The second largest fine ever levied against an HMO was $1 million back in 2002, following the death of a patient. It also was against Kaiser but obviously did nothing to deter similar misconduct.
In addition to the fine, Kaiser says it will make a $3 million donation through the East Bay Community Foundation to "Donate Life California," a program that encourages California citizens to donate organs and tissues.
While the donation was not a penalty imposed, Kaiser officials said at a press conference, that it was part of a package of responses created by DMHC that Kaiser agreed to implement.
In the DMHC's press conference, the agency's Director, Cindy Ehnes, said the fine and donation were intended to recognize serious problems in the operation, management and oversight of Kaiser's Northern California kidney transplant unit at its San Francisco medical center.
Ms Ehnes said in recent months the DMHC made oversight of Kaiser a main priority, to make sure that no patients lose an opportunity for a kidney transplant or become "a forgotten number."
She cited problems that included failure to provide adequate administrative oversight and enough personnel to accomplish patient transfers, failure to give patients timely access to kidney specialists and treatment referrals, and failure to properly respond to patient complaints.
She said the agency recommended the $3 million contribution to the donor registry program, because the additional payment by Kaiser "reflected the magnitude of the issue."
"We have structured the agreement and penalty with Kaiser in this way because not only will it acknowledge Kaiser's serious failures to adequately administer and operate its transplant center, it will directly benefit the patients who so desperately need help," she said at the press conference. "This funding will save lives."
Ms Ehnes also specifically noted Kaiser's inadequate oversight of its affiliated Permanente Medical Group of doctors, as one of the issues the DMHC was concerned about.
Members of the Kaiser HMO receive health care services from Kaiser hospitals and its affiliated group of doctors. However, prior to 2004, the HMO had contracts with other hospitals to treat patients in need of kidney transplants because Kaiser did not have a transplant program.
Up until 2004, Kaiser contracted with UC San Francisco and UC Davis to provide kidney transplants. When it decided to set up its own program, Kaiser cancelled the contracts with UC San Francisco and UC Davis and sent letters to approximately 1,500 transplant patients saying they were being transferred to the new Kaiser program in San Francisco.
Transferring transplant patients involves registration with the United Network for Organ Sharing, the federal contractor responsible for overseeing kidney distribution. Without a proper registration, a patient is ineligible to receive a kidney.
In June 2004, when Kaiser informed patients on waiting lists at UC San Francisco and UC Davis that from then on transplants would take place at Kaiser's hospital, patients were literally forced to participate in the program. One letter to patients said in part: "You will be financially responsible for any kidney transplant services you receive from the University of California, San Francisco, after Sept. 1, 2004."
According to the July 21, 2006, East Bay Business Times, critics say the role of Medical Group's doctors was central to setting up the transplant program. Unlike the rest of Kaiser which is non-profit, the Medical Group is a for-profit entity that splits profits among its physician partners, giving the group a financial incentive to bring services in-house.
A former transplant unit administrator told the Business Times that Kaiser planned to use the San Francisco program as a template for a series of other transplant centers nationwide that would save the HMO huge amounts of money by not having to send patients to outside hospitals for transplants.