A contracting feud between a managed-care company and a hospital system has reached extremes in Louisiana, where the state's largest health plan has gone to court to defend its practice of directly paying patients for care from out-of-network hospitals. The hospitals then must seek payment from the patients.
Blue Cross and Blue Shield of Louisiana is disregarding benefit assignments by patients at six hospitals that have not contracted with the plan to provide services at specific rates. All of the hospitals are at least partly owned by HCA-The Healthcare Co.
Benefit assignment is a routine practice that allows hospitals to file claims and receive payments directly from a health plan. Without benefit assignment, a plan would send payments to patients, who might not always forward the money to providers.
Several industry sources contacted last week could not cite another case of an insurer refusing to honor benefit assignments as a tactic to gain negotiating leverage with hospitals.
Challenging the policy is Rapides Healthcare System in Alexandria, La., which has filed complaints with the state insurance department, citing a Louisiana law that requires insurers to recognize patients' benefit assignments to hospitals. It also has alleged other unfair trade practices by the plan, including refusing to pay usual and customary charges.
In response, the Blues filed suit in September in U.S. District Court in Baton Rouge, La., asking the court to declare that the federal Employee Retirement Income Security Act pre-empts the state law for patients in self-funded and federal employee plans. Rapides and Louisiana Attorney General Richard Ieyoub have asked for a dismissal of the suit. Rapides expects a ruling on their motion by the end of this month.
In a written statement, the insurance department said it could not comment on the case until its investigation is complete.
Lack of benefit assignment has slowed payment of claims and inconvenienced the hospitals and their patients, according to Rapides, which stopped contracting with the Baton Rouge-based Blues plan in October 1999. Rapides, a 50-50 joint venture between Nashville-based HCA and a local not-for-profit foundation, has five hospitals in central Louisiana, four of which are sole community providers.
One other hospital that does not contract with the Blues, HCA's Dauterive Hospital in New Iberia, is not a party in the court action.
Rapides' lawyer Peter Urbanowicz said the tactic by the not-for-profit mutual insurer is a hostile act, meant to "make life as difficult as possible" for the hospitals. As of late 1999, about 4% of Rapides' patients were covered by the Blues, according to court documents filed by the healthcare system.
Urbanowicz said most claims for Blues patients are more than 180 days overdue, and some have been outstanding for more than a year. Claims for patients in other plans typically are paid within 60 days, he said.
"This is the sort of activity you might expect from a very large for-profit managed-care company," said Urbanowicz, who works in the New Orleans office of Locke Liddell & Sapp, a Houston-based law firm.
Blues spokesman John Maginnis acknowledged that benefit assignment makes claims processing easier for all parties, including the plan. But he said the Blues, which insures 740,000 Louisiana residents, views it as a privilege of being a contracting hospital. He said the plan uses benefit assignment as an incentive for hospitals to join its network.
The Blues sustained a $10.5 million underwriting loss in the last fiscal year, ended Dec. 31, 2000, Maginnis said. Total premiums were approximately $850 million.
As a result of the case, the Louisiana Hospital Association is educating its members about state law regarding assignment of benefits, said Clark Cosse, the association's vice president of legal and governmental relations.
"It's our position and the position of any lawyer who can read that domestic insurance companies may not require that the provider chase the patient for payment," Cosse said.