Many Oppose FHP-PacifiCare at O.C. Hearing

IRVINE — PacifiCare Health Systems’ proposal to acquire its largest managed-care competitor in Orange County struck a raw nerve Wednesday as opponents stepped forward to urge state regulators to block the deal.

About 100 consumer advocates, medical professionals, patients and others flocked to Irvine City Hall for the first day of unprecedented state hearings into Cypress-based PacifiCare’s proposed $2.1-billion buyout of Santa Ana-based FHP International Corp.

In pointed but orderly comments, supporters outlined the proposal’s merits while critics resurrected a variety of complaints about PacifiCare’s record on delivering quality care to its members.

San Diego resident Patricia MacInnes gave a moving account of how she believes PacifiCare failed to treat her mother’s long-standing heart condition, resulting in her death.

“I believe that my mother could be alive today had she received appropriate medical treatment when she first became ill,” she said.

But PacifiCare and FHP executives said the combined company would provide consumers access to an expanded number of hospitals and doctors across the state and enable FHP patients to keep their doctors.

They said efficiencies achieved by consolidation of staff would enable the combined company to both enhance benefits and keep a tight rein on health-care costs.

“People have an excellent memory for the negative things that have happened with managed care,” said Mark Wagar, an official of MedParters Inc., an operator of medical groups, who spoke in favor of the merger. “PacifiCare members have significantly lower grievance levels per 1,000 than any other plan we deal with.”

The acquisition has already been cleared by federal regulators and the state attorney general.

But Commissioner Keith Bishop of the state Department of Corporations, who is under increasing pressure from legislators to prove he’s a strong regulator of HMOs, set up the hearings Wednesday in Irvine and today in San Diego.

Earlier this week, Bishop announced plans for a similar hearing on a proposed merger of two other major state HMOs, Foundation Health Corp. and Health Systems International.

Critics Wednesday recalled how PacifiCare previously drew fire for denying regulators access to medical records, discouraging doctors from prescribing drugs or immunizations considered standard by practitioners and failing to adhere to a law requiring it to notify consumers about how to file complaints with regulators.

“Do not grant mega-HMO status to these companies that clearly need close monitoring and procedural checks,” added Paula Mack, a nurse representing the California Nurses Assn.

The Orange County Medical Assn. also opposed the merger, expressing concern that the combination would give PacifiCare too large a share of the HMO markets in Southern California and lead to a deterioration in health care.

Juan Carlos Cobo, a Mission Viejo surgeon and president of the association, urged Bishop to flex his regulatory muscle.

Cobo praised the agency’s recent decision to issue fines against 43 HMOs for failing to notify their members of a year-old law on how to register grievances with the state. PacifiCare was fined $70,000--the largest amount of the group.

However, Cobo said it’s “deeply disturbing” that the agency has essentially lost more than a year’s worth of grievances. He asked, as did others, whether the agency will conclude its review of more than 100 patient files it obtained last year from PacifiCare after extensive litigation.

The company and agency sued each other in Orange County Superior Court in 1995, when PacifiCare denied the agency broad access to patient records. The agency reported it had received more than 11,000 complaints by members of the company’s California HMO and its Medicare plan for seniors.

Dr. Michael T. Kennedy, an associate professor of surgery at UC Irvine, testified that he isn’t necessarily against the merger, but he urged the commissioner to require “much more accountability” from the companies on their quality of care.

Kennedy, a retired physician, said practitioners tell him of individual cases where “surgeons are seeing delays in referral of appendicitis and breast-cancer cases” and “patients with painful acute conditions are unable to get timely appointments with primary care doctors.”

But Kennedy said regulators should go beyond such anecdotal reports and require large-scale independent analysis of health outcomes for sick members.

He described the treatment of the sick as a barometer of the adequacy of care for all members.

“Analysis of the outcome of sick patients’ care will provide a warning of inadequate quality before the healthy subscribers learn the hard way,” he said.

PacifiCare executives raised the possibility that if the merger doesn’t proceed, both companies might be acquired by out-of-state HMOs and California could lose jobs. Supporters who testified in favor of the merger included patients, industry consultants and medical groups.

Roger Feldman, a University of Minnesota economist the state has retained to assist in evaluating issues, raised questions of those testifying, including Vera Marquez, a PacifiCare supporter.

Marquez, a local representative of the League of United Latin American Citizens, testified that PacifiCare shows unusual sensitivity in serving its Latino members by staffing clinics with Spanish-speaking members and providing Spanish-language materials.

When Feldman asked her whether FHP shows the same sensitivity, Marquez responded, “I don’t think so. My husband belongs to FHP and we’re not very happy [with the plan].”

Separately, state Sen. Herschel Rosenthal on Wednesday notified Bishop of legislation he is filing that calls for the state to halt the merger until Bishop can make sure whether the deal is in the consumer interest.

Rosenthal’s bill would require the commissioner to make sure that quality of care would be maintained or improved, industry competition wouldn’t be adversely affected, doctors and other providers would be fairly treated in contracts with the new company, and precautions would be taken against possible adverse consequences.