The Manipulation of HMO Medical Testing

Early in the 1970s Paul Ellwood, MD proposed a way out of the Medicare budget crisis. He suggested that the federal government turn to the prepaid health plans to control costs. To do so it would be necessary for the government to catapult these insurance plans from minor to major health care players. For the purpose of new legislation, these prepaid plans were renamed "health maintenance organizations" (or HMOs). The newly coined HMO term had (at that time) greater appeal.¹

The HMO Act of 1973 - thus designed, debated, passed, and signed (mostly out of the news due to prominence of the Watergate Hearings) - changed the face of health care. State laws restricting development of HMOs were overridden, federal grants were given for HMO startups, and employers with more than 25 employees were required to offer both a closed panel HMO and an open panel HMO among their health plan selections for employees whether or not the employer thought any of the HMOs were any good. The playing field was tilled away from private, personal physician care called fee for service under indemnity (not prepaid) insurance. In fact. Dr. David Lawrence (former CEO, president, and Chairman of the Board of Kaiser) has described the personal and independent physician as an archaic lone eagle flying about in the canyons of the past.
In about 1986 the federal ERISA bill elevated the health plans to the level of diplomatic immunity from legal suit, the only US industry so protected. This greatly lowered the risk of HMO suits and represented the removal of patient rights. The current bill - called the Patient Bill of Rights and now delayed in a Senate-House Joint Conference Committee - is really about the restoration of patient rights removed in 1986.

But prepaid health plans brought with them the predictable risk that the involved physicians might start withholding health care to make a profit within this new system. Physicians' costs (including their offices) are about 20% of the health care dollar, but the physicians normally order the other 80% of the health process. Physician groups could, therefore, get paid 30%, for example, of the old budget total (increasing their income by 50% of what they were then making before), if they could reduce the ordering of tests, medications, outside referral, and hospitalizations to 75% or less of what was previously utilized for these purposes. And the government would also get a portion of the savings in the form of a slower expansion of Medicare.

But the cutting of care might quickly go beyond supposed efficiencies of pre-planned delivery of services and evolve into a clever method of defrauding seniors and other dependent patients² out of their right to fair and honest medical testing and thereby diagnosis and treatment. And those most clever at the process might organizationally rise quickest to the top. And such leaders could end up defrauding the government because it is only the illusion of care that is being purchased through the government, because it would be only the illusion of care that was being subcontracted and purchased on behalf of citizen patients.

Pill splitting-now before a judge in Oakland in Timmis v. Kaiser - is an example of this new cleverness of cost cutting in that the patient, usually a senior, is asked to split their pills (thus into uneven pieces) and be satisfied that such an approach represents good medicine.³ One of my patients was asked to split three different pills at the same time, and the pill splitting system is about as "voluntary" as breathing.⁴ Kaiser has made some 500 million dollars from this medication game.

Kaiser care is fraudulent at nearly every level:

1) the advertising illusion that doctors are salaried and not for profit and are ready to spend appropriate time with patients,
2) the press releases about quality care (in contrast to the physicians almost never allowing time to read outside records of past patient care),
3) the purposeful failure of the Permanente physicians to write diagnoses in charts and track patient problems carefully thus resulting in patients being unable to participate in testing and treatment decisions,
4) the general attitude that most patients fall among the "worried well" and deserve few tests and few medications,
5) the idea that only one organ system should be treated at a time,
6) the failure to admit chest pain patients in sufficient numbers,
8) the sending home of stroke patients from the ER,
8) the withholding of testing, and
9) the undertreatment of disease in early stage, and
9) the race to call disease "end stage" once it is found., the latter term allowing Kaiser to tap into new federal monies.

This report, herein, focuses on this issue of fraud through a narrow but symbolic sampling - the HMO style of patient testing. One HMO in particular. Kaiser Permanente - the largest non-profit⁵ HMO in the country - will receive most of the attention. That is because I worked within the system for eighteen months (notice my ID card at the front of this report) and then read about its internal methods for the next four years leading up to the present time. As the Mother Ship of HMOs, Mother Kaiser - a self-named title - highly influences the practices and ethics of the copycat clones of those in close but synchronous competition.

Kaiser Permanente and its many HMO rivals have tried to advertise that they offer legitimate sick care (see sample Kaiser ads and postings - Exhibit 1) and then only deliver mostly well care, the latter an entirely different and ninety percent cheaper goal. With the puffery of ads and the senior hook of low cost medications, the elderly patient is invited into a complex system of supposed care in which there is expected to be the patient to physician relationship. But the professional model is discarded in favor of a business model ("customer" to "provider").⁶ (See also Exhibit 2 about "external customers" to go along with Footnote 6). Finally, the patient who is damaged and depressed by poor treatment is faced with mandatory arbitration, malpractice award caps (California's MICRA caps on malpractice awards), and federal ERISA HMO protection barriers. If the care received has little to do with the quality boasted in the HMOs ads, the chance for redress is minimal and very rare.

II. Kaiser Testing Theory

Within the official Kaiser Permanente Website there is a keystroke option to go to Permanente Medicine. This portion of the website is particularly controlled by the physicians - groups that supposedly negotiate with the Plan annually at arm's length but who also sit in on meetings and have veto power within the Plan at many levels. [The groups are called Permanente from the small stream that flows during all seasons in the San Francisco peninsula city of Los Altos where Henry Kaiser got raw materials for cement. The term Permanente Physicians was used - rather than the term "Kaiser Physicians" - so that the doctors could avoid the option of appearing like employees of the industrialist.]

And within this Permanente Medicine section of the Kaiser Website is the option to explore the official journal of the physicians called The Permanente Journal. (Sample front page - Exhibit 3). This journal goes out every three months to every Kaiser physician - part time or full time - without charge. It has some general medical articles, the best ever perhaps being on the topic of hemochromatosis. But the Permanante Jonrnal is primarily used to direct the activity of the Kaiser physicians system wide, and it is thus of little interest to clinically oriented physicians nationally. It is an important source of doctrine - for anyone studying Kaiser - on Kaiser culture and methods used to watch and "benchmark" physicians.

This journal's idea of humor, for example, is reflected in a cartoon (Exhibit 4) trying to joke about the reasons for keeping long lines. In fact, the founder - Dr. Sydney Garfield - invented the term "the economy of shortages," as if underfunding was an purposeful goal. This attitude helped him to personally pocket $250,000 during the worst four years of the depression while running his little hospital - the "Contractor's Hospital" - where he experimented in cutting corners for physician profit.

One relevant article to this report in the Permanente Journal focuses on the theory of testing at Kaiser (See Exhibit 5). Here the author tries to suggest the strange theory that you only need to order a test if there is a 50% chance of the patient having the suspected illness.⁷ This is an overall downgrading of professional curiosity from what would be more likely the community standard of ordering tests, e.g. to look for illness when there is a fairly small chance of illness with the goal of early diagnosis - real health maintenance.

In the case of TB, AIDS, B12 deficiency, hypothyroidism, and others, the normal standard is to order the test even if there is even less than a 1% chance because lack of early treatment can be so pathologically devastating. Yet, this article is a general encouragement across Kaiser to do as little testing as possible. [Kaiser has gone in the opposite direction of its 1968 approach of multiphasic testing in the interest of discovering disease - the HMO apparently found too much disease.]

III. Cardiac Stress Tests

When EKGs are abnormal or chest pains are not well explained, the next step is often to proceed to an exercise stress test to look proactively for cardiac disease under controlled situations of maximal exercise. This type of test seems too mathematical for HMO physicians to under-read.

Most people believe, therefore, that - if they undergo a cardiac stress test and the doctors say it is "unremarkable" at the end - that they, therefore, do not have heart disease. But at Kaiser there is often a deliberate attempt to call slightly positive stress tests "unremarkable" so that patients will not know that they have coronary artery disease.

The example can be seen in Exhibit #6 where a positive test was read as "unremarkable." A second, and more positive test on the same patient, was also read as unremarkable. There was no effort to pursue higher testing. The patient ended up suddenly dying with a positive autopsy for treatable coronary artery disease. He was still on antacids at the moment of death, entirely unprotected from a (diagnosed, but undisclosed) lethal process.

The family of the deceased patient received $600,000 for the mistake Kaiser made on then two different stress tests. Within the Kaiser patient's sudden death there were both the issues of medical malpractice and loss of family income plus companionship from the patient who died in his 40s. The outcome of the case, however, got buried by Kaiser after the pre-arbitration, sudden settlement. [And so the pattern of deceit gets thus buried as well, just as Firestone and Ford suits were buried early on. California comes close to passing each year a halt to the burying of arbitrations that might reveal risk to others, but the political will is not there to turn it into law.⁸]

So Kaiser has been able to change the definition of what is a positive stress test!
This is a form of organizational self-anointing, to believe that as a 20 billion corporation that they have achieved the right to redefine medical science.

Thus patients can be misinformed about the test outcome and end up with cardiac injury and the risk of a drastically shortened life span. But this misleading of patients - as to what is wrong with them - violates the patient's most basic right to know his or her diagnosis.^9, ¹⁰ It voids the promise by Kaiser that decisions will occur jointly between patients and doctors.¹¹ The first health right is to be treated with dignity. The second health right is to know your diagnosis.

Kaiser also voids this right by avoiding diagnostic terms in medical notes. While this is a violation of state law, no one seems to be auditing this behavior. I suppose it is good for Kaiser's legal position to stop diagnosing so as to avoid diagnostic error, e.g. one Kaiser ER physician simply writing "MVA" (motor vehicle accident) as the diagnosis after a trauma workup. But this is the opposite of good medical care in which almost all diagnostic possibilities are shared with the patient. It is also a huge fraud on the government as this fundamental chart features is left out and yet billing goes on as if the care is complete.

IV. Compete Blood Counts (CBCs)

White blood counts -
The value of the normal white blood count (WBC) should not shift in any particular hundred years. But Kaiser alters what is normal. See table below.

This table shows that in 1995 Kaiser physicians in Southern California were using the normal range of white blood count to be 4,800 to 10,800 (Exhibit 7a). Then, by 1998, Kaiser physicians in Southern California was using the normal 4,000-11,000 (Exhibit 7b).
The same Permanente Group kept this white blood cell count definition into 2001 (Exhibit 7c), and presumably also at this time. This would mean that on the low side, white blood cell depression from a chemotherapeutic agent would not be noticed as early as before. And on the high side, bacterial infection would not be caught as early.

But the Permanente Medical Group, Inc. (TMPG) in Northern California got even more aggressive and changed the normal value of the white blood count from 3,500 to 12,500 (Exhibits 7d, 7e, and 7f). Fewer low and high white blood cell reactions would be caught by this method.

Meanwhile, other hospitals outside of Kaiser, like Victor Valley in California, have chosen not to alter human physiology and to continue to use the 4,800 to 10,800 range. (Exhibit 7g).

Hemoglobin
The difference in hemoglobin levels - the oxygen carrying capacity of the blood - from Southern California Kaiser to Northern California Kaiser is equally interesting among the same exhibits. In Southern California the range of normal hemoglobin is 14-18. In Northern California the range is 11-15.
Thus fewer anemias will be diagnosed in the Northern region of the HMO, the one with the Kaiser physician stock value of $10,000 per share and dividends per doctor perhaps $80,000 per year average.

Nationally - see Exhibits 7h and 7i - the normal ranges are more clear and less manipulated. Health "maintenance" must not be allowed to be turned into illness non-recognition. Too many illnesses are not caught early in this second, Kasier approach (like the subtle anemia of a right sided colon cancer,¹²) and too many people can get hurt.

V. Renal Tests

A common blood panel order in outpatient medicine is called a metabolic or renal panel. It measures the balance between the electrolyte - sodium, potassium, chloride, and bicarbonate as well as the renal function of BUN and creatinine, since the kidneys maintain the balance through retaining or excreting the electrolytes. The BUN and creatinine represent constant metabolic byproducts that go higher if the kidneys are not working well and able to excrete them.

One would expect that the normals of these values would have been determined many decades ago and never be subject to variation. And yet there is variation among different Kaiser units and as contrasted to the private community. SC will mean Southern California Permanente Medical Group (a for profit partnership). TPMG will refer to The Permanente Medical Group, Inc. (a for profit corporation) representing Northern California physicians. [Kaiser tried to merge the two groups, but under new CEO leadership they are again more separate].
Kaiser Permanente Renal Chart

The higher setting of creatinine 1.5 at TPMG - Northern California Kaiser - means that renal disease will be caught a little slower than in other locations of California. (Exhibit 8). Nationally (recheck attachment 7h) the creatinine value is clear - with a top normal reading of 1.2. That small difference can lead to an error, e.g. when a radiologist is deciding whether or not to hydrate a patient before a cardiac angiogram; receiving word that the patient has normal renal function, the radiologist might skip hydration and send a patient into dye related renal failure. Similarly, diabetic renal disease will not be spotted as early.

VI. Lyme Disease Testing

Lyme Disease is caused by the B. burgdorferi organism that is introduced into patients by the tick bite. (See Topic Introduction - Exhibit 9a.) The organisms double in number every day but are not detectable by blood tests until there is a large distribution of organisms in the body. And since the organism spends much of its time within the cells of the patient, the serum markers miss many of the cases. The best chance to diagnose the illness and start timely treatment is for the physician to be interested, inclusive, and ready to move into treatment without restraint. But Kaiser - located in the Lyme endemic state of California- is often disinterested, exclusive, and ready to move patients into untreatable categories of illness.

About 12,000 to 15,000 cases of Lyme disease are reported each year in the United States, mainly in the Northeast and North Central parts of the country and in parts of California. If undiagnosed and/or untreated it can lead to arthritis (especially the knees), numbness or paralysis (especially the facial muscles), problems with heart rhythm, and problems with memory or concentration. A good over view of Kaiser's approach is supplied by Miguel Perez-Lizano in Exhibit 9b.

Kaiser's approach to Lyme's disease is to found in its protocol of treatment (Exhibit 9c), now hidden away from the public eye like most all of its treatment guidelines. It is clear from studying the Kaiser Lyme protocol that the ELISA test is used for screen (first chart) and the Western Blot (second chart) for positive diagnosis. To best see this one should follow the two flow charts of decisions. The expensive Ceftrioxone IV is reserved only for third degree heart block, proven arthritis, and proven CNS problems from Lyme.

The protocol suggests that the ELISA test "has a sensitivity of 94%." But in Kaiser's Permanente Journal article (See again Exhibit 5 - the graph on Lyme Disease.) The Kaiser chart shows that a greater number of patients are missed by depending on lab tests.

Kaiser's problem with aggressively treating suspicious cases of Lyme disease is the cost of long term Rocephin (cephtriaxone), an antibiotic given either by the intramuscular or intravenous route. The individual patient deprived of Rocephin and suing Kaiser under the arbitration system with records being altered has little chance for justice despite cardiac or nervous system damage.

The best approach to Lyme Disease is that published by Sam T. Donta, MD, Professor of Medicine, Divisions of Infectious Disease and BioMolecular Medicine, Director, Lyme Disease Unit, Boston University Medical Center- 1-617-638-6017. This summary report is found as Exhibit 9d. Dr. Donta - on page "6 of 13"- explains that the two-tiered system of testing [which Kaiser is using] came out in 1994, but "over 75% if patients with chronic Lyme Disease are negative by ELISA." Thus to use it as a screening test is ridiculous. A positive Western Blot test with a negative ELISA test is considered a positive test; but Kaiser excludes these patients.

Dr. Donta recommends four weeks for the initial treatment of possible Lyme disease. Kaiser recommends three weeks. Dr. Donta recommends 12 months of antibiotics if the disease has already had 12 months to develop.

As for ceftriaxone use for one month in proven cases followed by two months of oral doxycycline was too short for proven illness according to Dr. Donta. Kaiser, instead, concedes that maybe two weeks of ceftriaxone is too short, and four weeks should be used. Kaiser also suggests that placebo (sugar pill) use helps 35%, thus inviting the physician into an area of deception.

The Kaiser pattern is clear: undertesting and underdiagnosing. This comes through as one reviews individual patient stories - see Exhibits 9e, 9f, and 9g.

And in one patient's case an arbitration judge agreed that Kaiser had missed Lyme disease but was puzzled about liability if the pediatric neurologist - who assured the adult patient she did not have Lyme disease and did not need an infectious disease referral should be held to the error. The patient had asked for an infectious disease consult and that was refused. Certainly, a pediatric neurologist should not be screening for difficult to diagnosis adult conditions. (See arbitration outcome - Exhibit 9h; the patient would be lucky to get $25,000 after legal and expert expenses.)

As patients with untreated Lyme Disease will become disabled and fall into a governmental category of disability which triggers Medicaid and then Medicare, Kaiser does not, once again, have to pick up the cost of its failure to diagnose. Instead, the government does. This is also true of "end stage" emphysema, heart disease, renal disease, liver disease, etc.

Transferring risk back to the government is a favorite tool used to maintain Kaiser organizational profit.

VII. Anthrax Testing

Soon after Kaiser missed an anthrax diagnosis in a postman in Maryland - despite his asking the nurse practitioner to be checked for anthrax - the huge HMO tried to take the public relations offensive and featured on its website the Kaiser anthrax testing and treating criteria. This was unusual because Kaiser generally treats its testing protocols as top secret business documents.

The HMO said that it had worked out the criteria with Johns Hopkins School of Public Health (the same program which graduated Dr. David McKinnon Lawrence some thirty years earlier).¹³ There was also the suggestion of collaboration with the CDC.

But I did a comparison of the Kaiser criteria and the CDC criteria (Exhibit 10a) and noticed some dangerous deficiencies in the HMO version. The patient, for example, should only be taken seriously if having 9-1-1 level symptoms. This is a big mistake since Anthrax will cause only moderate symptoms before catastrophic collapse. It is a disease of the mediastinum (middle of the chest) more than that of the lungs - which is why the CT scan is so much better than a chest x-ray and providers should not wait for shortness of breath. By the time the patient is at the 9-1-1 level of symptomatology, it is generally too late. Also looking for low oxygen is not a screening tool for Anthrax infection.

The Kaiser criteria were, luckily, not adopted as the gold standard of care despite the website's hopes to imply that such was true. In fact, the website topic - if accessed by physicians - was turned into a recruiting tool for Kaiser in California even picturing a view of the Bay Area similar to that enjoyed by Dr. Lawrence up in the hill in Piedmont. (Exhibit 10b.) Perhaps the idea was that Kaiser could be an escape route for those doctors not willing to interact with the East Coast's bioterrorism issues. East Coast urban residencies - particularly for those doctors from other countries - is a common recruiting area for relocation to Kaiser. Help with getting a new home loan in California - which is later partially or completely forgiven - is part of the pitch as well.

The Anthrax approach of Kaiser was an example, once again, of using an undertesting strategy to keep costs down. Luckily, for Kaiser patients in particular, the threat of Anthrax has been temporarily contained. But Kaiser will be picking up some day the legal fallout from missing a case where the patient came in with the request to be checked for an illness highly tied to his occupation - working with mail bags at the Brentwood facility.

VIII. Blood Clotting Studies

One Kaiser patient suffered first a venous clot in his right leg and than later an arterial clot. Kaiser assured the family that all clotting studies that were useful had been done, that the patient had no definable clotting disorder. The patient went on to lose his leg.

Only in later testing by Stanford was the correct clotting defect - one actually causing excessive clotting - found and the proper high dose of Coumadin given. New clots stopped occurring.

Kaiser confused the issue at arbitration arguing that the problem was the smoking related Buerger's disease, even thought that disease is about peripheral clotting. But since Kaiser spoils the chart evidence, judges have an easier time awarding little or nothing to patients.

[Kaiser is the largest payer to retired judges in California. The idea that such arbitration judges are truly neutral under such a situation is highly questionable. The patients do win about half the time - if they can survive the many challenges - but the awards are often so low that the patient gets nothing, e.g. facial nerve damage due to surgical error with permanent shoulder sag and terrible pain (damage award $30,000) or knee of a repairman wrecked so that career lost (damage award $15,000) or a Kaiser pedophile endocrinologist physician masturbating a diabetic child on every visit (award only $50,000). ]

IX. Chest X-rays

Kaiser saves money if its x-ray departments do not pull up old x-rays for comparison. It can accomplish this simply through impossible workloads. The Kaiser radiologist trying to show a "report card" of efficiency will read through as many x-rays as possible without old films.

When the x-rays are read, the standard of describing the heart, the lungs, the rib pattern, etc. is often changed to the simplistic word "normal." The idea is that the less the patient understands about abnormalities, the less interested the patient will be in asking questions at the next visit. And most symptoms can be funneled into fibromyalgia and the stress symptoms of the "worried well."

This pattern of ignoring old films lead one patient to untreatable lung cancer, the type that is not smoking related. Careful viewing of successive films would have caught it earlier. Such careful comparisons are not part of the HMO business plan.

Similarly, in the case of another patient, an outside x-ray ( Exhibit 11a) showing a key respiratory diagnosis was sent with the patient in March of 1999. By the next x-ray -just one day later - the radiologist said that there were no old x-rays for comparison (See exhibit 11b). The outside x-ray was lost just that quickly. The patient went on to have serious heart problems from underdiagnosis.

The general pattern of ignoring early symptoms of cancer - "give the cortisone a chance" - spills over into underreading disturbing x-rays and then suddenly finding the cancer everywhere later on. Or there may be simply no x-ray taken at all when the symptoms would have demanded it. In Exhibit 11c, I (a former Kaiser physician) and co-author Romana Eagen (a former Kaiser patient) dramatized a real missed cancer case in preparation of a book on managed care (mostly Kaiser).

X. MRI'S

CT scans utilize a $1 million machine. And MRI machines cost at least $2 million. Pure efficiency of care management would lead to using the machines around the clock to maximize the cost of purchase.

But there is another approach - to put barriers in front of the physicians. When I worked in the Kaiser emergency room, the then Chief of Radiology told me that I could not order a CT scan of the low back from the emergency room location without first getting the permission of the physical medicine director.
So I called the physical medicine director only to hear that the need for his permission was not true.

So as an hourly physician, I was subject to the tricks of the for profit partners. Generally I had to threaten their licenses with the Medical Board to get their attention. [It is now my belief that the California Medical Board has brought on a disproportionate number of "experts" from the Kaiser ranks and the fear by the Permanente partners of license challenge is minimal. Kaiser is so large and its physicians so politically positioned, that the Medical Board can be turned into a weapon to quell Kaiser whistle blowers.]

On another occasion the same radiologist tried to stop me from ordering so many head CT scans by saying that he would not give me the CT readings results in any convenient fashion. I told him that he would be hurting patients waiting for results and occupying ER rooms as well as those in the lobby who were having to wait six hours just to be seen. Once again I threatened his license, and he reversed his decision. It took me three complaint letters to get him fired as head of radiology.

Some MRI's have the purpose of checking certain ligaments. The MRI of the knee, for example, is used to check the cruciate ligament and meniscus ligament tears. Thus any MRI should describe both. In the Kaiser Santa Rosa this service is contracted out to a physician group; those physician do not even bother describing the cruciate ligament (Exhibit 12a). The actual Kaiser reading is thus downgraded from the real damage of the knee - see a better, private report in on the same films Exhibit 12b. The latter report turned up too late to be used for the arbitration process.

XI. Biopsies for Cancer

Cancer biopsies would seem to be incorruptible. Almost all cancers are staged by cell type under the microscope and staged body distribution by CT scans. These are then reported to the national cancer registry. So what could go wrong?

One patient whose records I know well went in to Kaiser for a salivary gland area growth. During surgery the Kaiser ENT surgical resident went too deep for the unnecessary removal of a lymph node and clumsily cut the patient's accessory nerve. This patient now has a sagging and painful shoulder and will have this for the rest of her life. During the arbitration. Kaiser said that they had lost track of the Kaiser resident. In reality he was simply employed by Kaiser across the Bay, only a single keystroke needed to find him. There is no penalty in California for hiding percipient defendants.

The patient was told that she had a cancer of the gland. But the staging was not consistent in the Kaiser records. And when she looked for out of state confirmation, slides were sent. But were they hers? Suddenly Kaiser said that they were recut tissue and that the original slides had simply disappeared.
Kaiser is not the only HMO that manipulates cancer diagnosis interpretation. Another patient in another HMO system had an abnormal gastroscopy. The biopsy was read as a "maltoma," a very low grade tumor. But a rebiopsy at Stanford showed a gastric lymphoma, a more serious problem. When the original slides were re-read, the original interpretation was proven to be an underdiagnosis. To cap it off, the patient has a letter from the IPA medical director saying to the patient that the latter did not have cancer at all.

Thus patients in states highly penetrated by HMOs cannot trust biopsy reports. And California is one of highest penetration HMO states (See Exhibit 13). In fact, the penetration is so high that most physicians have decided to treat every patient as if they were in HMOs. It no longer matters what plan you have. This was noted in the report called "The Evolution of Medical Groups and Capitation in California," put out by the California HealthCare Foundation (Exhibit 14 - Cover page and page 11). On page 11 the report offers the following quote:

"At some point, each of the five groups [physician groups organized as for profit independent physician associations or IPAs] decided to develop operational systems as if all its patients were captitated. "

One particular group expressed it best (on the same page):

"Our definition of managed care is capitation. We decided to begin to treat every patient as a capitated patient. " By David Druker, MD, President, Peninsula Coastal Region, Sutter/CHS.

Thus, every patient in California is at risk for HMO/IPA strategies even if the individual has a higher cost insurance policy just to avoid such compromising.

XII. Colon Testing

To score HEDIS supposed quality points. Kaiser has created a large program of sigmoidoscopy testing to screen for colon cancer. [This sounds positive, but only about 70% of colon cancers are in this final portion of the bowel; the other 30% are often missed; full colonoscopy needs to be done more often at Kaiser.] But to save money on the sigmoidoscopy, Kaiser has empowered nurses to do the test including colon biopsies. The patient is not given a choice - physician or nurse. Rather the consent is unclear and nurse is just there as the patient is laying on the table, tilted up for the procedure; this is hardly a moment to question who is doing what.

In 1997 Kaiser was non-profitable for the first year in its sixty year history. Dr. David McKinnon Lawrence, who only directly treated patients during his intemship in Kentucky and never thereafter - created the Pathway for Recovery 2001. Within this secret, internal plan, many physicians were asked to retire. (See Exhibit 15.) The remaining physicians became more like team leaders for other, lesser trained practitioners (See Exhibit 15). Orthopedists would often be matched up with three nurse practitioners, one bragging in an ad that he and three nurse practitioners could handle a pool of 24,000 enrollees. Family physicians were asked to let nurses perform many new tasks, e.g.changing insulin doses rather than teaching patients how to follow the physician orders.

In fact, the whole Kaiser system is about everyone practicing just past their training. The State of California found Kaiser "service partners" (janitorial housekeepers) being asked to answer emergency call buttons. Nurses were and are empowered to do colon biopsies. Nurse practitioners are asked to make orthopedic decisions, even on knee ligaments. Pediatric neurologists are asked to see adults as well. General surgeons are asked to do pediatric surgery.

Each patient being forced into arbitration ends up trying to question the judgment at the moment, the latter represented by Kaiser as some "contractor's" bad day. So if a nurse made an error in a colon biopsy, there would be a covering physician nearby and the patient none the wiser.

XIII. The Permanente Culture

To understand the thinking that goes into the "Permanente Culture" that creates these strange ethics, the interested reader needs to study two Kaiser produced materials."¹⁴ One is a book Can Physicians Manage the Quality and Costs of Health Care?, also called The Story of the Permanente Medical Group, by John G. Smillie, MD, a retired Kaiser physician manager. For future references, I will call this The Kaiser Story book. The other Kaiser production is a corporate overview published by Kaiser called "The Permanente Map" (also "Permanent Medicine: Navigating a Course to Our Sustainable Future"). This is shown in Exhibit 16, somewhat enhanced for better color contrast.

Cross referencing the Kaiser Story book and the Permanente Map, the interested reader can piece together an organization which approaches cult status. In fact, one of the requirements at Kaiser is that the physician cannot work elsewhere; this rule is said to be because of "malpractice" insurance concerns¹⁵ but is really about insulating the physician from the standards of care in the community.

The Kaiser Story book - The book begins with a focus on "group practice." This seems obvious for Kaiser, but it really means a "group" ethic in which each physician must weigh every patient decision against the partnership profit of the other physician. In fact, the "genetic code" (page 99) of the Permanente group is prepayment, group practice, adequate facilities, and "a new economy of medicine." While the "new economy" started out as an emphasis on prevention, it drifted by 1967 to a new era when "health" would "no longer" be "something that doctors gave patients, but as something that healthy members maintained for themselves through a healthy lifestyle."

This change in construct meant, thereafter, that patients with less than perfect lifestyles were to be short changed on care. And further that Kaiser would become expert at blaming as many conditions on life style as possible. This latter blame reduces the patient's self esteem and will to fight for proper testing.

But the Kaiser ads give no such indications of such treatment. Rather the ads ask everyone to trust Kaiser (See numerous examples in Exhibit 1). Kaiser also (on page 211 of the Story book) emphasized that many patients were and are simply among the "worried well." This meant that testing should be spared on such individuals. And, as further guidelines for the new Kaiser physician, "the well member became an asset, the sick patient a liability" - (see page 255). Dr. Sidney Garfield, the physician founder of Kaiser, also taught "the economy of shortages" as if purposely underfinancing was good policy.

Perhaps the most disturbing issue - to the Hippocratic Oath promise held out by the Western physician in the white coat - is that in Kaiser by the 1950s it was clear that "the individual physician was the profit center." Thus the physician was the combination of accountant and gate keeper.

Kaiser's statement that physicians are not second guessed by accountants really means that they are, instead, all trained and pressured to be their own accountants; and, they get benchmarked or graded to make sure they do not do otherwise. Monthly meetings are held at each Kaiser facility to compare business score cords and embarrass those who are too generous with medical care. And Kaiser did not and does not keep those physicians who were or are unclear about this part of the Permanente culture. "Physicians who created more than their share of unnecessary expenses ... were encouraged to leave the Medical Group." (Page 177.)

"The Permanente Map" - This is the only document I have seen that tries to summarize corporate goals and challenges of Kaiser Permanente. Although primarily an internal, motivational graphic put together by the Grove Consultants (advertising specialists) for Kaiser, a faded copy of the map got placed in the Permanente Journal. I believe that the fading of the copy was meant to deter those from the outside studying the details within, just as important patient records are light copied when they might hurt Kaiser legally.

The map begins on the left side with the "group ethic." Kaiser physicians understand that this replaces the Hippocratic Oath and elevates the partnership over the best interests of the patient. If pressed, Kaiser will spin this into the idea that the "group" means those marginally financed patients who are able to join Kaiser due to low premiums; Kaiser will express this as a gift from the older generation to the younger generation with all patients happy with the compromises involved. But the "group" is really the senior physician partners, both active and retired, in need of a high cash flow to fund yearly profit distributions and future retirement bliss.

Then the Permanente Map - displaying historic beginnings left to right - wanders through the early clinic/hospital phases as Kaiser developed as a Contractor's Hospital for the LA Aqueduct project and the Grand Coulee Dam. And Kaiser has always been employer friendly, and employee brutal.¹⁶

Lake Tahoe is next featured with the home of Henry Kaiser, as if the only house on the lake. This is shown to remind physicians of the origin of the Tahoe Accord that spelled out hospital/physician split of profit -the 50:50 split. This arrangement has not changed in sixty years but is hidden from public view. I doubt that one patient in the whole Kaiser system understands that the refusal of MRI tests results in half of the saved money from not doing the test flowing back to the same physicians as unspent premium dollars sitting in risk pools and called "profit" when unused.

The rest of the map shows Kaiser's approaches in double speak style:

1. "Partnership" is about the profits of senior and junior shareholders physicians;
2. "Care Teams" is really about less not more physician involvement with patients, a retreat to physician coach status;
3. "Group capitation" is about the prepaid monies that each physician must try not to spend;
4. And while the licensed "doctor patient relationship" is mentioned, the unlicensed "Permanente patient relationship" is more of a constant issue - see one spoke of the steering wheel in the helm of each Permanente group ship.

Note also the crossed triangles on the right side of the Map emphasizing the distributive group ethic being more prominent than the individual humanist ethic. The whole effort is to distant the doctor from the patient - and any professional covenant learned in medical school during the white coat ceremony - as the key to getting to the "KP Promise Land" of "Investment Capitol" [and retirement monies called "Our Sustanable Future''].

Interestingly, "For Profit" is ridiculed as a "Siren" of "Greed." There is, again, the attempt to make Kaiser physicians look only salaried.¹⁷ Actually the profit percentage of senior Kaiser physician partners would probably top others in the state if ever disclosed. At times when the physician is in Kaiser long enough, it exceeds the physician's regular salary.

The limitations of lab tests and alteration of the normal limits of testing in many areas - so as to result in less disease being found - fit these principles as part of "Group Responsibility." And the individual physician print out every three months of how Kaiser is doing on the profit side (unspent risk pools) is enough to substitute as its own siren of green toward the year end enrichment. If the physician is "group suitable," personal wealth is soon to follow. [But is it green (honest) or red (fraudulent) money?]

And, as for the "evidenced based practices," this is another illusion. Kaiser physicians review national guidelines for supposed evidence¹⁸ apparently paying a license fee to the National Clearinghouse - and then Kaiserize them into a downsized version. For example. Kaiser gives the impression in its Diabetes CPC (Clinical Practice Guideline) that the rest of the world is turning back toward the 1970's diabetic pill Tolinase, now dirt cheap. But the PDR suggests that this medication takes more monitoring in the elderly than some of the newer medications because it lasts into the night when it can drive the sugar of the patient too low. Kaiser uses Tolinase a lot; Stanford University pharmacy, in contrast, believes that medicine to be more of a museum curiosity and is not particularly into pill splitters.

One Kaiser patient in the Bay Area of Northern California was told that he had diabetes and then was begun on Tolinase. In fact, he had to split a larger pill into two unequal halves. He had nausea and vomiting from the medicine. Then he was told it would take six weeks to get in to make a medication change. When he went in to the clinic, he was told that he did not have diabetes after all. If the disease cannot be treated cheaply, it is time to remove the diagnosis.

Kaiser has tried to hide its Clinical Practice Guidelines from non-Kaiser physicians. That is because if the guidelines are compared on the outside, they will reflect the cheapness and not the science that has been introduced. Finally, after a two-year lawsuit. Kaiser has agreed, in 2003 to share the guidelines on its website. To date it has not done so. The reason for this is that these documents have been manipulated or Kaiserized away from the standard-of care endorsed by the national specialists in the same field.

XIV. Not Reviewing Outside Records

One way to save money is to ask patients to sign for the transfer of old records but to never read them. I have yet to see where a Kaiser physician has read any outside record carefully. Instead, such records are simply filed in case someone might want to review it. That means that all of the past abnormal testing is almost always ignored. This is a huge loss to patients transferring in to Kaiser. Lack of record sharing creates a huge loss at the other end as patients leave Kaiser. The state's concept that medical systems and patients share 50-50 ownership in California is not respected in the state's largest HMO. But the state would, apparently, rather benefit by Kaiser's low cost than police its poor behavior.

XV. Patients as "External Customers"

The overall view of the patient in Kaiser is that of a dis-empowered "External Customer" waiting in line. In the brochure shown in Exhibit 17a, this attitude is graphically displayed. In contrast, in the same document, the staff in Exhibit 17b looks bright and attentive.¹⁹ And the drawings do reflect the attitude.

In the emergency room I worked in with Kaiser, I heard for the first time the phrase "therapeutic waiting." The joke was that the excessive waiting times perhaps six hours just to start to be seen by a physician - test to see just who is really ill. Actually, the most ill leave first, as they cannot physically endure sitting so long.

XVI. Physician Total Income

A typical Kaiser emergency physician at a partner level makes:
1. $15,000 a year as a base;
2. A benefit package that is probably worth 25% more;
3. Signing bonuses (I was offered $30,000);
4. A corporation/partnership dividend of about $72,000 for the profit of not testing or treating patients at community standards - so $6000 a month accrues;²⁰
5. A great vesting package for money at retirement;
6. Achievement bonuses,
7. Moving benefits including home loans which appear to be partially or totally forgiven over time;
8. Decreasing work load over time.

One Kaiser physician managed to create a $ 1 million private art collection off all the monies pouring in. (See "Kaiser's dirty little secret" - Attachment #18). The corporation dividend to physicians - item 4 in the above list - is Kaiser's biggest secret. It should be a warning forced onto every Kaiser ad, like the cancer warning on a pack of cigarettes.
One of the rights spelled out is within "Your rights in a Medicare Managed Care Plan" page 46 of Medicare and You - 2001 by HCFA (now HHS).

"You have a right to know how your plan pays its doctors. "

This may be the most frequently violated medical right in all of Medicare. It is not that HMO plans simply do not tell about the profit splits, they - with Kaiser in front of the pack - go out of their way to picture the physicians as simply working for monthly salaries or defined contracts. Notice this concept in the Kaiser press release out of Denver (Exhibit 19).

It is time for the public to understand the profit sharing from top to bottom so that can realize that the blame for poor care is split between the HMO's "plan" cleverness at withholding broad benefits and the physician shareholders' cleverness at withholding basic care at the clinic and hospital level. This is a deadly combination for seniors.

Only the federal government can spell this out for its citizens. The public often wonders why its Medicare benefits are going down (Exhibit 20) as their costs are going up. The answer is found within the physician groups at the partnership level skimming off the top, particularly in California. Even the groups that go bankrupt reform months later, e.g. Priority IPA which failed and then reformed into Phoenix IPA utilizing much of the same board. Patients moving from one HMO to another achieve no escape from this greed but rather simply a new set of faces with similar compromises. [Actually, patients moving from one system to another generally seek no care for three months; this is why an HMO can make money by firing one IPA and hiring another across town. ²¹]

And the public would like to know the life style of the CEO executives at the top of HMOs like Kaiser. First, there is outgoing CEO of Kaiser, David McKinnon Lawrence. Issues the public might want to better understand would include:

1.   Exhibit 21a-Dr. Lawrence's $2,800,000 home, a reflection of his base year 2000 salary of $2,186,384 (hidden bonuses perhaps doubling this amount);
2.   Exhibit 21b-Dr. Lawrence's relationship to Watson Pharmaceuticals - is he the same David Lawrence who was listed as Vice President of Business Development?;
3.   Exhibit 21c-Did he have part of his home loan forgiven (See"ln Silicon Valley a new kind of house call" as Exhibit 21c).

He has pledged in a published pre-retirement interview to simply become a health care advisor in the future rather than to actually draw profit and salary from any health care entities. The chance of this being true is zero. (As most Kaiser physicians finish a task - like being a physician in chief of a hospital - they are pictured as disappearing into the sunset of retirement or change of field; then they pop up in another Kaiser system in another region, suddenly without a past.)

As for incoming Kaiser CEO Halverson, the Attorney General of Minnesota found in his records and that of the HMO all sorts of hidden perks and attempts to hide these from his own staff (See Exhibit 22). Often the similarities to Enron emerge - complex and changing ventures, self enrichment at the top, public relation spins that keep staff and patient misinformed, accumulations of power into CEO-President-Chairman of the Board,²² etc.

The only way to understand Kaiser is to follow the money from start to finish. Occasionally a light goes on and we catch a glimpse - (See Exhibit 23 - see the Bayer/Kaiser fraud). But, then. Kaiser seems to have the Teflon quality that nothing sticks and the government keeps hands off. One wonders if Kaiser will wiggle out of the Bayer scandal. Instead, the government should connect more dots - Kaiser - the repackaging Livermore distribution center - Watson Pharmaceuticals - Chinese production sites with high arsenic in the ground water - Kaiser executives on both sides of contracts - Kaiser patient records of all pharmaceutical transactions stored near Watson Pharmaceuticals in Southern California etc.

The Illusion of Non-Profit Permanante Physicians - In its 990 filing with the federal government - a document that is made very public and very well read²³ - Kaiser defines its different entities (See Exhibit 24) as the Plan, the Hospitals, and the Contracting doctors. It does not mention that the physicians are for profit groups. So standing side to side with the "Health Plan, a California non-profit public benefit corporation" and the "Hospitals, a California nonprofit benefit corporation," the image created is that the physicians are simple contractors with the public good in mind as well.²⁴ And with California's HMO penetration the highest in the country (See again Exhibit 13), there is little political will to make the issues clear."

The illusion is further maintained by the assertion that Kaiser Permanente does not have any national stock. (See Exhibit 25). The goal is to try to make the public believe that Kaiser physicians are just salaried folks like most of their patients and thus not subject to profit from withholding care. But The Penmanente Medical Group, Inc. is a registered corporation created for profit and issuing stocks (Exhibit 26).

XVII. Conclusion

The enormous under-testing of Kaiser patients is simply a small, sample biopsy of the broad corruption of a medical regime that is defrauding hundreds of thousands every day. The Mother Kaiser regime is then copied by other HMO/IPA mixes, whenever Kaiser can bypass, fool, influence, bore, or bully the regulators into playing along; silence is the biggest ally of evil. .

The regulation of health care in California just becomes part of the pretense that health care is occurring. The inspection notebooks all look good for the surveys (the latter run like high school proms); but the care does not match. (I was present during a multiple agency inspection of Kaiser and saw the games being played. I was not allowed, for example, to see the notebooks representing the emergency room, even though I was putting in the most hours of any physician that month.)

The testing frauds include:

1) normal blood cell and chemistry values being changed,
2) normal electrical criteria being altered in stress tests,
3) x-rays lost or being read without proper details,
4) infectious diseases like Lyme Disease being purposefully underdiagnosed with untreatable firbromyalgia substituted,
5) patient's with risk of Anthrax being shunted to clinics rather than the emergency room,
6) cancer biopsies being under read,
7) cancer slides disappearing, etc.

And those physicians not cooperating get bad report cards. Notice the word "Report Card" on my own computer record as a Kaiser physician (Exhibit 27 two pages).

This all accomplishes the goal of advertising sick care and then delivering only well care. Those who are sick must simply endure under-diagnosis until they drift to end stage conditions, thereafter to fall into other governmental reimbursement categories. Kaiser hospices abound with "end stage" illnesses that are not cancer; and morphine dispatches those who are profit liabilities.

Patients are defrauded; the government is defrauded. The outcome for seniors and the poor is dismal (Exhibit 28). The profits that come out of not spending premium monies are enormous (Exhibit 29), with a split 50% to the physicians. Kaiser does not deny the incentive but only hides in documents - like in Exhibit 30 - the full amount. In fact, the physicians even brag about being part ownersExhibit 31.

The only way the Kaiser culture will come to a screeching halt is if the federal government actively reclaims the billions spent on the illusion of care. And another $5 billion could be obtained if Kaiser lost its tax status - as Intermountain Health did - for not measuring up to the open, community health standards of the IRS.
The place for the government to start is with The Tahoe Agreement - Exhibit 31. And investigators must watch for the immediate disappearance of documents, as the state caught with Kaiser in a different case - Exhibit 32. When the government is ready, the places for document seizure can be specified. And a new deck of cards can be prepared to name those who have profited the most off the pain and suffering of seniors, e.g. the CEOs at the top and on down to the Kaiser male nurse who saw himself as a "closer" in home health care using unsterile technique to hasten lethal outcome.

HMOs should be required to show clearly to every patient how physicians are paid with exact figures. Then the individual patient is empowered to understand whether he or she is dealing with a doctor committed to the individual oath or the partnership for profit group ethic. When patients catch on. Kaiser has to move out of states - Utah, Nevada, Texas, Missouri, New York, etc.
But California is Kaiserfomia, and information is spun so well and newspapers so co-opted that one would think Kaiser is great resource for the West Coast rather than a ethical brownout pulling down the whole neighborhood of health care.

Customers can return bad products for refunds. Patients only have one life to protect and unfair professional tactics need to be understood before they begin, before the patient signs up to become a dependent member. This is a legitimate task for government, one formed to protect life, liberty, and the pursuit of happiness. I hope that in this report I have given government a few more tools to achieve such good governance.

Prepared without Reimbursement
As a Gift to Seniors and the Poor

By Charles Phillips, MD, FACEP
Former Kaiser physician [insider]
Current Kaiser reformer [outsider]

Footnotes

1. Page 6 of 1045 The Managed Health Care Handbook Third Edition by Peter R. Kongstvedt 1996 an Aspen Publicaiton: "Elwood, sometimes referred to as the father of the modern HMO movement, was asked in the early Nixon years to devise ways of constraining the rise in the Medicare budget.
Out of those discussions evolved a proposal to capitate Medicare beneficiaries (which was not enacted until 1982) and the laying of the groundwork for what became the HMO Act of 1973. The desire to foster HMOs reflected the perspective that the fee-for-service system, by rewarding paying physicians on the their volume of services, incorporated the wrong incentives. Also, the term health maintenance organization was coined as a substitute for prepaid group practice, principally because it had greater public appeal."

2. As most small businesses now offer only one health plan and an HMO plan at that, these millions of workers are dependent on the quality of an organization for which there is no real public analysis. These workers - for example, the Hmong translators of the KW Health Clinic in Fresno, California - are dependent patients in the sense that if the state and federal regulators stay quiet - which they do - the care is highly compromised. In fact, the care is sometimes worse than having no care at all.

3. As a volunteer plaintiff and expert witness in this case - since Audrey Timmis was my patient and is still my friend -1 discovered Kaiser not only splitting some 35 different pills (including some medications for seizures and heart rhythms) but even asked women to routinely use cheaper, oral estrogen pills vaginally.
The Timmis suit has temporarily reduced the number of Kaiser split medications. And many other "mananged care" systems are watching to see if Kaiser gets away with this compromise in care.

4.Kaiser's latest spin brochure on the topic tries to call all this medication "halving," which is another fraud. The resulting pieces are not equal in size. In fact, the dosage swings may exceed 40% from day to day.

5. To be "non-profit" - really a mostly IRS regulated designation-an organization need only be 51% non-profit. The Plan can be involved in all sorts of for profit ventures (up to 49%) and the public never be the wiser. The physicians groups, like the Permanente groups and other IPAs (independent medical associations), are clearly shareholders with stocks and huge dividends, but are never portrayed to the public in the for profit light. It is a deception that particularly hurts medical care in California since the media so rarely touches on the subject, Susan Goldsmith of the East Bay Express being a rare exception. In this most HMO penetrated state, the physicians do as much cutting of services as the plans do. I often think our state should be renamed Kaiser-fornia. Worst of all the physicians and the plans split the profits of withholding through the deal worked out at Henry Kaiser's estate some sixty years ago called The Tahoe Agreement. The unspent risk pools of money become the enormous dividends of medical inaction.

6. The degradation of the covenant of trust between the physician and the patient occurs first through language in which the patient becomes an "external customer" (see Exhibit 2). And the physician has become - particularly after 1997 - merely the coach of a "provider care team." This patient dis-empowerment through language is extraordinary and, as Karen Shore pointed out to Congress, just as effective as the Cambodian effort to kill off the intellectuals. The whole idea of a profession and its need for self-regulation is due to the gap in knowledge between the source of service and the dependent receiver of care that is not customer to business. But the protection systems are all failing in the race toward maximum MD and CEO income. About half of CEO income in "managed care" is in bonuses.

7. 10/25/02 - The Permanente Journal "Selecting and Interpreting Diagnostic Tests" page 7 of 8.
"Conclusion: ... Laboratory tests are of greatest diagnostic use to clinicians who find themselves in a '50:50 dilemma' and cannot decide whether the patient does or does not have the disease in question."

8. The LA Times had an editorial on this subject comparing buried arbitration mistakes to domestic terrorism. But the law did not change.

9. From "A Patient Bill of Rights" - American Hospital Association - Patient Right Number 2 - page 124, Ethical Issues and Patient Rights - Across the Continuum of Care put out by the Joint Commission of Accreditation ofHealthcare Organizations Chicago) Illinois) in 1998.

10. See also Chapter 1 "Rights of Patients" - "Patients are provided, to the degree known, complete information concerning their diagnosis, evaluation, treatment, and prognosis."
Accreditation Handbook for Ambulatory Health Care 1998 - Accreditation Association for Ambulatory Health Care, Inc. in Skokie, Illinois " a spin off from the Joint Commission.

11. Interestingly to me Kaiser leaves out the right of diagnosis in its "Patient Rights" section - page - 12
1998 Reference Guide [Booklet] - Kaiser Permanente Medical Center Fresno. This right is conspicuously absent.

12. Cancer of the colon is one of the top three cancers in the United States, and right sided cancer of the colon is often caught too late because there is no obstruction and only mild anemia to give a hint of disease until it is too late. And Kaiser's sigmoidoscopies by nurses do little for right colon diagnosis.

13. Whenever evaluating the support by any university of Kaiser's strategies, it is wise to first check on how many Henry Kaiser endowed positions are being supported by the Kaiser Family Foundation, falsely assumed to be separate from Kaiser Permanente, e.g. Stanford, etc.

14. These are rare glimpses of what Kaiser tries to keep as an oral tradition only - older Kaiser doctors teaching newer Kaiser doctors at hotel retreats (p. 203) of the book about to be discussed. So these few written renditions need close study.

15. This was the way it was explained to me when I wished to continue my separate, non-competing office and yet progress to a benefit status.

16. Kaiser is one of a handful of organizations in California that can force their injured employees to stay within the HMO system for one year. Other workers in the state have freedom of provider choice after one month.

17. Kaiser also lets the Kaiser Family Foundation criticize HMOs in general, with the Kaiser Health Plan hoping to escape the public wrath by pushing its brand name Kaiser trust and "non-profit" status. The goal is for Kaiser to try to end up as a West Coast Mayo Clinic type of public image; this effort has failed because the stories of mistreatment pour out every day. The Kaiser Family Foundation also tries to look very separate from the Kaiser Plan, but the family is represented on the Plan's board and, in fact, helps guide the Health Plan into venture capital spinoffs of many varieties: CareTouch, Hearx West, LLC, OnCure Technology, Meridian Health Care Management, Inc, Optimal Renal Care, LLC as part of the German Company of Fresenius) ?Kaiser Pharmaceutical Co., Ltd, ?Caremark, ?KPC Medical Management, ?Emageon, Inc., ?Micro Optic Design Corporation, ?Kaviset 1, LLC, etc.

18. These guidelines were developed by the government - Agency for Healthcare Quality and Research ("arc") - for a cost of $500,000 to $1,000,000 per disease, e.g. community acquired pneumonia. The spirit of science has already been removed by the time they got through this process.

19. I am often reminded of the peasants of Sherwood Forest lining up to get scraps from the Castle of the Sheriff of Nottingham. The self-anointing that goes on in the castle is related to the MICRA cap and ERISA legislation protections - legal motes keeping the citizens disempowered and demoralized. Thomas Jefferson would have a hard time matching this up to the human rights expressed in the Declaration of Independence and the Constitution.

20. This money is viewed quarterly and distributed annually.

21. PacificCare did this to 65,000 patients in Fresno several years ago. The records nightmare resulted in HMO profit as patients thought that the new IPA physicians would care about the diagnoses of the previous IPA physicians.

22. The only oversight of Kaiser under Dr. Lawrence was his own view of HMO headquarters from his fancy home in the Piedmont Hills.

23. Commonly used as a place to brag about community service, even though that is required under tax law.

24. The Florida Supreme Court in its March 27, 2003 recognized, in Rotlando Villazon v. Prudential Health, that HMOs and their physician groups have become intricately entangled. 'While physicians in the past in the traditional pattern of American life may have constituted distinct entities and independent centers of occupation and profession, that model has been dramatically altered through the HMO concept in a significant manner which a legal system cannot simply ignore." The decision was that the HMO could not invoke the federal EKISA protection over state law such that the HMO could escape agency in the in compromises of medical necessity. [This is probably why the HMOs want to hide under the new federal tort capping law being passed by the House and now studied by the Senate; the public is unaware that the HMOs have any legal crisis and are, instead, rather stunned by their profits and reserves - Kaiser's "reported net income" in 2002 is expected to be about $600 million. In fact, Kaiser is probably waiting to disclose how the physicians are paid having lost a major lawsuit on the issue in January 2003 - until the new HMO lawsuit cap is passed.]

25. Actually, Kaiser Plan has been caught - by Santa Monica consumer advocate Jaimie Court - loaning money to the Permanente Physicians so as to make donations to Governor Davis. This loan, I believe, will be added some day to the long list of Permanente loans forgiven by the Kaiser Plan over time. I even believe individual home loans to Kaiser physicians by the Kaiser credit union are forgiven or bought outover time.

Contents

I. Introduction