Metropolitan News-Enterprise


Wednesday, March 13, 2002


Page 11


Assembly Panel Witnesses Dispute Pros, Cons of HMOs’ Mandatory Arbitration





SACRAMENTO (CAPITOL)—Lawyers, patients and representatives of private arbitration firms gathered yesterday to debate whether mandatory arbitration clauses are bad medicine for patients in health maintenance organizations.

HMO representatives told a joint hearing of the Assembly Judiciary and Health committees that mandatory arbitration—where a patient waives the right to sue in court in favor of binding arbitration—keeps health insurance costs from skyrocketing, while giving patients access to a fair and uncomplicated forum for resolving disputes.

Trial lawyers, nurses and patients painted a bleaker picture—one in which patients forced into arbitration have their rights trampled by arbitrators with financial ties to the HMOs.

“The culture of the system is just such that it doesn’t work,” former paralegal Hiram Ash said, citing problems he had while arbitrating claims of medical malpractice with Kaiser Permanente. “I was treated with complete disdain by the Kaiser attorneys, with the cooperation of the arbitrator.”

Ash alleged that the arbitrator engaged in ex parte communication with Kaiser’s attorneys, and that his right to discovery was not protected. Ash, whose claim alleged that Kaiser’s staff ignored his need for pain-killers in the weeks after an operation for kidney stones, said the arbitrator’s award of $2,700 wasn’t even enough to pay his expert witness.

Rick Simmons, of Consumer Attorneys of California, said it’s a “myth” that arbitrators offer complainants the same neutrality they could expect in a courtroom. In practice, he said, the HMOs who contract with arbitration companies are able to track each decision, patients don’t have the ability to do so.

Nor is that the only problem, Simmons said. He testified that he recently was asked to choose an arbitrator from a panel of 12 that had been randomly selected by an arbitration firm. “I got 11 white guys over the age of 50 and one woman,” he said.

Sharon Hartmann, a Los Angeles lawyer who administers an arbitration system used by Kaiser, defended the system. She said Kaiser’s 6 million members in California have the ability to check into the backgrounds of arbitrators, and to reject those they deem unfair. The information is readily available on the system’s Web site, she said. She also noted that Kaiser’s arbitrators sign declarations that they will adhere to professional standards—including one requiring disclosure of conflicts of interest—approved by the American Arbitration Association.

Hartmann also testified that anonymous surveys show that lawyers and patients who have been through arbitration overwhelmingly say they would recommend their arbitrator to another party.

Lawmakers, including Judiciary Committee chair Assemblywoman Ellen Corbett, D-San Leandro, voiced concerns that the details of arbitration proceedings are kept secret, and the public therefore doesn’t know when their HMOs are giving substandard care.

Maureen O’Haren of the California Association of Health Plans offered a different view, saying arbitration offers privacy, not secrecy.

“Patients are probably pretty appreciative that people can’t go online and find out about their incontinence problem or the breast-augmentation surgery that didn’t go right,” O’Haren said. If the cases went to court, she noted, the press and public would have access to such information.

Somewhere in the middle of the debate was the American Arbitration Association, whose senior vice president told lawmakers that while AAA works hard to ensure that its arbitrators are impartial, the company no longer will administer arbitrations involving health disputes unless both parties enter the proceedings voluntarily.

AAA’s Robert Meade Sr. said the new policy will affect a minute percentage of the company’s business, and under heavy questioning from lawmakers, he acknowledged the policy will apply to health care disputes only, not to product liability claims or other types of cases.

The joint committee hearing was scheduled as an informational forum, so no votes were taken. But with their questions, lawmakers made it clear that had they voted, they would have backed major changes to give patients the ability to opt out of arbitration and take their disputes to the courts.

In fact, most of the lawmakers in attendance have introduced legislation to address perceived problems with private arbitration. Monday, members of the Judiciary Committee unveiled a six-bill package of legislation which seeks to force California judges to wait a year before becoming private arbitrators; remove arbitration firms’ immunity from suit; require that data on private arbitrations, including their outcomes, be collected and published; ban private judging firms from investing in companies that are parties to mandatory consumer arbitration cases that they hear; bar companies from picking an exclusive arbitration firm as part of its mandatory clause; and ban requirements that the loser of an arbitration pays all costs.

The hearing was the third in a series of meetings on arbitration agreements. In addition to the forum on arbitration in health care contracts, lawmakers have taken testimony on the growing presence of mandatory arbitration agreements in contracts for consumer items such as furniture and cars.

Arbitration came up later in the day, as well, when Chief Justice Ronald George delivered his annual State of the Judiciary speech to the Legislature. George, who has worried openly that the pay disparity between private arbitrators and California judges will cause a “brain drain” from the courts, said a Judicial Council task force is working on crafting a code of ethics for private arbitrators, and the results are to be completed by July 1.


Copyright 2002, Metropolitan News Company