Michigan BCBS sued for second time over hospital contracts

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Nov 4 2010

Blue Cross Blue Shield of Michigan is being sued for a second time in two weeks for allegedly pressuring hospitals to sign "most favored nation" contracts that required them to charge competing insurers higher rates.

"The class action suit was filed by The Shane Group Inc. of Hillsdale and Munising resident Bradley A. Veneberg, who say the practice by the state's largest health insurer leads to inflated prices for health care services," The Detroit News reports. "They are suing on behalf of likely thousands of Michigan consumers and companies who, since January 2007, have been affected by Blue Cross' 'most favored nation' contracts, said David Fink, one of the attorneys who filed the class action suit last week in federal court in Detroit. The class includes consumers like Veneberg, who have paid co-insurance to a hospital; self-insured employers such as The Shane Group who directly pay hospital expenses for employees; and competitive insurers that paid higher hospital charges because of Blue Cross' contracts" (Burden, 11/3).

Business Review West Michigan: "The lawsuit seeks monetary damages, a court order preventing Blue Cross Blue Shield from using or enforcing MFNs, and reforms in contracts between the health insurer and hospitals that strike the clauses" (Sanchez, 11/2).

Crain Detroit Business: "Last month, Michigan Attorney General Mike Cox and the U.S. Department of Justice filed a federal lawsuit in U.S. District Court in Detroit. It asks for the clauses to be removed. In its investigation, the Justice Department and Cox's office [alleged] that in 2007 Blue Cross threatened to cut payments by up to 16 percent to 45 small and rural hospitals if they did not agree to the most favored nation contracts. Blue Cross also allegedly required 22 larger hospitals to pay more than 20 percent more than Blue Cross rates" (Greene, 11/2).

This article was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.