LANSING, Mich. (Legal Newsline) - Michigan Attorney General Mike Cox announced on Monday that he has joined forces with the U.S. Department of Justice in a federal suit to stop Blue Cross Blue Shield of Michigan from its alleged use of anti-competitive clauses in reimbursement contracts.
Approximately half of Michigan's hospitals have been hit with these "Most-Favored-Nation" clauses, which allegedly give Blue Cross an unlawful advantage over other insurers. Cox says Blue Cross Blue Shield requires hospitals to charge other insurers more than they charge Blue Cross, and this drives up prices for consumers and damages competition in the health care market place.
"It is deeply disturbing that Blue Cross, a non-profit created to help Michigan citizens, would strong-arm hospitals at the expense of hard-working families," Cox said.
"These greedy deals are hardly what the Legislature had in mind when it created Blue Cross. We need more competition to keep prices down, but with the support of our tax dollars, Blue Cross is doing everything it can to kill its competition."
The suit alleges that Blue Cross increased its MFN clauses in 2007, threatening to slash payments to 45 small rural hospitals by up to 16 percent if the hospitals refused. It is also alleged that Blue Cross secured MFN clauses with at least 23 larger hospitals, putting other insurers at a competitive disadvantage by offering to increase the amount they paid hospitals if other insurers paid more.
The larger hospitals were secured with an "MFN-plus," which required the hospitals to give Blue Cross better prices than other insurers while adding on a specific percentage increase, which reached as high as 39 percent in some cases, Cox claims. This allegedly allowed Blue Cross to protect its market share and stop new insurers from joining the marketplace. The three Beaumont Hospitals in Detroit, Troy, and Grosse Pointe have MFN-Plus contracts with Blue Cross.
Blue Cross competitors at Covenant Medical Center are required to pay at least 39 percent more, Cox claims. At Marquette Hospital, the MFN status requires other insurers to pay the hospital at least 23 percent more than Blue Cross, Cox claims. At Beaumont Hospitals, they are required to pay 27 percent more, Cox claims.
The 23 hospitals across Michigan with MFN-plus provisions include Alpena Regional Medical Center, Genesys Regional Medical Center, St. Mary's of Michigan Medical Center, St. Joseph Health System, Borgess Medical Center, the six hospitals of St. John Providence Health System, St. John Hospital, Southfield Providence Hospital, Providence Park Hospital, St. John Hospital's North Shore Campus, St. John Macomb's Oakland Hospital, St. John River District Hospital, Botsford Hospital, Covenant Medical Center, Dickinson County Memorial Hospital, Gratiot Community Hospital, Marquette General Hospital, Metro Health Hospital, Mid-Michigan Medical Center in Midland, Munson Medical Center in Traverse City, Sparrow Hospital, and the William Beaumont Hospitals in Troy, Royal Oak and Gross Pointe.
In addition, 45 of Michigan's "Peer Group 5" rural hospitals each have MFN provisions as part of their Participating Hospital Agreements with Blue Cross.
The U.S. Department of Justice successfully challenged Blue Cross Blue Shield of Ohio's use of MFN clauses in 1999 under Section 1 of the Sherman Act in the case U.S. v Medical Mutual of Ohio (formerly Blue Cross Blue Shield of Ohio).
The court will determine a pre-trial schedule for the case against Blue Cross Blue Shield of Michigan once the insurer files its response to the lawsuit.