ESCONDIDO -- The secrecy surrounding Kaiser Permanente's controversial bed "guarantee" at the new Palomar Medical Center has been appropriate because the health care industry is so competitive, according to a San Diego County grand jury report issued Thursday.

The report vindicates the longtime stance of officials from both health care providers that their agreement was properly disclosed and not a misuse of money from a 2004 taxpayer-funded facilities bond.

But a longtime critic of the Kaiser agreement said the grand jury report was "incomplete," because jury members did not interview the newspapers and local residents who were frustrated that many details about the agreement have been kept secret.

The report was strongly praised Thursday by Michael Covert, chief executive of Palomar Pomerado Health, a publicly funded health district that is building the new hospital in western Escondido.

"It clearly indicates what we've said all along," said Covert, who helped negotiate the agreement after taking the district helm in 2003. "And it negates what the naysayers have said about misuse of public funds."

The agreement, which guarantees Kaiser roughly 100 of the new hospital's 300 beds, has been criticized for a variety of reasons since it came to light in 2006.

Critics have complained that the district should not have guaranteed publicly financed hospital beds to a private managed-care provider such as Kaiser. They also contend that voters should have known about the deal before they approved a $496 million facilities bond to pay for the new hospital.

Amplifying the controversy has been the refusal of Kaiser and Palomar Pomerado to divulge the contract's financial details, such as how much Kaiser is paying Palomar Pomerado and how the bed guarantee works. The press and the public have received only heavily redacted versions of the agreement.

But Kaiser and Palomar Pomerado contend that state law allows those details to remain secret, and that the extremely competitive health care market makes it crucial for those details to remain secret. The grand jury report supported those conclusions.

The report declared that Palomar Pomerado Health was justified in treating details of the contract with Kaiser as "a trade secret."

Revealing the details would have put the district in a weaker "negotiating position" regarding potential deals with other health care plans, the report said. The report also mentioned the state law that allows public health districts to protect their trade secrets.

The grand jury also declared that it was OK for the district to guarantee Kaiser use of a facility that is being funded by taxpayers, saying such a move did not constitute "misuse" of bond money.

But Robroy Fawcett, a frequent critic of the district and the Kaiser agreement, said the grand jury does not understand what trade secrets are and has allowed the two providers to define that term too broadly.

Fawcett also complained that the grand jury did not contact him or the press.

"They should have asked the people who have been complaining about the lack of disclosure," he said.

Covert said district officials wish they could disclose every detail of every contract to local residents and taxpayers, but that the extremely competitive health care marketplace makes such transparency ill-advised and nearly impossible.

Roger Dougherty, a Kaiser spokesman, said Thursday that the grand jury report was good news but not a big surprise.

"This is consistent with our stance all along," he said.

The grand jury investigates citizen complaints about government agencies in San Diego County and looks into issues that jurors raise about local governing bodies. The panel prepares written reports about its investigations and recommends changes for the agencies.

State law requires the agencies involved to file responses to grand jury reports, but the grand jury has no formal power to enforce its recommendations.

Call staff writer David Garrick at 760-740-5468.