Date: Wednesday, March 01, 2000 11:29 PM
From: Arlan Cohen M.D., J.D.
To: Marianne O'Donnell

Dear Marianne,

I learned over the internet that you are looking in to arbitration abuse, and particularly into the possibility that arbitration clauses may be hidden and may prevent harmed patients from getting justice.

I do medical malpractice law in California. I am an MD/JD, and was in medicine for 23 years before going to law school at Harvard. I deal with arbitration problems all the time, usually relating to the conduct of Kaiser Permanente, which has a mandatory arbitration clause in its subscriber agreement, and which has close to or about half of the patients in the state enrolled, I believe.

I can't give you instances of "hidden" arbitration clauses, because in California, to obtain certain protections of the law, and to make the arbitration agreement enforceable certain wording is prescribed and required by the "arbitration act" statutes.

However, there is an even greater and widespread abuse than hidden HMO-protective clauses that I run up against all the time, and this came to a head recently in a very large case that resulted in no compensation for a severely disabled child. I understand that you may not be interested in this angle, but if you are, here it is.

The bottom line is this: in California, since one particular entity, Kaiser Permanente, controls virtually all of the appointments of medical malpractice arbitration "neutral" arbitrators, any judge who wants to earn a living in retirement from the bench as a neutral arbitrator has a personal financial interest in finding in Kaiser's favor, and will be penalized greatly, personally and financially, for finding against Kaiser in any very large case. It is therefore impossible to get a fair shake on any large case against Kaiser, and this is precisely why Kaiser has insisted on arbitration with all its subscribers.

In more detail:

In California, Kaiser Permanente is the defendant ("respondent" is the proper word for the arbitration defendant here) in probably 90-95% of all medical malpractice cases that go to arbitration. One of the medical malpractice insurance companies requires its insured doctors to ask patients to sign an arbitration form before beginning treatment, but this remains voluntary on the patient's part as a rule. As an acceptable approximation, Kaiser is the defendant in virtually all medical malpractice arbitrations in this state.

These arbitrations are binding, i.e. are the final resolution of the case. They also are virtually unappealable, since usually there is no reporter's record to use on appeal, and since the only grounds for overturning an arbitration award is gross abuse of discretion. Most of the grounds for appeal accorded a plaintiff in a true court are inoperative.

In the past ten years or so, increasing numbers of retired judges have turned to work in mediation or arbitration to fund their retirement incomes. The competition for "neutrals" to serve in such proceedings has become fierce. Judges can earn anywhere from $350 to $600-800 an hour for such proceedings. One former California Supreme Court judge is reputed to charge $1,000/hour.

In this setting, some unusual characteristics of arbitration outcomes has come to light. The judges who want this income understand that in any arbitration and in any mediation, both sides must agree on who will be the highly paid "neutral." No one plaintiff's attorney, and no one organization of plaintiff's attorneys has the clout or the resources to keep close track of the outcomes of mediations and binding arbitrations. But Kaiser does. It has become increasingly obvious to the judges who seek to earn a retirement income that any large judgment they render against Kaiser will penalize their own ability to earn a living at least as much as it penalizes Kaiser.

I have been in practice for about ten years. Early in my practice, I found no problem with Kaiser arbitrations. The cases I had early were relatively small, i.e. for less than $300,000. As my practice has grown, however, and I began to bring larger cases against Kaiser, I began to notice heavy pressure to settle these cases from the judges who would eventually serve as the "neutral" arbitrator.

As you know, in Kaiser arbitrations, each side chooses one "party" arbitrator, and they choose the third or "neutral" arbitrator. Of course, with rare exceptions, each party arbitrator votes for the party who hired her or him, and the neutral arbitrator is the one who decides the case.

Recently, I had a large "bad baby" case in Kaiser arbitration: Guzman Groves v. Kaiser. In that case it became clear that Kaiser had two different obstetrical services: one a midwife service, and one a doctor service. If you were assigned to the midwife service, you never saw a doctor until and unless the midwife became alarmed, and thought she needed a doctor to help.

The literature handed out by Kaiser does not say that there are these two services; it merely talks about the doctors and the nurses and the midwives all helping each other out. Most patients, I suspect, believe that a doctor will be there for the delivery even if a nurse or midwife looks after them during the early parts of labor.

Mr and Mrs. Ronald Groves were led to believe that their child would be delivered by a doctor. They sometimes saw a doctor and sometimes saw a nurse/midwife during the pregnancy. When Mrs. Groves went into labor, she and her husband went to admitting at Kaiser, and, while filling out the admission papers, asked when their doctor would be in. They were told that their doctor was off duty, but another doctor would be in to see them.

In fact, they were assigned without their knowledge to the "midwife" service. And Mrs. Groves was evaluated on admission not even by a midwife, but by a nurse who was going through her midwifery training, i.e. a "midwife" who was not licensed as a midwife.

This trainee determined the baby's size to be 3300 grams, a normal size, i.e. about 7 pounds. No fully trained midwife and no doctor checked this determination. In fact the baby weighed over 4,500 grams, making this a "macrosomic" baby, and requiring the offering of a Cesarian section. No such offer was made.

Over the next eight hours or so, the progress of the baby was markedly abnormal. For about six hours there was a complete arrest of descent. In the setting of a macrosomic baby, such a labor arrest requires a Cesarian section. No midwife reassessed the baby's size, and none called a physician.

After about eight hours of labor retardation or arrest, a physician was called. That doctor did not come to see Mrs. Groves, but just advised giving Pitocin. It took more than twelve hours for the mother to get ready for the delivery; this was not her first child.

After about 12 hours of labor, the baby's fetal heart monitor became abnormal. Finally a doctor was called: but the obstetrician (there was one for the large Kaiser facility) did not come; rather a second year resident was called. She did the delivery of the large baby, which was complicated by shoulder dystocia.

More important, the baby showed what our expert felt was fetal distress and hypoxia (oxygen deprivation) for well over an hour, unrecognized by the ob resident. And the baby proved to have permanent brain damage and requires 24 hour a day care for life.

A controversy arose about when the baby's injury occurred. Kaiser claimed the brain injury occurred months before labor and delivery, and we claimed it occurred during labor and delivery, and most likely at the end, and that it could have been avoided with a Cesarian Section, which should have been offered at the start of labor, because the baby was large, and should certainly have been done several hours into labor, when there was an arrest of the baby's descent.

There were experts on both sides. One of the key arguments related to the size of the baby's head. Generally speaking, when severe brain damage occurs in utero, the brain does not grow normally. Then the skull, whose growth parallels that of the brain, also stops growing. A baby with severe brain injury early in pregnancy is usually born with a small head.

By contrast, a baby who has injury at the time of birth will be born with a normal head, but will slowly develop "microcephaly" - a small head- as the child grows after birth.

In our case, the baby was born with a normal head size; the 50th percentile, though he was heavy in his total birth weight, related to the mother gaining a lot of weight during pregnancy. In the year following birth, the baby's head rapidly went from the 50th to 5th percentile: a pattern implying a birth injury.

At trial, we discovered an ultrasound of the baby's head taken at about the time that Kaiser claimed the injury had occurred. This too, showed a head in the 50th percentile in size. This meant that the baby's head continued to grow at the same pace throughout the pregnancy, staying in the 50th percentile. This in turn proved that contrary to Kaiser's theory, there could not have been a serious brain injury 2-3 months before birth.

The neutral arbitrator found for Kaiser.
He refused to acknowledge that the baby had been placed on a midwife service without the knowledge and consent of the parents.
He refused to acknowledge negligence in permitting an unlicensed midwife in training to assess the baby's size without any checking exam by a midwife or a doctor
He refused to acknowledge the negligence in failing to do a Cesarian section during a prolonged arrest in the progress of labor

He decided that the baby must have had an earlier injury because the baby's head was 50th percentile in size, but the baby's body was 90th percentile in weight, despite evidence that the head grows in proportion to the development of the brain, and the body grows in large part in proportion to how much weight the mother gains and how high her blood sugar is.

During the deliberations, my party arbitrator noticed the "neutral"acting strangely. It became clear to him that in this case, where the appropriate award for a baby needing lifetime care would be several million dollars, this arbitrator was acutely aware that any such award against Kaiser would mean that he would no longer get any Kaiser business. His ability to earn a living as a mediator and certainly as a neutral arbitrator would come to an end.

He earned more than $20,000 just on this particular arbitration.

What seems clear to me now is that where Kaiser can effectively decide whether or not any judge can earn a living as a med mal arbitrator, it is impossible for any judge to be neutral. The choice for my neutral, who was earning far more in retirement doing mediations and arbitrations than he had earned on the bench was simple: the child gets several million dollars now, or I get several million dollars in fees over the next ten years.

I spoke with a gentleman who writes a column for the LA Times about my experience, Ken Reich. He seemed to recognize the problem, and prepared to write a column that would open the issue to discussion here in LA. I spoke with him the day before the column was to be run. It came out so watered down by his editors as to be virtually useless pap.

I wrote a letter to the editors of the LA Times, which I attach, in which I try to put the point in a relatively small space. It wasn't published.

It seems to me the arbitration system, through economic control over the future of the finders of fact, immunizes Kaiser and other "large employers" from liability in the very large cases. There is no way out of this except a system in which the decision of a judge or arbitrator in one case has nothing to do with his later employment or income. And the arbitration system here and, I suspect in most areas, does just the opposite.

Sorry for being so long. If what I write seems interesting, let me know. I have no need for publicity personally; my partner and I, both MD/JDs have more cases than we need or know what to do with. But I must confess to being increasingly unhappy about the absence of a level playing field, and the failure of otherwise perceptive people to understand how impossible it is to get justice in large cases when the judge's future income depends on how he or she decides the case.


Arlan A. Cohen, M.D., J.D.