in a nondestructive manner. The elements of a high-quality dispute-resolution process include:
Internal resolution (grievancing). Everybody's time is valuable, so fewer but more meaningful steps are better than several layers. Permit enrollees to be present and represented at meetings. Make information immediately available so enrollees may knowledgeably participate in and influence the process.
External resolution (mediation). Mediation has become the remedy of choice in America for the early resolution of disputes without the rancor, expense, time and often unforgiving outcomes of adjudication. Some carriers and other companies even pay all costs in cases where the dispute is resolved. In mediation, the parties don't give up their rights to anything. The mediator, often a lawyer, simply gets the parties together in an effort to reach a reasonable agreement and settle the dispute.
Mediation is the least expensive effective remedy and should generally be used before proceeding to arbitration or court. While companies have rapidly embraced mediation, most plans still insist on arbitration or court as the post-grievance remedy. That commonly compels members to forgo claims because of the higher cost of arbitration. Such a policy reduces access and can increase disenrollment.
Self-administered arbitration. Self-administered arbitration systems such as Kaiser's are rare. Fair process requires that arbitrators be unbiased and independent of the parties. The best and usual practice is to use an independent organization that stands as a virtual wall between the parties and the arbitrator. The American Arbitration Association and numerous other organizations provide such administrative services.
Tripartite arbitration panels. A dispute-resolution process should not impose costs on parties in excess of what is reasonable considering the nature and amount of the claim. Tripartite panels -- consisting of two party-appointed arbitrators and a third, neutral arbitrator selected by the party-arbitrators -- cost roughly twice as much and consume significantly more time than a single neutral arbitrator hearing the same case. The efficacy of tripartite panels is subject to serious question given that two of the three arbitrators reflect the views of the parties who selected them.
Many plan contracts provide for tripartite arbitration. While not onerous for a plan, the expense of this method often effectively bars enrollees and providers from pursuing legitimate claims. California law now requires a single arbitrator for claims not exceeding $200,000 and for payment of all costs of the neutral arbitrator in cases of "extreme hardship." That's a step. But why should any member pay the cost of an arbitrator when it is the plan that has insisted on using [email protected] Had the dispute been in court, the enrollee would not have paid the judge's salary.
This and other policy issues should be addressed in an industrywide, patient-centered uniform grievance and review procedure. Such a procedure should be designed by the healthcare industry in conjunction with consumer groups and lawmakers.
Critical to any dispute-resolution program is an effective and reliable information system that enables the parties and public to evaluate the process by which the industry resolves conflict and disputes. Well-informed consumers will drive performance and accountability into the system.
When we marshal our information and best practices with a focus on patient care, we will increase the quality and cut the costs of the justice system. That's good business and good medicine.
Wolfe is a lawyer with ADR Solutions in Beverly Hills, Calif. He specializes in the design and evaluation of dispute resolution systems for the healthcare industry and the mediation and arbitration of healthcare and business disputes.