< Kaiser Permanente and TDI Settle Dispute
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Kaiser Permanente and TDI Settle Dispute

April 18, 1997

Kaiser Foundation Health Plan of Texas agreed today to drop its lawsuit against the Texas Department of Insurance, pay a $1 million fine and take specific steps to assure high-quality patient care for its 124,000 enrollees.

Insurance Commissioner Elton Bomer and Dr. Bill Gillespie, president and medical director of Kaiser Permanenteīs Texas health care organization, jointly signed an order in which Kaiser consented to the fine and to several quality assurance and financial solvency conditions. By accepting the order, Kaiser Permanente did not admit any wrongdoing or violation of Texas insurance laws.

The order probates $250,000 of the fine. Bomer may waive all or part of the $250,000 depending on Kaiserīs compliance with the terms of the order.

Bomer and Gillespie reached the accord after two days of negotiations at Kaiserīs southwestern headquarters in Dallas and in Bomerīs office in Austin.

" From the beginning, TDIīs objective -- and, I believe, Kaiserīs as well -- has been to make sure that every Kaiser patient receives topnotch care from a medically and financially sound HMO," Bomer said. "Once Dr. Gillespie and I could sit down together away from the superheated rhetoric of the courtroom, it didn’t take long to see that we both were on the same page. I’ve always believed that reasonable people of good will can work out their differences without the need for adversarial proceedings. Todayīs agreement reinforces that belief.

" The Kaiser organization holds a national reputation for both quality and integrity. I quickly learned in our negotiations that those same attributes are embodied in Bill Gillespie, president of Kaiser Permanente Texas. He amply demonstrated to me that Kaiser cares about its patients and wants to do the right thing."

Bomer said that revocation of Kaiserīs license as a Texas health maintenance organization never was an issue except in the context of the companyīs financial condition. Kaiserīs Texas operation, centered in the Dallas-Fort Worth area, lost $52 million over the past two years.

" Revocation would have been an extreme step that might have disrupted medical treatment for many patients," Bomer said. "Kaiserīs agreement to submit a business plan and take steps to strengthen its finances without cutting corners on patient care eliminated any possibility that I would consider revocation."

Under the agreement, Kaiser will receive an $80 million financial package from its corporate parent, California-based Kaiser Foundation Health Plan Inc., in 1997 and additional contributions as may be required in 1998. Kaiser Foundation Health Plan is a non-profit corporation.

Kaiser filed a lawsuit and obtained a temporary restraining order on February 28, 1997, blocking TDI from releasing a report by staff attorneys accusing the HMO of quality of care violations and recommending a substantial fine.

In the consent order, TDI agreed that before releasing the report to the public, it would ask the Open Records Division of the Office of the Attorney General to determine if any part of it contains information that is confidential by law. TDI will release those parts of the report deemed non-confidential after receiving the Attorney Generalīs opinion.
Accusations in the report dealt with alleged patient record problems, refusal to pay for emergency care services in violation of TDI rules and failure to follow quality assurance procedures contained in Kaiserīs application for a Texas HMO license.

" The report to the Commissioner, like any pleading, was written in strong language as a persuasive document. By settling this action, I have not concluded that every allegation in the report has been proven," Bomer said. "What I have concluded is that Kaiser is fully committed to addressing every issue raised and that we at TDI have the will, the expertise and the resources necessary to audit and verify that Kaiser lives up to the agreement."

Bomer also said he is grateful for the support of the Office of the Attorney General in defending TDI in the lawsuit.
Under the agreement worked out by Bomer and Gillespie, Kaiser will pay for an independent consulting firm that will report to TDI. This consulting firm must include at least one physician and additional people with appropriate medical credentials and expertise. This consultant will review and recommend changes in Kaiserīs emergency care, claims processing, quality assurance, quality improvement, peer review and credentialing programs and procedures.

The consultantīs tasks will include recommending improvements for gauging the severity of complaints and incidents.
Kaiser agreed to achieve a "high degree of accuracy" in processing all emergency care claims, make the emergency care information in its enrollee brochure "user friendly" and to promptly pay emergency care claims when the patient had a reasonable belief that emergency care was needed.

The consent order also obligates Kaiser to continue to follow accepted standards for maintaining medical records that are current, detailed and well organized to permit effective patient care and quality review. This includes a commitment to have on its staff a qualified medical records librarian who will develop a plan for assuring proper training of all personnel who create or maintain patient records.

Kaiser is required to submit a business plan within 30 days, describing how it will carry out its agreement under the consent order.

(Copies of the consent order are available on TDIīs web page, www.tdi.state.tx.us.)
For further information call the Texas Department of Insurance Public Information Office at (512) 463-6425 or send a note to PIO@tdi.state.tx.us