Insurer Clashes With Hospitals On Cost Of Care
The long-simmering dispute over New Jersey's high charges for out-of-network hospital care spilled into federal court this week, when three Hudson County hospitals known for some of the highest prices in the nation sued the state's largest health insurer, alleging the company owed them more than $76 million.
CarePoint Health's hospitals -- Bayonne Medical Center, Christ Hospital in Jersey City and Hoboken University Medical Center -- allege in the lawsuit that Horizon Blue Cross Blue Shield of New Jersey has an "intentional and unlawful pattern of drastically underpaying and/or refusing to pay" claims that the hospitals submit.
None of the for-profit hospitals, which were purchased separately in the past decade by a group of investors, currently has a contract with Horizon that sets the rates the insurer will pay for care. That leaves the hospitals free to charge whatever they wish.
And those out-of-network charges -- often nearly 20 times what Medicare would pay for the same care -- have drawn national attention, with government data showing that Bayonne, in particular, consistently charges more than any other hospital in the nation for many common diagnoses.
The lawsuit is the latest front in the struggle for financial dominance between hospitals and insurers. Horizon, as the state's largest insurer, has 3.8 million members and covers more than half of those with private insurance in New Jersey. Last year, it backed legislative efforts to rein in out-of-network costs, but lost the support of some key lawmakers when it created a new insurance plan that gave selected hospitals preferential treatment but left others out.
On Wednesday, Horizon attacked the CarePoint lawsuit, calling it "the most blatant, despicable example of CarePoint's out-of-network price gouging."
The lawsuit "is a $70 million slap in the face to our members and the employers, labor unions and taxpayers of New Jersey we serve," said Tom Wilson, Horizon's director of public affairs. "Horizon will fight this suit to protect the millions of New Jerseyans who already pay the second-highest health care bill in America."
Last year, Horizon estimated that out-of-network bills add $1 billion annually to health care costs in New Jersey, leading to higher premiums and slower wage growth. Patients themselves are often liable for out-of-network bills if their health insurers are not governed by state regulations, which require the insurer to protect the patient in emergency situations and pay whatever balance the hospital says is owed.
The $76 million owed by Horizon, according to the lawsuit, is mostly for emergency care and is increasing at the rate of $4 million to $6 million a week at the three hospitals.
The total was accumulated over 15 months of claims at Christ Hospital, and less than five months of claims at Bayonne and Hoboken, where the in-network contracts were terminated this year.
One of the claims arose after a woman in the late stages of labor arrived at Christ Hospital, according to the lawsuit.
Readings of the fetal heart rate were "non-reassuring" and a C-section was performed. The baby's umbilical cord was "wrapped tightly around his neck," the lawsuit said. It added that Horizon denied reimbursement because it said the patient had no out-of-network benefits and her delivery was not an emergency -- she could have been transferred to an in-network hospital. That position was "clearly illegal and abhorrent to good medical practice and any sense of common decency," the suit said.
Business strategy
CarePoint has made no secret of using out-of-network bills as a business strategy. Bayonne Medical Center was one of the first hospitals in the country to advertise its short emergency-room waiting times on billboards, a marketing method that encouraged patients to seek care there regardless of their insurance coverage. When the hospital was out-of-network for the patient, the hospital simply billed the insurer, and the patient was not charged anything more than an in-network facility would charge.
CarePoint's lawyers argue that the revenues generated are crucial to the survival of the hospitals, which were purchased at or near bankruptcy.
The out-of-network payments compensate for financial losses from treating uninsured and Medicaid patients, the lawsuit said. The owners -- Vivek Garipalli, Jeffrey Mandler and James Lawler -- "have generated huge economic benefits to Hudson County and the state" through their capital investments and rescue of the hospitals, it said.
They have also made substantial contributions to the political campaigns of various lawmakers. A proposed measure that would have used binding arbitration to settle disputes over out-of-network bills stalled in the Legislature last year and never came to a vote.
In his statement, Wilson said the suit "is a deliberate part of CarePoint's strategy of refusing to participate in insurance networks in order to maximize their profits. While most hospitals are engaging in patient-centered, value-based care programs that lower health care costs, CarePoint is refusing to join insurance networks and filing suit demanding payment of their egregious charges."
The hospitals would participate in Horizon's network if it paid sustainable rates that would "generate a reasonable profit," the lawsuit said.
A Horizon spokesman, Thomas Vincz, said the insurer was "in negotiation/mediation with CarePoint in hopes of bringing them back in network."
"CarePoint's highest-in-the-nation charges for some out-of-network services and this lawsuit are two reminders of the urgent need for legislative intervention," said Ward Sanders, president of the New Jersey Association of Health Plans. "Consumers deserve transparency and fair pricing of services, especially in an emergency situation, where there may be no opportunity for choice of providers. Price-gouging simply should not be permitted, and as long as it is we will all pay the price."
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