In a lawsuit that will go before a state judge this week, eight not-for-profit hospitals in western Pennsylvania will argue that health insurer Highmark improperly trimmed Medicare Advantage payments by 2% last year following federal budget cuts.
The hospitals, including Butler Memorial, Conemaugh Valley Memorial, Miners and Washington, say Highmark and its subsidiary, Keystone Health Plan West, violated terms of their provider agreements. The insurer cut the rates after the CMS reduced its payments to Advantage plans by 2% in response to automatic federal spending cuts known as budget sequestration. The hospitals say changes to the provider agreements were allowed only if both parties agreed to them, and the hospitals never signed on for the reduction.
Highmark counters that the agreements allow it to adjust rates in the event of a CMS payment reduction. An Allegheny County judge is scheduled to hear arguments in the case Tuesday.
Many Advantage plans across the country passed the CMS payment reduction on to providers, prompting similar challenges, said Amanda Hayes-Kibreab, senior counsel at Hooper, Lundy & Bookman in Los Angeles. The Highmark case may be unusual in going to court. Most of the challenges are likely being arbitrated because their provider contracts require arbitration of disputes.
