A small pharmacy management company in Seattle is suing Blue Cross of Washington and Alaska, claiming the insurer tricked it into revealing capitation secrets by feigning interest in acquiring the company.
Blue Cross' supposed interest in buying family-owned HealthCare Dispense caused other major healthcare companies that had expressed an interest to back off, the suit charges. HealthCare Dispense filed the charges May 9 in King County (Wash.) Superior Court and is seeking $14 million in damages.
Blue Cross, with $1 billion in annual revenues, is the state's second-largest insurer. HealthCare Dispense had 1994 sales of $14 million.
The charges, which Blue Cross denies, are a sign of the market value of well-developed capitation systems as well as the continuing intense pressure to consolidate and integrate.
Blue Cross has been under scrutiny by state Insurance Commissioner Deborah Senn, who said earlier this month she was concerned about the insurer forgiving a $4 million loan to NCAS, a for-profit subsidiary, and other alleged improprieties. Blue Cross' plan to buy HealthCare Dispense involved transferring the purchase price to NCAS, the suit said.
Senn had no comment on the suit.
The dispute began in July 1994 when Blue Cross entered into an agreement with HealthCare Dispense to provide pharmaceutical services to Aid to Families with Dependent Children recipients in Washington state for two years.
Under capitated contracts with insurers such as Blue Cross, HealthCare Dispense developed a network of more than 1,000 pharmacists in Washington state. The pharmacists agreed to negotiated fees for dispensing prescriptions and to use HealthCare Dispense's list of generics that can be appropriately prescribed.
The operation, which uses a computer system to monitor physicians who are overprescribing, allows HealthCare Dispense to manage the cost of pharmaceutical care and keep it below the capitated payment from insurers.
In its suit, HealthCare Dispense says it relied on a "letter agreement," which Blue Cross was supposed to formalize in a contract to provide managed pharmacy services.
But in January, Blue Cross gave the company contracts for various counties that were substantially different from the original agreement and included a March termination date. As the company argued with Blue Cross over the contracts, the insurer presented a buyout proposal.
In subsequent negotiations, Blue Cross requested and received confidential information on all aspects of HealthCare Dispense's operations and placed a staff member on site for several weeks. The suit alleges that, once it learned what it needed, Blue Cross then terminated all its contracts with HealthCare Dispense and began dealing directly with HealthCare Dispense's vendors.
The suit also charges that Blue Cross re-fused to pay hundreds of thousands of dollars of unpaid claims and retroactively canceled health insurance coverage for HealthCare Dispense's 10 employees.
Jack McRae, a senior vice president of the Blue Cross plan, said, "We vehemently disagree with the basis of the lawsuit and will oppose it in court." McRae said he could not comment further because the matter is in litigation.