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AUSTIN, Texas-Kaiser Foundation Health Plan of Texas is crying foul over regulators' release of a report critical of its operations in Texas after the HMO agreed to pay the state a $1 million fine and make changes in the way it provides health care.

In an agreement reached April 18 with the Dallas-based health maintenance organization, the Texas Department of Insurance indicated it would release only parts of the report deemed non-confidential by the Open Records Division of the Texas Attorney General's office.

But the entire document was ordered released last week by Texas Attorney General Dan Morales after insurance regulators received requests by newspapers for copies.

The report is only part of Kaiser's woes in Texas. The HMO has lost $52 million in the state over the past two years due to rate cuts, and as part of its agreement with the Insurance Department is shoring up its financial condition with an $80 million contribution from parent Kaiser Foundation Health Plan of Oakland, Calif.

Release of the report brought protests from both the HMO and the Texas Department of Insurance.

Dr. William Gillespie, president of the Texas HMO, said the attorney general was wrong to release the report because it contained confidential patient and physician information and is laced with inaccuracies.

In a statement released by Kaiser, the HMO noted that the agreement with the Insurance Department stipulated that the HMO would have the right to appeal in district court an opinion by the Open Records Division before the report was released.

"Quality health care begins with a trusting relationship between patient and physician," Dr. Gillespie said in the statement. "The confidentiality of what is shared between patient and physician is critical to building that trust. I'm appalled the attorney general would throw that away, in violation of the law."

Texas Insurance Commissioner Elton Bomer was not happy with the release of the entire report either, saying the move violated the spirit of the agreement reached between the two parties to end their two-month spat over the document.

Kaiser's problems in Texas began earlier this year when the Insurance Department completed the 19-page report, which detailed dozens of alleged violations of the state's insurance code and recommended a $3 million fine against the HMO. The report also asked for a number of changes in the way Kaiser provides services to its 129,000 covered lives in the Dallas-Fort Worth area.

The HMO filed suit in late February in Travis County District Court in Austin and won a temporary restraining order blocking release of the report (BI, March 17).

The report charged that Kaiser violated state law by denying payment of emergency care services after advising enrollees to seek such care, delaying claims payments, engaging in unfair claims settlement practices and failing to follow programs and procedures the HMO said were in place and necessary to maintain a certificate of authority to operate in Texas.

Listed in the report were some specific allegations, including one in which the parent of an 11-year-old child called 911 because the child was bleeding severely and experiencing dizziness and weakness. Kaiser allegedly denied the resulting emergency room claim even after paramedics who responded to the call wrote letters informing the HMO that the treatment was needed, the report said.

The report also charges that Kaiser denied a claim for an enrollee who was taken to a hospital for emergency treatment after being found in a state of disorientation apparently as a result of overdosing on prescribed medication. And, an emergency room claim by a pregnant woman who fell on her abdomen and experienced pain was denied by the HMO, according to the document.

Kaiser also was charged with taking a year or more to settle some claims and denying others in which "Kaiser's liability had become reasonably clear," the report said.

According to the HMO, claims were in fact paid in a number of cases even though the Insurance Department report indicated that they were not. The report's allegations were made by "unqualified and untrained" Insurance Department reviewers, the HMO claimed.

Under the agreement reached earlier this month, $250,000 of the $1 million fine could be waived by the insurance commissioner depending on Kaiser's compliance with terms of the agreement.

The HMO is required to submit a business plan next month that will indicate how it intends to carry out terms of the agreement.

The terms call for Kaiser, which admitted no wrongdoing or violations of Texas insurance laws, to pay for an independent consulting firm to review and recommend changes in its emergency care services, claims processing, quality assurance and improvement programs, peer review and credentialing procedures.

The HMO is required to have on its staff a qualified medical records librarian who will develop a plan for ensuring proper training of personnel who create or maintain patient records. Kaiser also has agreed to accept $80 million in financial help from its parent after losing $52 million in Texas over the past two years.

The HMO, which has operated in the state since 1979, tried to boost market share with price cuts in 1995 and 1996, according to a spokesman in its Dallas headquarters.

"But due to increased competition from our longstanding competitors, as well as new entrants in the last couple of years, the member growth we were hoping for was not realized," the spokesman acknowledged.

"We are not satisfied with our cost structure," he added, and the HMO is working on ways to "improve the cost-effectiveness" of its operation.

A business plan expected to be completed in June will detail how Kaiser Permanente expects to reach that goal.