DMHC Levies Six-Figure Fines Against Kaiser, Anthem

The California Department of Managed Health Care (DMHC) has levied six-figure fines against Kaiser Permanente and Anthem Blue Cross for failing to respond to a seriously ill child's request for a medical second opinion and lapses in addressing payment delays to providers.

Kaiser received an administrative penalty and fine totaling $225,000 for a case involving a minor of an unspecified age.

According to DMHC records, the female child had been diagnosed  “with a rare and complex disease which caused constant dizziness, headaches, deformity and head sensitivity.” Although the DMHC correspondence did not directly spell out the medical condition, it makes passing reference to an arteriovenous malformation, or AVM, an abnormal connection between arteries and veins. Cereberal AVMs can lead to brain seizures and dizziness in all patients. Children diagnosed with the condition are at higher risk for cardiac failure.

Kaiser did convene a team of medical specialists to oversee the enrollee's care. Surgery was discussed but it was decided to put it off until the child reached a certain unspecified age.

The child's legal guardians requested a second opinion on the surgery for a specialist outside of Kaiser's provide network. Kaiser denied the request, citing that the child's insurance policy required second opinions be rendered within the Kaiser network.

But in the child's case, the DMHC's report concluded that “no written response” to the request for the second opinion was provided. “The medical group did not offer any specialist in or out of Kaiser to perform the second opinion. Instead, the medical group informed the enrollee that she was being treated appropriately within the medical group and was therefore not entitled to a second opinion.”

Altogether, 16 requests by the patient's guardians for a second opinion were summarily rejected verbally over a period of six months. “During this period, the enrollee was repeatedly being directed to the medical group by the plan or vice versa, allowing her symptoms to persist,” according to the DMHC.

Kaiser finally relented, allowing an examination by an out-of-network specialist, which led to surgery shortly thereafter.

The DMHC concluded that Kaiser's medical group had a legal obligation to provide a second opinion when requested by a patient suffering from an illness that is life-threatening or could lead to loss of bodily function or impairment, and that Kaiser had violated state law by not doing so. Moreover, the ongoing verbal rejections of the request for the second opinion left the enrollee without an appropriate paper trail to file a strong grievance with either Kaiser or the DMHC.

Kaiser has agreed to a corrective plan. It includes new procedures in which enrollees can request second opinions through its Member Services division, new training of its medical group employees about how to handle second opinions, revisions to its evidence of coverage documentation, and general notices to enrollees through communications posted at its medical offices and on the Kaiser website.

The fine is the largest Kaiser has received from the DMHC this year. It was fined $195,000 by the agency in July for multiple instances of not responding to grievances from its enrollees in a timely manner. Its largest fine from the agency was imposed in 2013, a $4 million penalty for failure to provide adequate mental health services for enrollees.

Anthem Blue Cross was fined $200,000 for a failure to correct all deficiencies that arose from a routine examination the agency undertook of the plan in 2010. Among them was Anthem's incorrect denial of provide claims, among other issues.

Immediately after that examination some six years ago, Anthem agreed to a $900,000 fine from the DMHC. Anthem agreed to pay $500,000 upfront, with the remaining $400,000 suspended in lieu of Anthem being fully compliant with claims payment and dispute resolution processes under state law.

But in a followup examination that occurred in 2013, the DMHC found that Anthem had mishandled reimbursements for four of 59 claims it had examined, violating the original 2010 agreement. It also provided “inaccurate facts or reasons” for those four decisions. Moreover, six of the 59 claims had interest owed that was not paid or underpaid. Among 73 denied claims, seven were improper denials, and that in five instances the denial language was unclear or inaccurate.

As a result, the DMHC determined the lapse constituted a “repeat deficiency” and that half of the suspended $400,000 fine should be restored.

Additionally, Anthem Blue Cross has agreed to remediate the claims and pay to the providers what is owed them within 120 days.

The fine is the third-largest levied against Anthem Blue Cross this year. It was fined $700,000 earlier this year for improperly terminating enrollee coverage and $415,000 for failing to properly address enrollee grievances.

Anthem Blue Cross has accumulated the most penalties from the DMHC of any health plan. It has received nearly 1,100 dating back 15 years – comprising nearly 40% of all actions taken by the agency.