Mayo Clinic, others accuse Blue Cross Blue Shield of price-fixing

Aug. 27—ROCHESTER — Mayo Clinic and other large health systems are again suing Blue Cross Blue Shield (BCBS), which provides health insurance for more than 115 million Americans, for alleged illegal antitrust actions that result in underpayment to hospitals.

Mayo Clinic — along with fellow Minnesota nonprofit care providers Allina Health System, CentraCare Health System and Fairview Health System, plus Atlantic Health System, RWJBarnabas Health, University of Florida Health and the University of Chicago Medical Center — filed a new lawsuit against BCBS on Aug. 4 in the Northern District of California.

The lawsuit argues that BCBS entities, including those in Minnesota and North Dakota, should compete with each other and should individually negotiate contracts with care providers. Instead, the lawsuit alleges, the contract negotiations are limited by the BCBS geographic territories.

The hospitals also allege the BCBS entities work together when negotiating with health systems to "fix prices."

That, in turn, results in Mayo Clinic and other systems being "underpaid by the Blue Plans for the services they render to members of Blue Plans." It is "textbook economics," the lawsuit says, that less competition results in less revenue for hospitals.

"Plaintiffs bring this action under federal and state antitrust laws to address anticompetitive agreements between separate economic entities that should, but do not, act in the market independently of one another when contracting with and reimbursing healthcare providers, selling certain health insurance services, and administering employee benefit plans," says the complaint.

"Defendants are parties to long-standing, explicit, and illegal agreements to eliminate competition in predesignated geographic areas. Plaintiffs are healthcare providers who contracted with and were underpaid (under-reimbursed) by one or more Blues for the provision of healthcare services, equipment, supplies, facility use for medical or surgical procedures, and/or professional services."

Neither Mayo Clinic nor BCBS immediately responded to questions about the lawsuit. The first court conference about the case is scheduled for Nov. 6 in San Jose, Calif.

In the Rochester area, BCBS represented 56% of commercially insured patients and 38% of all of the patients in Minnesota in 2023, according to the complaint. It has the largest share of the health insurance market in Minnesota.

"Exclusive service areas" assigned to BCBS entities such as BCBS North Dakota or BCBS Illinois do not stop patients from seeking care from providers that might be outside their ESA or from hospitals that provide unique care, such as Mayo Clinic.

For example, the complaint states that a "notable share" of charges to Blue plans from its Arizona locations are to BCBS Illinois and other Blues outside of Arizona.

And in Rochester, Mayo Clinic "continues to treat and seek reimbursement for more patients through the BlueCard Program than ... through its local Blue," the complaint says.

"Ordinarily, in a truly competitive environment, providers, like Mayo Clinic, would be able to observe these patterns and contract directly with the Blues most often associated with the patients they treat," the complaint says. "The anticompetitive ESA allocation agreements, however, prevent Plaintiffs from negotiating to provide coverage to these patient populations that they already serve — Plaintiffs are instead forced to accept terms on a take it or leave it basis; choose between covering all Members of all Blue Plans, at the same price, or none of them."

The allegations contained in the lawsuit are not new. Lawsuits alleging BCBS entities illegally work together instead of competing have been moving through U.S. courts for years.

Earlier this month, BCBS agreed to a $2.8 billion settlement in a similar lawsuit in Alabama. However, 6,480 health care providers, including Mayo Clinic and the other plaintiffs in this case, opted out of the settlement.

The implication is that the health systems want BCBS to change its behavior rather than to collect a one-time settlement payment.

Mayo Clinic and the other plaintiffs in the California case are demanding a trial by jury. They are asking for triple the amount of actual damages as well as "permanently enjoining" BCBS from restricting territories, from "horizontal market allocation" and from developing any other programs "intended to or has the effect of fixing prices paid to healthcare providers."

The lawsuit claims that the "mind-boggling profits" means that BCBS executives are paid substantial compensation. In 2020, then-BCBS Minnesota CEO Craig Samitt received $3.36 million in total compensation.

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