The financially distressed city of Pontiac, Mich., has joined the list of litigants filing sweeping class action lawsuits alleging anticompetitive behavior involving Blue Cross and Blue Shield of Michigan and hospitals across the state.
Pontiac, Mich., joins parade of price-fixing lawsuits
The allegations are essentially identical to what the U.S. Justice Department set forth in its own lawsuit in October, although Pontiac is suing Ascension Health and 21 hospitals and health systems in addition to the state's largest insurer (Oct. 25, 2010, p. 6). At least four other class action lawsuits besides Pontiac's have been filed, two of which have already been withdrawn.
At issue are the Blues' use of so-called “most -favored nation” clauses in contracts with providers. The insurer says it uses the contract language to guarantee that it receives the best rates available for hospital services, while critics contend the contracts force providers to artificially raise rates charged to other insurers.
None of the 21 hospitals or systems Pontiac targets is in the city, which is near Detroit and was placed under state receivership in 2009. Defendant Marquette (Mich.) General Hospital, for example, is more than 400 miles to the north on Michigan's Upper Peninsula.
The city did formerly pay Blue Cross and Blue Shield to administer Pontiac's self-insured health plan, and the city continues to pay employees' claims to various Ascension facilities. But the lawsuit says the city has been harmed by an overall pattern of price-fixing and anticompetitive behavior that has raised prices across eight separate metropolitan statistical areas.
“Since 2007, the city of Pontiac has directly paid millions of dollars to Blue Cross and the hospital defendants and has been injured, damaged, and overcharged by defendants' conspiracy and unlawful agreements,” the lawsuit says. “As the entity responsible for paying the claims, the city of Pontiac is economically at risk and is a direct purchaser of hospital services for the purposes of the antitrust laws.”
Ascension Health and five of the other hospitals and systems declined to comment. The other hospitals were either owned by Ascension and barred from commenting or did not respond to requests for comment.
“At a time when insurance premiums are increasing because of medical costs, it hurts consumers to remove tools that insurers use to negotiate the lowest possible cost for medical care in the hospital,” Blue Cross and Blue Shield of Michigan spokeswoman Helen Stojic said in a written statement.
In its legal defense, Blue Cross led off its motion to dismiss the Justice Department's lawsuit with a quote from the influential 7th Circuit Chief Judge Richard Posner, who said in a 1995 appeal from a Wisconsin case that most-favored nations clauses are used to secure the lowest rates for customers, making them the kind of thing antitrust laws “seek to encourage.”
In its Dec. 17 response to the federal allegations, Blue Cross lawyers went on to disparage the “growing swarm of class action lawyers, seeking injunctions of their own, plus untold millions of dollars—claims that could engulf nearly half of Michigan's hospitals as well as Blue Cross.”
Pontiac's case was filed Jan. 21, making it at least the fifth such private class action lawsuit mirroring the federal allegations. One of other cases, Frankenmuth Mutual Insurance v. Blue Cross, named the identical defendants as Pontiac's case, and was voluntarily dismissed seven days after it was filed.
Mary Anne Noonan, a private citizen in Birmingham, Mich., voluntarily dismissed her case Nov. 5, one day after she filed it.
The other two cases are still pending and motions have been filed to consolidate them. Both mirror the Justice Department's allegations of price-fixing, though they do not name hospitals as defendants. The plaintiffs in those are an insurer, a private citizen and two labor unions.
Blue Cross lawyers said in response to the Justice Department allegations that Blue Cross is trying to secure only the best discounted rates for its clients—as was its mandate under its legislatively enacted creation in Michigan.
“While Blue Cross participates in providing healthcare by, among other things, ensuring the universal availability of healthcare financing, it is, by design, not an unfettered competitor,” the insurer's response says. “Rather, it is charged by the state with fulfilling state policy as the insurer of last resort, and the actions it takes are shaped by that goal.”
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