Another public clash over hospital reimbursement is taking place between hospitals and a market-dominant insurance company.
A lawsuit filed last week by 32 Kentucky hospitals charges the Kentucky division of Anthem Blue Cross and Blue Shield with breach of contract for reducing and freezing its hospital reimbursement rates.
The hospitals filed suit on Feb. 5 in a state trial court in Glasgow, Ky.
Anthem's Louisville, Ky.-based division is Kentucky's largest health insurer with 1 million enrollees, or 50% of the state's insurance market.
About half the hospital plaintiffs are owned by for-profit chain Columbia/HCA Healthcare Corp., and the remainder are rural facilities. Unlike many other Kentucky hospitals, they weren't given a chance to renegotiate with the giant insurer.
The dispute is another example of the growing tension between providers and payers as both find it harder to cut costs.
Earlier this year, the Minnesota Blues and Twin Cities healthcare powerhouse Allina Health System entered nonbinding mediation after months of failed negotiations. They declined to disclose terms of the eventual agreement (Jan. 20, p. 20).
In Kentucky, the tale differs, with the weak banding together to battle the strong. In Columbia's case, Anthem said it didn't negotiate with the chain because it's attempting to enter the Ohio insurance market, where a sister company competes.
The Kentucky Hospital Association isn't party to the suit, but it helped coordinate the hospitals involved.
The bigger story here may be the unintended consequences of well-intended laws.
Anthem froze the hospitals' payment as of April 1, 1996, if it had negotiated discounted charges.
Louisville attorney Gregg Hovious, who represents the hospitals, said Anthem breached the contracts by acting unilaterally. The changes have cost the hospitals at least $2 million so far, he said.
Anthem spokeswoman Alliea Phipps said its contracts allow unilateral action if a major change in law occurs. That happened in 1996, when Kentucky began requiring insurers to offer individual coverage to all comers and barred them from charging higher premiums to sick people.
Anthem now is losing millions of dollars, Phipps said.
It isn't alone. More than 40 insurers have left Kentucky since it began enacting various healthcare programs in 1994, she said.
Under state law, Anthem can't abandon the individual insurance market and remain in other markets. It also can't raise its premiums without state approval.