In the Popeye cartoons, Wimpy tried to get free meals by telling patrons at the diner, “I’ll gladly pay you Tuesday for a hamburger today.” Needless to say, Wimpy never came to the diner on Tuesdays. After the settlement of the landmark Blue Cross and Blue Shield antitrust litigation, some attorneys and litigation funders are imitating Wimpy, trying to entice hospitals to opt out of the settlement and file their own lawsuits against the Blues in exchange for future riches that may never materialize. To put it simply: don’t give Wimpy your hamburger. Opting out would be a mistake because there are major payment reforms hospitals will miss out on. And linking up with litigation funders would only double down on that mistake.
The benefits of the settlement
The benefits of the settlement are enormous. Above and beyond paying $2.8 billion, the Blues will invest hundreds of millions of dollars in improvements to the BlueCard system and make other changes that will benefit healthcare providers and their patients. Economists estimate that those changes will save providers more than $17.3 billion in administrative costs over the first ten years of its implementation. Hospitals that opt out of the settlement will not be entitled to these administrative benefits and the attendant savings. However, some lawyers are now telling hospitals that they can enjoy those benefits while they pursue further action against the Blues, despite the fact that the court has been crystal clear that this will not be permitted. Insurers will have no trouble excluding opt-outs from valuable benefits of the settlement— for example, they could withhold passwords to the most valuable parts of the Blues’ streamlined systems.
The burdens and risks of opting out
Lawyers and litigation funders take a big risk when they take on cases like these after a settlement, so they expect big returns. As a hypothetical example, assume that a hospital would receive $1 million plus all the non-monetary administrative burden relief if it stays in the settlement. A litigation funder might offer what might sound like a sweet deal at first: $1 million right now, plus a share of what they say could be more money from separate litigation. But that $1 million isn’t a gift—it’s a loan that must be paid back with possibly a 300% return if indeed the hospital recovers any money. The lawsuit funder has to front the expenses of the case on the same terms, which could easily reach into the tens of millions of dollars. It should be noted that the lead counsel for the plaintiffs in the now-settled class action spent $100 million as they fought over twelve years.
It’s unlikely that a subsequent case could be litigated for a tiny fraction of that. But even if such a case costs as little as $5 million, those lawyers will have to be paid too, with a contingency fee that could reach 40% or more. Between the loan, the expenses, the funder’s return on its investment, and attorneys’ fees, the hospital might need to recover more than $40 million before it sees another dollar. Hospital leadership should carefully consider the risks of chasing a result forty times greater than the attorneys who secured the largest healthcare antitrust settlement in history.
Much of the conversation with lawyers and lawsuit funders is about future funds. But don’t be distracted and forget about the tremendous value of the payer accountability reforms with the BlueCard program. These begin soon for all hospitals remaining in the class and need to be weighed in any cost-benefit analysis. There are further risks in pursuing new legal action, such as an onerous discovery process. A hospital would have to open its books and records to the Blues’ lawyers, who will examine every detail of the hospital’s operations, costs, margins, and contracts with other insurers. The workload on the hospital’s in-house lawyers and the costs of outside counsel will be significant.
Even further, the hospital could be subject to counterclaims, as The Blues will have a strong incentive to identify all viable causes of action they might have. Counterclaims could also involve all affiliates if the hospital is part of a system. Contract negotiations with Blue plans during such developments would certainly become more difficult.
All of this downside risk of opting out needs to be explored before taking that step. And we cannot forget about patients, who are also part of this equation. For providers who stay in the settlement, eligibility and coverage determinations for Blue plans must be made within twenty seconds. This and other administrative simplifications are huge victories in a time where denials and prior authorizations are increasing elsewhere.
At the end of the day, there is much to lose in opting out. Hospitals and other healthcare providers should think twice before selling their privacy, focus, and reputation for an outside chance at recovering funds way down the road. The settlement is a great achievement for all hospitals, and we should now turn our collective efforts to improving competition and accountability across the entire insurance market.
Sponsored Content Provided By Whatley Kallas
Opting out of a landmark antitrust settlement and using litigation funders — two bad decisions hospitals shouldn’t make
About the author
Brian Tabor joined the Indiana Hospital Association in 2008 as Vice President of Government Affairs and became the fourth President of IHA in 2017. Tabor left IHA in 2024 to found Cotinga Consulting, LLC. He resides in Indianapolis with his wife and two daughters.
Sponsored by
Sponsored Content