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 joins Mich. Blues fray
Aetna, 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.
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.
In the lawsuit, Aetna said it has been financially harmed by Michigan Blue Cross' “most favored nation” pricing, which allows the dominant insurer to use its market position to prevent less-established entities from competing with it. The lawsuit asks the federal court to invalidate the contracts and pay triple damages to Aetna, with the amount to be determined at trial.
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 Michigan Blues insures 4.3 million beneficiaries in the state. Aetna said it insures between 5% and 6% of the total Michigan market, but declined to release an exact figure
The U.S. 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. (Oct. 25, 2010) U.S. District Judge Denise Page Hood has rejected the Blues' request to throw out the lawsuit, and she set a bench trial for April 2013.
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.