Justice Department Sues BCBS of Michigan Over Improper Hospital Deals
The Department of Justice is suing Blue Cross Blue Shield of Michigan on antitrust grounds, alleging that the insurer set up agreements with hospitals that likely raised health costs and insurance premiums for state residents, the Wall Street Journal reports (Catan/Johnson, Wall Street Journal, 10/19).
The suit contests agreements made between BCBS and 70 of the state's 131 general acute care hospitals (Reichard, CQ HealthBeat, 10/18).
The deals involve a "most-favored-nation" clause, which stipulates that hospitals must charge BCBS' competitors equal or higher prices for health care procedures, allowing hospitals to raise their prices as long as they raise them more for other insurers. In some cases, the clause has led to hospitals charging BCBS' competitors up to 40% more, the suit alleges.
According to the Journal, most-favored-nation clauses are used frequently in business but are not necessarily legal. In some situations, DOJ has found them to be anticompetitive and has filed lawsuits against businesses.
BCBS said that the suit is "without merit," adding that it would defend itself against the allegations.
BCBS said that the agreements were part of an attempt to negotiate discounts for customers (Wall Street Journal, 10/19).
Andrew Hetzel -- vice president of corporate communications for BCBS -- said, "At a time when the focus on health insurance affordability has never been more intense, it seems strange and ironic that the federal government would be suing a health plan that has worked very hard to negotiate the lowest prices for its customers with hospitals" (Hilzenrath, Washington Post, 10/18).
Brett Lieberman -- a spokesperson for BCBS -- said, "In 2010 alone, a variety of cost-saving programs and negotiated discounts generated hundreds of billions of dollars in cost savings for the nearly one out of three Americans who belong to the [BCBS] network nationwide."
Probe Could Have Wide-Reaching Effects
DOJ suggested that the suit could be the first of many, as it seeks to generate more competition in the health insurance market.
Robert Laszewski -- an industry consultant with Health Policy and Strategy Associates -- said many Blue Cross plans use the clause in their contracts, and other insurers make similar agreements if they are the largest in the state.
An expansion of DOJ's investigation into the matter could heavily affect WellPoint, the largest insurer in the U.S. by membership, because the company runs Blue Cross plans in 14 states, about half of which use most-favored-nation clauses (Wall Street Journal, 10/19).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.