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Foundation Health sued for deceptive marketing practices; preliminary injunction against HMO sought.

SAN FRANCISCO--(BUSINESS WIRE)--Feb. 9, 1995--Two public interest groups and a San Francisco law firm filed suit Thursday on behalf of Medi-Cal recipients charging Foundation Health, the HMO giant, with deceptive and abusive door-to-door marketing practices.

Also named as a defendant in the suit is the California Department of Health Services (DHS), which has known about Foundation Health's fraudulent practices but has failed to stop the managed care company from continuing its illegal practices.

The plaintiffs are asking the court to grant an injunction barring Foundation Health from soliciting new business through unscrupulous marketing tactics and directing DHS to enforce the legal provisions prohibiting such practices.

Until recently, Medi-Cal recipients received their health care on a fee-for-service basis. Under the new Medi-Cal managed care arrangements the state pays the HMO a set fee for each Medi-Cal enrollee. The Department of Health Services is responsible for overseeing Medi-Cal, the state program that provides health care to the poor.

The complaint, filed in San Francisco Superior Court, outlines how Foundation Health's salespeople have misled Medi-Cal recipients into believing they must sign up with Foundation's managed care plan in order to keep their Medi-Cal coverage.

In addition, the Foundation representatives have told Medi-Cal recipients they can go to any doctor they choose under the plan. However, once they sign up, victims are barred from using any doctor but those that are part of Foundation's program.

"We have more than 60 clients who have been lied to by Foundation Health," said Michael Keys, an attorney with San Francisco Neighborhood Legal Assistance Foundation and co-counsel to the plaintiffs.

"Our clients have been misled into believing that they have to sign up with Foundation to keep their Medi-Cal coverage. Foundation Health tells them they can see any doctor they want. Although we've been complaining to the state for months, the Department of Health Services has failed to stop these illegal practices."

The request for an injunction was filed by San Francisco Neighborhood Legal Foundation, the law firm of Chavez and Gertler and Consumers Union's West Coast Regional Office. Most of the Medi-Cal recipients affected speak little or no English.

Edward Ivy, a 68 year-old plaintiff in the case, signed up with Foundation after marketing representatives set up a table in his HUD subsidized apartment building. He had been told that the pending cuts in Medi-Cal could only be avoided by joining the Foundation Health plan. He was not told that he could no longer be treated by his physician of several years.

Another of the plaintiffs, Ms. Dung Lee, said she was visited at her home by a Foundation marketing representative in the Fall of 1994. Lee told the representative that she may have cancer and was receiving ongoing treatment for this condition at UC San Francisco, and it was very important that she be able to continue to go to UCSF.

The Foundation representative assured her that she could continue her treatments at UCSF under the plan. Once Lee signed up with Foundation, she went back to UCSF for treatment only to find that UCSF was not a Foundation provider, and she could no longer receive treatment there.

"Poor people all over the City have been systematically defrauded by Foundation Health," said Mark Chavez, a private attorney with Chavez and Gertler and co-counsel to the plaintiffs. "We are asking for punitive damages against the HMO for lying to our clients, and we are demanding that the Department of Health Services put an end to this type of door-to-door preying on Medi-Cal beneficiaries."

"This is a statewide problem for consumers," said Judith Bell, co-director of Consumers Union's West Coast Regional Office. Consumers Union, nonprofit publisher of Consumer Reports, is a party in the case. "State oversight has not kept up with the marketing strategies of these managed care companies. If the state can't end these types of abusive tactics and protect consumers, the courts certainly will."

For a copy of the complaint please call Consumers Union at (415) 431-6747.

CONTACT: Consumers Union

Judith Bell, 415/431-6747

S.F. Neighborhood Legal Assistance Foundation

Michael Keys/David Bonillo, 415/627-0200

Chavez & Gertler

Mark Chavez, 415/777-5515
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Publication:Business Wire
Date:Feb 9, 1995
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