Illinois Blues disputes PHO role in rate talks

The insurer's lawsuit is a blow against doctors trying to gain negotiating leverage through large groups.

By Julie A. Jacob, AMNews staff. Oct. 21, 2002.

The right of a health system to negotiate on behalf of doctors in its network through a physician-hospital organization is at the heart of a contract struggle between a large hospital system and a large health plan.

On Oct. 4, Health Care Service Corp.'s Blue Cross Blue Shield of Illinois filed a lawsuit in U.S. District Court in Chicago challenging the legality of Advocate Health Care negotiating rates for some of the physicians in its network through Advocate's physician-hospital organization. The Illinois Blues contends that negotiating through the PHO violates antitrust laws, but Advocate maintains that "our PHO agreement is in step with the law ... and if the lawsuit proceeds, we will defend ourselves."

Meanwhile, Advocate sent the plan notice that it was terminating its contract with the Illinois Blues effective Dec. 31 unless the two sides came to terms on reimbursement and the right of Advocate to negotiate on behalf of its physicians through a PHO.

Although contract disputes between health insurers and health systems are common occurrences, this one highlights the broader issue of whether health systems can negotiate reimbursement rates for physicians through physician-hospital organizations, said Lee Sacks, MD, president of the Advocate Health Partners PHO.

"We have worked with external experts and feel very comfortable that we are on solid ground," Dr. Sacks said. "By representing physicians, the PHO is negotiating rates as part of a package to provide added value through integration." [...]