Seventeen New Jersey hospitals are challenging the state's approval of a healthcare plan that they say harms them and patients by relegating the hospitals to a lower-tier network.
The hospitals allege in a brief filed Thursday in state court that the New Jersey Department of Banking and Insurance didn't follow proper procedures for approving Horizon Blue Cross Blue Shield of New Jersey's OMNIA Health Alliance and Health Plan. The department “failed to comply with its own regulations concerning network adequacy and abdicated its responsibility to ensure that the OMNIA Plan was not contrary to the public interest,” according to court documents.
The hospitals want the department to put the plan on hold pending review of the approval process. If the department refuses, the hospitals will challenge that in court.
The plan divides hospitals into two tiers, with one cheaper tier for plan members. The 17 hospitals were placed into the more expensive tier, which they argue will prevent plan members from accessing certain services. The hospitals also argue the plan could destabilize the New Jersey hospital system as a whole by endangering the financial health of hospitals in the lower tier, which may lose large numbers of patients.
“If some of these hospitals that have been pushed into Tier 2 suffer enough economic damage so that they can't survive, you are potentially jeopardizing the access to care for a lot of people, particularly poor and minority groups that live in urban areas,” said Steven Goldman, a partner at Kramer Levin Naftalis & Frankel who is representing the hospitals.
Horizon spokesman Thomas Rubino responded to the lawsuit in a statement: “New Jersey has some of the highest health care costs in the nation and consumers are demanding relief. It is unfortunate that these lawsuits aim to preserve the high-cost status quo in New Jersey, which is neither sustainable nor acceptable.”
The state's banking and insurance department declined to comment.
The hospitals also note in their brief that OMNIA leaves out all but one of the state's Catholic hospitals from the top tier “thus severely limiting the opportunity for healthcare consumers to choose faith-based institutions for care.”
Goldman said it's possible religious discrimination might be at play, but added that their exclusion likely has more to do with their missions.
“I'm not saying because they're Catholic hospitals and because they serve the needy they're excluded, what I'm saying is because of that mission and their service to those communities they were apparently not … given the same opportunity to participate in the Tier 1 group,” Goldman said, noting that the excluded hospitals weren't part of big systems. “They were excluded because the driving principle of this program was an exchange of patient volume for lower reimbursements.”
The hospitals and systems include Capital Health Regional Medical Center; Centrastate Medical Center; Holy Name Medical Center; JFK Medical Center; Kennedy Health; Our Lady of Lourdes Health Care Services; St. Francis Medical Center; St Luke's Warren Hospital; Trinitas Regional Medical Center; Valley Health System; and Virtua Health. Some of those systems have several hospitals within them.
The legal action follows a lawsuit filed against Horizon by St. Peter's University Hospital in New Brunswick over the same issue earlier this month. That hospital claims it was wrongly excluded from the cheaper tier. Horizon's Rubino said in a statement earlier this month; “It is unfortunate St. Peter's, one of our long-standing network hospitals, would choose litigation instead of conversation on how we can work together to provide those we both serve with access to lower cost healthcare.”
In recent years, insurers have faced a number of lawsuits over so-called narrow networks brought by customers, consumer groups and hospitals. Children's hospitals and cancer hospitals have sometimes been left out of narrow network plans because of their higher costs.
In California, customers filed a class-action lawsuit last year against Anthem, Blue Shield of California and Cigna for allegedly deceiving customers about participating hospitals and doctors in their networks. Earlier this year, the New York state attorney general's office settled with EmblemHealth, requiring the insurer to cover anesthesiology services that accompany in-network screening colonoscopies.
States, such as New Jersey, must decide how to handle issues related to narrow networks, said Mark Garriga, a partner at Butler Snow, who represents providers. Some states have addressed the issue through so-called “any willing provider” laws.
Insurers have opposed these laws, saying they could reduce their power to negotiate rates and keep premiums down. Garriga, however, said states must decide: “What's best for the population at large, not what's best for Blue Cross but how do we make sure that the average citizen has access to a wider range of providers? That should be the focus.”