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Tiered and Narrowed Managed Care Networks

Capital Health System v. Horizon Healthcare Services (Bergen Cnty. NJ Super. Ct.)

Issue

The issue in this case is whether Horizon Blue Cross Blue Shield of New Jersey (Horizon) breached its contractual obligations to certain of its in-network hospitals by creating a tiered network insurance plan.

AMA interest

The AMA believes tiered insurance networks of physicians should disclose the criteria used to create the network and physicians should be allowed to review and correct any inaccuracies in the data used to classify them.

Case summary

Horizon is the largest health insurer in New Jersey, with more than 50% of the commercial insurance market.  Within its already established panel of health care providers (including hospitals and physicians), Horizon established the OMNIA Health Plan (OMNIA Plan) tiering system.  Patients receive monetary incentives (lower copays and/or deductibles) if they use the services of Tier 1 providers than of Tier 2 providers.

Horizon claims it chose the Tier 1 providers because those providers offered better value-based health care and were willing to accept reduced reimbursement rates.  Beyond those generalities, Horizon did not disclose the specific criteria used in the selection process or how it weighted the criteria.  Also, Horizon acknowledged that some of its criteria were subjective.  Providers did not have an opportunity to appeal the selection decision.  All of the Tier 1 hospitals entered into exclusivity agreements with Horizon.

Several Tier 2 hospitals have sued Horizon in the New Jersey Superior Court.  The hospitals alleged, primarily, breach of contract.

The case is in the discovery phase.

Litigation Center involvement

The Litigation Center, along with the Medical Society of New Jersey, will file an amicus brief in opposition to the OMNIA Plan.

Capital Health Systems v. New Jersey Department of Banking & Insurance

(NJ Super. Ct. App. Div.)

Issue

The issue in this case is whether the New Jersey Department of Banking & Insurance (“DOBI”) properly approved a tiered network plan of Horizon Blue Cross Blue Shield of New Jersey (“Horizon”) under New Jersey law.

AMA interest

The AMA believes tiered insurance networks of physicians should disclose the criteria used to create the network and physicians should be allowed to review and correct any inaccuracies in the data used to classify them.

Case summary

Horizon is the largest health insurer in New Jersey, with more than 50% of the commercial insurance market.  Within its already established panel of health care service providers (including hospitals and physicians), Horizon established a tiering system.  Patients receive monetary incentives (lower copays and/or deductibles) if they use the services of Tier 1 providers rather than of Tier 2 providers.

Horizon claims it chose the Tier 1 providers because those providers offered better value-based health care and were willing to accept reduced reimbursement rates.  Beyond those generalities, Horizon did not disclose the specific criteria used in the selection process or how it weighted the criteria.  Also, Horizon acknowledged that some of its criteria were subjective.  Providers did not have an opportunity to appeal the selection decision.  All of the Tier 1 hospitals entered into exclusivity agreements with Horizon.

The Horizon tiering plan was subject to DOBI approval, and DOBI gave that approval without a public hearing.  After the approval was announced, eleven Tier 2 hospitals (but no physicians) objected to the decision.  The objectors asserted, primarily (i) the tiered network failed the criteria for network adequacy (including geographic distribution and breadth of specialized medical services) under New Jersey law and (ii) DOBI failed to consider whether the tiered network plan was consistent with the public interest.  DOBI rejected both contentions.

The eleven hospitals have now appealed the DOBI approval to the Superior Court of New Jersey, Appellate Division. 

Litigation Center involvement

The Litigation Center will contribute financially to an amicus brief filed by the Medical Society of New Jersey.

Washington State Medical Association v. Regence BlueShield (King Cty., Wash., Super.Ct.)

Issue

The issue in this case was whether a managed care organization’s creation of a planned sub-network of physician-providers was based on flawed methods of evaluating physicians’ quality of services.

AMA interest

The AMA supports fairness in any review of physicians’ professional qualifications.  It also supports  the relationship of trust between physicians and their patients.

Case summary

Regence BlueShield, one of Washington State’s largest managed care organizations, instituted a provider sub-network called “Select Network.”  Supposedly based on its analyses of quality and efficiency, Regence planned to exclude some of its own network physicians from this sub-network.  In fact, however, the Regence Select Network Plan was based on flawed measurement criteria.  The plan infringed basic notions of fairness, and it was so communicated to patients as to intrude on their relationship of trust with their physicians. 

Faced with overwhelming public opposition, Regence, with apologies to the affected physicians and patients, withdrew the plan shortly after its introduction.  However, Regence announced that it would reinstate the plan later.

The Washington State Medical Association, the Litigation Center (acting through the AMA), and six individual physicians sued Regence.  The suit charged violations of the Washington Unfair and Deceptive Business Practices statute, the common law torts of defamation and intentional interference with contract, and breach of contract. 

The lawsuit has been settled and dismissed.  Under the settlement, Regence must allow WSMA to suggest more objective criteria for physician performance measurements in any new Select Network Plan.  Also, any new plan must allow physicians to appeal their scores.

Litigation Center involvement

The Litigation Center, through the AMA, joined the lawsuit as an additional plaintiff.