Kaiser Agrees to Pay $5.35 Million as Settlement in Malpractice Case

In one of the largest malpractice settlements ever against Kaiser Permanente, the HMO agreed Wednesday to pay $5.35 million to the survivors of a Texas man whose family claimed his death was partly due to Kaiser’s medical cost-cutting.

The case turned on an issue at the heart of national debate over managed care: whether the push to drive down health-care costs is diminishing the quality of medical care, as a majority of Americans in a recent poll believed.

The Texas settlement was reached after an unusual Dallas County “test jury” had said it would award the family of electronics technician Ronald Henderson more than $60 million. The settlement was reached a day before the actual trial was to begin.

Henderson, who was 56, collapsed and died at a Kaiser clinic in 1995. His family claimed that Kaiser had failed to diagnose his heart disease.

In prior statements about the case, lawyers for Oakland-based Kaiser said Henderson received appropriate care. They described him as overweight, a smoker and a patient who disobeyed doctors’ instructions.

The case garnered wide attention because of the allegation that Kaiser’s financial considerations were a contributing factor in the man’s death. It is not the first time that an HMO’s financial motives have been raised by plaintiffs’ lawyers in malpractice cases, but it is by far the largest settlement in a case in which such claims were made, legal experts said.

Among evidence presented by lawyers for the Hendersons was a transcript of a 1995 internal speech by a Kaiser medical executive, Dr. John O. Vogt, who candidly discussed the HMO’s emphasis on reducing medical costs.

“The first thing that ever comes out of a Kaiser CEO now is ‘What’s the bottom line?’ I’m trained to do that almost automatically,” said the speech by Vogt, an associate medical director for the Permanente Medical Assn. of Texas, the physician group that treats Kaiser members.

Elsewhere in the speech, Vogt describes an episode in which Kaiser, after failing to diagnose nine heart attacks, improved its procedures and the next year “missed” only one heart attack. But it subsequently revised those successful new procedures because the result was “a tripling of our hospital days.”

Elsewhere during the speech to Kaiser colleagues, Vogt discusses how he and a colleague developed a plan for sharply cutting medical costs during an airplane flight from San Jose to Dallas.

“I don’t know how many Wild Turkeys on the rocks I had, and [the colleague] is Irish, so he had Irish whiskey . . .,” he says in the speech transcription.

But in the speech, Vogt also tells his audience that cutting costs is not the only goal. “I can’t emphasize this more . . . you have to improve [medical] quality” as well, he says. Vogt declined comment when reached at home Wednesday evening.

Kaiser officials declined to comment directly on the Henderson case or Vogt’s remarks, saying the settlement included a nondisclosure clause prohibiting either side from discussing the case.

But David O’Grady, a Kaiser spokesman, told the Dallas Morning News in an article Wednesday that Vogt was admonished for inaccurate remarks about the company.

“Dr. Vogt was in a situation where he had to talk about an incredibly dull, drab, dry subject,” O’Grady told the newspaper. “He was trying to talk like David Letterman.”

O’Grady also suggested that Vogt’s statistical references to hospital usage for cardiac patients were inaccurate.

Randall Moore, a Dallas attorney who represented the Henderson family, said his firm has filed two other malpractice lawsuits alleging that Kaiser missed diagnoses for two other heart patients who died within seven months of Henderson.

“Our view is that in these two cases we have developed very compelling evidence that Kaiser places too much emphasis on the bottom line and cost-cutting at the expense of quality care,” Moore said.

The Henderson case involved an experimental and little-used court procedure known as a summary jury trial, or mini-trial, that is intended to relieve overburdened courts and reduce costs by encouraging pretrial settlements. Lawyers had 90 minutes to make their arguments and present evidence. The jury’ decision was nonbinding, but jurors were not told that beforehand.