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New Jersey's largest insurer continues legal disputes with hospitals it labeled as Tier 2; Judges' discovery rulings affirmed

By Dee Thompson | Aug 14, 2017

Medical malpractice 04

TRENTON, N.J. (Legal Newsline) – Horizon Healthcare Services Inc., the largest insurer in New Jersey, has lost the right to keep confidential certain documents sought by several hospitals that have sued the insurer.

Those hospitals claim Horizon's tier system for designating hospitals is unfair. On July 24, the New Jersey Supreme Court affirmed a trial court ruling that orders Horizon to comply with discovery requests by the hospitals.

Horizon maintains a system known as OMNIA, a two-tiered system that the Department of Banking and Insurance approved. Certain hospitals in New Jersey were placed in Tier 2 status. They sued Horizon, claiming Horizon violated its OMNIA agreements when it placed in them in the Tier 2 category.

Capital Health System’s Inc. and St. Peter’s University Hospital Inc. both sued Horizon in separate lawsuits in 2016. 

According to the Supreme Court's decision, both hospital systems felt that the tiering system used by Horizon was set up to wrongfully guarantee that certain larger hospital would receive Tier 1 status.

The hospital systems have sued Horizon because subscribers were given financial incentives to encourage them to go to Tier 1 hospitals, referred to as “Alliance partners.” The partners that were part of that group "agreed to financial concessions on reimbursement in return for sharing in the savings expected from OMNIA and an increase in patient-volume,” according to the court's order.

The method by which Horizon assigned tier status to the hospitals also became a question for the courts. Horizon maintains NHAs (network hospital agreements) that designate how each hospital shall participate in the networks or sub-networks, and the hospitals suing Horizon claim breach of contract related to the NHAs. 

When discovery commenced in both lawsuits, confidentiality orders were approved by the chancery judges saying the confidential information disclosed couldn’t be used for any business or commercial purpose.

In both the Alliance and St. Peter’s lawsuits the lower court judges ordered Horizon to produce the Tier 1 scores and other key documentation, including performance scores used to calculate the tier designations for the hospitals. Horizon argued the documents contained proprietary business information and were irrelevant.

The discovery orders in both cases were reversed by the New Jersey Appellate division. Horizon appealed. 

In its July order, the New Jersey Supreme Court found that “The chancery judges' determinations were soundly and logically reached and should not have been second-guessed because the appellate division harbored a different view of the merits. 

"We have never held that, when dissemination may be adequately protected by a confidentiality order, a party’s right to relevant discovery is governed by a court’s impression of that party’s likelihood of success on the related claim or defense. The orders under review in these interlocutory appeals are reversed, and the matters remanded to the trial courts for further proceedings.”

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