Hospitals Sue Blue Cross Over Cancellations
Five not-for-profit Southern California hospitals on Monday filed a lawsuit alleging that Blue Cross of California routinely authorized high-cost medical treatment for members and then refused to reimburse hospitals after canceling members' coverage, the Los Angeles Times reports (Girion, Los Angeles Times, 5/9).
The case is related to lawsuits filed by former Blue Cross members who allege that the insurer routinely canceled policies for members after reviewing applications for inconsistencies, rather than fraud. According to legal experts, state law permits insurers to cancel policies only if members made deliberate misstatements or omissions in their applications (California Healthline, 4/26).
The hospitals' lawsuit claims that Blue Cross authorized treatments, but later retroactively canceled policies after patients' bills reached a certain threshold and refused to reimburse hospitals for services.
Blue Cross sent payment denial letters to hospitals that misled them "into believing that the patients lacked coverage at the time the services were provided without explaining that (Blue Cross) really had rescinded that coverage after services were provided," the lawsuit says. According to the hospitals, state law requires insurance providers to pay for claims they authorize in advance -- whether the policy cancellations were valid or not.
The hospitals are seeking a court order to stop the alleged practice and collect an unspecified amount of back payments and other damages. Hospitals often had to write off their bills because patients could not pay, with some bills totaling more than $100,000.
The lawsuit was filed by:
- Anaheim Memorial Medical Center;
- Long Beach Memorial Medical Center;
- Miller Children's Hospital;
- Orange Coast Memorial Hospital; and
- Saddleback Memorial Medical Center.
Blue Cross parent company WellPoint said it has not seen the lawsuit and could not comment on it. The company has denied wrongdoing in the lawsuits filed by former policy holders and said policies were canceled legally.
According to the Times, the "hospitals' suit may be the first of many against Blue Cross" because the suit alleges the practice is "widespread" (Los Angeles Times, 5/9).