Healthcare Business News

Michigan Blues faces lawsuit from rival Aetna

By Joe Carlson
Posted: December 7, 2011 - 8:00 pm ET

Blue Cross and Blue Shield of Michigan was hit with yet another antitrust lawsuit challenging its “most favored nation” pricing contracts with hospitals—but this time, the lawsuit came from a competitor.

Aetna, based in Hartford, Conn., filed a lawsuit in U.S. District Court in Detroit alleging that the Michigan Blues responded to new competition in the state by convincing hospitals to sign anti-competitive pricing contracts.

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Specifically, Aetna said at least 62 of the state's 131 acute-care hospitals signed contracts guaranteeing that Blue Cross would receive the lowest possible prices for hospital services, sometimes including a defined price differential. Aetna said Blue Cross also agreed to pay higher rates under many of those contracts, thus raising the “price floor” for the entire market.

Aetna's lawsuit said Blue Cross' variations on so-called “most favored nation” contract clauses violate federal and state antitrust laws, and asked a district court judge to invalidate the contracts and pay triple damages.

Blue Cross officials denied the allegations, saying their contracts only relate to the prices that they pay, not their competitors.

“If we negotiate a contract that guarantees the best price, a competitor could look at the same contract and claim that requires them to pay more. But we deny that,” said Andrew Hetzel, communications vice president at Blue Cross Blue Shield of Michigan. “We have certain provisions in some of our contracts that guarantee us the best possible price.”

Hetzel said Blue Cross officials expect pricing that reflects the volume of patients they brings to hospitals, and that their price negotiations have led to nationally recognized controls on hospital prices across the state.

The Justice Department filed its own antitrust lawsuit against Blue Cross and Blue Shield of Michigan last year, lodging similar allegations of anti-competitive price controls through the use of variations on “most favored nation” pricing. U.S. District Judge Denise Page Hood has rejected the Blues' request to throw out the lawsuit, and set a bench trial for April 2013.

Blue Cross has also been sued under similar allegations by the City of Pontiac, the Michigan Regional Council of Carpenters Employee Benefits Fund, the Shane Group and a private individual named Scott Steele who is seeking class-action status. All of those separate lawsuits are pending in federal court.

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