Local Health Care Provider to Merge with Public Corportation

Class action lawsuit cites concern over patient’s
rights for treatment

By Toby Lewis

An upcoming merger between a local health care provider and a national publicly-held corporation has some patients, and one local law firm, crying foul.

In May, Torrance-based HealthCare Partners announced a merger with DaVita, Inc., a Denver-based publicly-traded dialysis company with no previous ties to California.

The $4.4 billion merger, the largest consolidation in healthcare history, is set to take place Oct. 30, according to Randy McMurray, attorney with the Cochran Law Group, LLP in Los Angeles.

“This merger has real-world consequences,” McMurray said. “Consumers are in jeopardy of an unregulated medical group taking on too much risk.”

McMurray said the Cochran Law Group is filing for an injunction next week in an attempt to stall or stop the merger, which he says may be an unlawful transaction — i.e. a contract to achieve the unlawful objective of permitting non-physicians to control patient care.

According to California law, a license from the Department of Managed Health Care is required to operate a health plan. The plan then transfers the risk and obligation to provide coverage to other entities called “risk bearing organizations.”

Risk bearing organizations are most often medical groups or associations of doctors who agree to assume the risk for all professional costs in exchange for a fixed fee, per member, per month, called a “capitation fee,” McMurray said.

“Physicians’ groups are not allowed to pay for or direct hospital care without having a Knox-Keene, license,” he said. “And HealthCare Partners does not have such a license.”

Most importantly, McMurray said, HealthCare Partners is directing hospital care, and it is providing its members a much narrower hospital network than members are entitled to under their policy.

“This practice has decimated the Los Angeles hospital market, denying legitimate, licensed hospitals capitation contracts which might improve their financial position,” McMurray said. “Every hospital and medical group which obeys the law suffers a competitive disadvantage, as they can’t compete with an unregulated lawbreaker.”

According to McMurray, local hospitals outside of HealthCare Partners’ network are not the only ones affected by this practice. Patients are suffering too.

Take the case of Juan Carlos Jandres. Jandres consulted his healthcare provider, HealthCare Partners, in 2010 when he felt a strange growth on the roof of his mouth. The growth was causing him sinus problems, pain and discomfort, he said.

In a malpractice lawsuit brought by Jandres against HealthCare Partners in 2012, Jandres alleges that HealthCare Partners and its associates “failed to correctly treat, examine, diagnose or otherwise care for” the growth.

Instead, doctors informed him that the growth was of no concern and performed sinus surgery on Jandres, without removing the growth, the lawsuit alleges.

“I wanted to get a second opinion from an expert,” Jandres said. “But HealthCare Partners would not allow me to see any other specialists outside of their network.”

Nearly one year after Jandres first reported the growth to his doctors, HealthCare Partners finally removed the growth and sent it to a lab for analysis, according to the lawsuit. The growth turned out to be cancerous.

Ultimately, Jandres was seen by experts at UCLA Medical Center in Los Angeles who informed him he was suffering from an advanced form of cancer that had spread to his tongue and various bones around his facial area. UCLA doctors recommended he should be treated immediately, according to the lawsuit.

Jandres ended up losing all of his teeth, part of his tongue and a facial bone, in addition to undergoing many months of rigorous chemotherapy.

“The problem that we have with the merger between HealthCare Partners and DaVita is that DaVita is publicly held,” McMurray said. “It’s only duty is to its shareholders, not to its patients.”

McMurray said California laws such as the Knox-Keene Act of 1975 and the ban on the corporate practice of medicine are intended to prevent unlicensed persons from interfering with or influencing a physician’s professional judgment.

“The purpose of the licensing process is to make sure that the groups are subject to increased oversight by the California Department of Managed Healthcare,” McMurray said. “These increased oversight requirements were put into place to protect the California consumer.”

He also said the laws are in place to avoid a repeat of the bankruptcies that occurred during the 1990s when numerous physicians groups proved incapable of managing risk and went out of business, all at great harm to patients.

McMurray stated that the Department of Managed Health Care has allowed HealthCare Partners to operate without a license and has not launched an investigation into the company’s upcoming merger with DaVita, in spite of many complaints.

Marta Bortner Green, Communications Director for the California Department of Managed Health Care did not respond to a request for comment on the merger and as to whether or not a medical group can legally direct or reimburse hospital care without a Knox-Keene license.

Representatives for HealthCare Partners also did not return a phone call for a request for comment.

“If this issue is not addressed now, there will never be another opportunity for California legislators and regulators to remedy the situation,” McMurray said. “HealthCare Partners should be required to obtain a license before the deal is allowed to close.”