Area physicians sue Kaiser Class-action case stems from HMO's decision to leave Kansas City area

Source: Kansas City Star
Date: 03/17/2001
Document ID: AA20010319030007942
Citation Information: p. C1
Author(s): Julius A Karash
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Three physicians who formerly practiced with Kaiser Permanente have sued the health maintenance organization, claiming it cheated doctors out of money as part of its plan to leave the Kansas City area.

Kaiser, which is based in Oakland, Calif., announced in January that it planned to close its four Kansas City area medical offices and sell most of its membership contracts to Coventry Health Care of Kansas Inc. Kaiser expects to complete that agreement, which involves about 425 layoffs, this spring. Financial terms of the transaction have not been disclosed.

The lawsuit against Kaiser was filed as a class action earlier this month in Johnson County District Court by physicians Herbert J. Waxman, Steven Warlick and Jeffrey Wall.

The three formerly practiced with, and held shares in, a Kaiser physician affiliate known as Permanente Medical Group of Mid- America. The suit was filed on behalf of every physician who ever held shares in that group.

"The lawsuit will not affect our transaction with Coventry," said Gerard Grimaldi, vice president of strategy and human resources for Kaiser's Kansas City area operations.

"We continue to expect to finalize the sale with Coventry this spring and assure a smooth transition for our members," Grimaldi said. "It is regrettable that these three physicians, who left the medical group last year, felt compelled to make these allegations. We deny the substance of these allegations."

The three physicians contend that Kaiser decided in 1999 to leave the Kansas City area and began at that time to take actions to implement that decision.

For example, the suit contends that Kaiser misrepresented its financial situation to Permanente Medical Group shareholders last year in order to persuade the Permanente board to close two clinics and transfer 15,000 patients to another group of clinics.

It also contends that Kaiser subsequently arranged for other medical groups to replace Permanente shareholder-physicians, resulting in the loss of their jobs and the loss of value in their shares, as part of the planned liquidation of the Permanente group.

The lawsuit claims that the Kansas City area Kaiser health plan and its national parent organization "conspired with each other, through the fraudulent representations ... for purposes of weakening and liquidating PMG (Permanente Medical Group) so as to enable the defendants to sell the HMO and thereby avoid any payment or benefit" to Permanente.

Ronald Gold, a Mission attorney representing the doctors, said that when Kaiser has left other markets, the medical practice has been sold at the same time as the HMO. The difference in this case is that the medical practice is being liquidated with no compensation to the physicians, he said.

The plaintiffs are seeking a jury trial to determine what share of the proceeds are due to the Permanente shareholder-physicians and to determine whether the Kansas City area Kaiser plan made improper payments to its parent organization.

- To reach Julius A. Karash, health-care reporter, call (816) 234- 7728 or send e-mail to jkarash@kcstar.com

Credit: The Kansas City Star

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