Hospitals sue Highmark, subsidiary Keystone Health Plan West over reduced reimbursements

Sept. 24--A group of Western Pennsylvania hospitals has sued health insurer Highmark Inc. and a subsidiary for reducing payments to them, causing what the hospitals say are "significant economic damages."

The lawsuit, filed on Monday in Allegheny County Common Pleas Court, claims Highmark and Keystone Health Plan West have been improperly shorting the hospitals 2 percent of Medicare Advantage reimbursement payments since Jan. 1, violating the terms of their contract. The hospitals want a judge to order the insurer to pay back the money it withheld. An audit would determine the amount.

Highmark, the state's biggest health insurer, is the largest provider of Medicare Advantage plans in Western Pennsylvania, where it has about 150,000 members.

Under Medicare Advantage, an alternative to traditional Medicare, the federal government contracts with private insurance companies to administer Medicare benefits to seniors.

The private plans are especially popular in Pittsburgh. According to data from the Kaiser Family Foundation, a nonprofit research organization, 62 percent of Medicare beneficiaries in Allegheny County are enrolled in the private plans. By comparison, 30 percent of beneficiaries nationwide are.

A federal law to cut spending, known as the sequester, reduced Medicare funding across the board by 2 percent.

Edward Weisgerber, a partner at K&L Gates representing the hospitals, said the hospitals oppose Highmark passing the federal cuts to them. They sued after discussions "that did not resolve the matter," Weisgerber said.

"The Center for Medicare & Medicaid Services (the federal agency that administers the Medicare program) has taken the position that passing that 2 percent along is not a federal mandate because they've already recovered their money," he said. "The hospitals' position is the contract they have with Highmark does not permit (it) to unilaterally withhold the 2 percent."

Highmark spokesman Aaron Billger said the insurance company is prepared to negotiate and hope to reach an agreement outside of court.

"In the interim, we'll defend our position and our right to implement the adjustments," Billger said.

Gretchen Jacobson, associate director of Medicare policy at the Kaiser Family Foundation, said Medicare Advantage reimbursement rates paid by insurers to hospitals are determined by contracts, not the Medicare program.

"There isn't a set payment that the Medicare Advantage plans are required to make to the hospitals," Jacobson said. "They negotiate with the hospitals what the rate will be and what they will pay them."

Many hospitals are struggling with cuts in reimbursement from the government and private insurers.

"Any reduction in payment is not typically welcomed," Jacobson said.

Central Pennsylvania'sSusquehanna Health System filed a similar lawsuit against American Progressive Life and Health Insurance Co. of New York in July.

It is not clear how many insurers have passed on the 2 percent to health care providers.

The hospitals filing suit include independent hospitals Butler Memorial, Conemaugh Valley Memorial, Indiana Regional Medical Center, Jameson Memorial, Miners Hospital, Meyersdale Community, St. Clair Memorial, Washington Hospital and Windber Medical Center and three Excela Health hospitals: Frick, Latrobe Area and Westmoreland Regional.

Staff writer Alex Nixon contributed to this report. Adam Brandolph is a staff writer for Trib Total Media. He can be reached at 412-391-0927 or [email protected].

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