Hearings Loom as a Showdown on PacifiCare

Next week’s public hearings on the merger of two Orange County managed care organizations are shaping up as showdowns between PacifiCare Health Systems Inc. and its critics over complaints that the Cypress-based HMO has provided substandard health care and violated state law.

The company is likely to face consumer advocates, physicians, and other critics at state hearings in Irvine and San Diego on its proposed $2.1-billion acquisition of its Santa Ana-based rival, FHP International Corp.

Though PacifiCare executives will focus testimony on the merger’s merits, opponents now say they will also force attention on such prior issues as the company’s denial of regulators’ access to patient and doctors’ peer review records, its failure to encourage doctors to prescribe drugs considered standard by practitioners, and its failure to follow a law requiring it to notify consumers about how they can register complaints about their care with regulators.

This week, the company faced criticism from the psychiatric community for discouraging use of Prozac, a widely prescribed anti-depressant, and Risperdal, a treatment for schizophrenia with fewer side effects than the drug PacifiCare prefers.

Both physicians and consumers claimed the company specified cheaper alternatives in an attempt to save costs at the expense of patient care.

Dr. David Davis, a former spokesman for the Orange County Psychiatric Society, is one of many practitioners who this week questioned PacifiCare’s restrictions on anti-psychotics.

He noted that patients on Prozac are less likely to quit taking their medication than those on similar drugs. He added that at least 20% to 30% of patients on Haldol--the anti-schizophrenic drug PacifiCare prefers to Risperdal--develop bad side effects, such as muscle spasms.

Davis also noted that research suggests that limiting the list of preferred medications actually causes medical costs to increase, because patients and doctors can waste time struggling through the list of prescribed items before the patient finally ends up taking the drug that is necessary to treat the patient.

PacifiCare officials maintained that the company passes cost savings on drugs on to patients, thereby enabling them to afford longer treatment. The company said the “overwhelming majority” of schizophrenics on Haldol don’t suffer major side effects, though it declined to specify how many.

The company also said that cheaper alternatives to Prozac tend to work as well for many patients. And it said it will generally approve Prozac and Risperdal if it receives a special request from a physician.

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The hearings--called by the Department of Corporations, which regulates HMOS--will likely also touch on PacifiCare’s recent tug of war with that agency over its access to patient and peer-review records. In 1995, the agency reported that it had received more than 11,000 complaints by members of PacifiCare’s California HMO and its Secure Horizons plan for Medicare recipients.

When the company refused the agency’s request that it open its books for investigation, the two ended up in Orange County Superior Court. Last November, the company settled the dispute by agreeing to allow regulators “reasonable access” to health records.

The agency hasn’t disclosed whether it found any matters of major concern involving the company’s practices after the HMO handed over records from more than 100 patient cases.

PacifiCare also drew fire last spring from a consumer group for failing to promote chicken-pox vaccinations to physicians. In a settlement with the agency, the company agreed to pay $40 per shot to immunize children who’d missed out on the vaccinations during a period when they weren’t being recommended.

In addition, PacifiCare this week received the largest fine--$70,000--among 43 HMOs penalized by the agency for ignoring a year-old law intended to help consumers redress problems with their HMOs. PacifiCare failed to properly notify consumers already pursuing grievances against the company about a toll-free 800 number they could call for registering their complaints with the agency.

The company says it’s now in compliance.

Both the company and its opponents are rallying supporters to attend their face-off next week.

On the patient side, Jamie Court, director of Santa Monica-based Consumers for Quality Care, who is one of PacifiCare’s harshest critics, plans to testify. Court said his group will encourage patients to speak out as well, and he expects the California Nurses Assn. to send representatives.

An economist from the California Medical Assn., which opposes the merger, also expects to testify. Lozis says she plans to attend, but said HICAP hasn’t developed an official position on the merger.

PacifiCare is trying to line up members, doctors and outside legal experts to testify, a spokesman said. The company is combing through correspondence from members who’ve expressed satisfaction with the plan to find those who’ll make testimonials.

The company won’t solicit testimony from its part-time core of seniors who, as “ambassadors” for its Secure Horizons program for Medicare recipients, get paid for representing the company at marketing events, says a spokeswoman. However, she said, these individuals will be encouraged to attend.

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Hearing Set on HMO Merger

Public hearing in Irvine and San Diego take place next week on the proposed merger of two Orange County-based health-care giants: FHP International Corp. and PacifiCare Health Systems Inc.

In August, PacifiCare agreed to buy FHP for $2.1 billion in cash and stock.

The hearings, sponsored by the California Department of Corporations, will take place at the following times and locations:

* Irvine: Wednesday, 9 a.m. City Council chambers, Irvine City Hall, 1 Civic Center Plaza.

* San Diego: Thursday, noon. South chambers, Room 358, County Administration Center, 1600 Pacific Highway.