Groups sue to block New York Blues' for-profit conversion

Consumers Union and other organizations are upset that funds from the Empire conversion will go for hospital pay hikes, not for more health coverage.

By Julie A. Jacob, AMNews staff. Sept. 16, 2002.

In another case of groups trying to stem the tide of Blues plans seeking for-profit status, Consumers Union and four other organizations have filed a lawsuit in New York seeking to block the conversion of nonprofit Empire Blue Cross Blue Shield.

Consumers Union, the other groups and plaintiffs representing Empire members charge that it is illegal for 95% of Empire's $1 billion in charitable assets to go toward wage increases for unionized hospital employees and just 5% for a charitable fund to improve access to health care.

"The New York Legislature's approval of this secret Blue Cross deal was not only outrageous; we believe it was unconstitutional," said Mark Scherzer, the attorney for the organizations filing the lawsuit.

"The state cannot simply take $1 billion of charitable assets that were dedicated to increasing New Yorkers' access to health care and divert those funds for other purposes," Scherzer added.

The lawsuit charges that the legislation directing most of Empire's assets to pay raises for hospital employees violates the state constitution, interferes with the contract between Empire and its members and is a breach of fiduciary duty.

When Empire announced plans to convert in 1997, the company originally planned for all assets to be placed in a charitable foundation to improve health care in the state. [...]