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October 19, 2010 6:22 PM

DOJ Slaps Antitrust Suit on Blue Cross in Michigan

Posted by Tom Huddleston Jr.

Blue Cross Blue Shield of Michigan is facing antitrust allegations after allegedly inserting clauses into its contracts with hospitals in order to handicap competing insurers.

According to The Blog of Legal Times, the Justice Department filed a civil antitrust suit against the insurance company on Monday. The suit claims that Blue Cross is abusing "most favored nation" (MFN) clauses--aimed at preventing alternate insurers from receiving more favorable rates. In some instances, the DOJ alleges, Blue Cross offered to pay more to hospitals that promised to charge Blue Cross's competitors even higher prices. Blue Cross has turned to Hunton & Williams for legal counsel in the matter.

The complaint filed by the Justice Department in the U.S. District Court for the Eastern District of Michigan--and joined by the state of Michigan--asks for an injunction that will prohibit the use of MFNs in Blue Cross's contracts with hospitals while also voiding any such clauses that already exist in the company's Michigan contracts. 

BLT's article goes on to quote Christine Varney, assistant attorney general of the Justice Department's antitrust division, who said in a press conference on Monday that Blue Cross "used its dominance to impose anticompetitive MFNs in contracts with approximately half of the general acute care hospitals" in the state. The DOJ complaint cites Ascension Health--Michigan's largest hospital system--as among the hospitals who included MFNs in contracts with Blue Cross, as well as 70 of Michigan's 131 general acute care hospitals.

MFN clauses in Blue Cross's contracts with some Detroit-area hospitals require that the hospitals charge the insurer's competitors at least 25 percent more than Blue Cross is charged, the complaint alleges. BLT notes, though, that Varney has said the DOJ is not currently planning legal actions against hospitals that entered into contracts containing the clauses in question.

BLT also cites a company statement in which Blue Cross rebukes the DOJ's allegations, stating that the lawsuit has no merit.

"Our hospital discounts are a vital part of our statutory mission to provide Michigan residents with statewide access to health care at a reasonable cost," said company spokesman R. Andrew Hetzel in the statement. "At a time when insurance premiums are increasing because of medical costs, it hurts consumers to remove tools that insurers use to negotiate the lowest possible cost for medical care in the hospital."

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