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Seventeen ‘Tier 2’ Hospitals Go to Court to Block Horizon’s OMNIA Plans

Former chief of state Department of Banking and Insurance leads plaintiff action against his former agency

steven goldman
Steven M. Goldman, former commissioner of the state Department of Banking and Insurance (DOBI) under Gov. Jon Corzine

If Horizon Blue Cross Blue Shield of New Jersey’s OMNIA health plans launch at the end of the year, they may first have to overcome both legal and legislative obstacles.

Steven M. Goldman, former commissioner of the state Department of Banking and Insurance (DOBI) under Gov. Jon Corzine, has filed an appeal on behalf of 17 hospitals that Horizon placed in its Tier 2 category of the OMNIA plan. Tier 2 hospitals will cost patients more under the Horizon plan than Tier 1 facilities and doctors.

In the filing, the hospitals contend that DOBI “failed to comply with its own regulations concerning network adequacy and abdicated its responsibility to ensure that the OMNIA Plan was not contrary to public interest.” They want the state to block the launch of OMNIA or, failing that, for the court to intervene to block it.

In addition, Sen. Joseph F. Vitale (D-Middlesex) and Sen. Nia H. Gill (D-Essex) are crafting legislation that Vitale said would affect the OMNIA plans -- although details won’t be available until the bill is officially announced. Vitale said the bill would seek “in part to correct the mistakes that were made by DOBI, or what could be a weakness in the regulations.” He added that if the bill becomes law, he would expect it to affect the OMNIA launch.

Horizon executives likely knew that Tier 2 providers would be upset at the possibility of losing patients to lower-cost providers, but they may not have foreseen the extent to which the proposal would be savaged by various opponents since it was announced in September. While Horizon representatives have highlighted the demand from consumers for lower-cost healthcare in offering OMNIA, the hospitals and some elected officials have focused on the potential negative effects of the plan which they say could include hospital closures and a loss of healthcare access to underserved communities.

In addition, Vitale and Gill are working on a bill that seeks to address the OMNIA approval, Vitale said.

“The fact of the matter is Horizon was opaque and less than honest with respect to the design and the rollout of this product,” Vitale said. “And the state dropped the ball on network adequacy, in addition to other factors that affect cost and accessibility that … affect underserved communities.”

Vitale said that insurers “should not decide which systems succeed and failed. And they certainly can’t be trusted to decide and implement state health policy.”

The 17 hospitals that filed the appeal include Capital Health Regional Medical Center, Trenton; CentraState Medical Center, Freehold; Holy Name Medical Center, Teaneck; JFK Medical Center, Edison; Kennedy Health System in Cherry Hill, Stratford, and Turnersville.

Also party to the suit are Lourdes Medical Center of Burlington County, Willingboro; Our Lady of Lourdes Medical Center, Camden; St. Francis Medical Center, Trenton; St. Luke’s Warren Hospital, Phillipsburg; Trinitas Regional Medical Center, Elizabeth; Valley Health System, Ridgewood; and Virtua in Berlin, Marlton, Mount Holly, and Voorhees.

The lawsuit notes that DOBI didn’t hold any public hearings on Horizon’s OMNIA application, which was approved two weeks after it was submitted. In addition, the department didn’t notify any of the hospitals about its decision, so none could weigh in before DOBI issued its approval on September 18.

Specifically, the appeal contends that Horizon hadn’t finalized its Tier 1 agreements at the time of the approval, “making it impossible for DOBI to evaluate compliance of the OMNIA Plan with its own regulations on network adequacy.”

The state requires that in each county, 90 percent of people covered by an insurance plan have at least one acute-care hospital with licensed medical-surgical, pediatric, obstetrical, and critical care services within 20 miles or 30 minutes, driving time, whichever is less. In addition, in counties in which more than 20 percent of covered residents rely on public transit, the driving time must be based on average public-transit travel times.

Horizon admittedly didn’t have Tier 1 hospitals with obstetrical services in Burlington and Mercer counties. However, Tier 1 University Medical Center of Princeton in Plainsboro is just outside of Mercer, and Horizon said it would cover that county. And Horizon told DOBI officials before they approved OMNIA that it would add Tier 1 obstetrical services in Burlington, perhaps by separately including the obstetrical department of a Tier 2 hospital in Tier 1.

In addition, the lawsuit notes a state requirement that health plans include all Level 1 and Level 2 trauma centers “or otherwise agree to cover medically necessary trauma services at a reasonable cost, with the provision of benefits at the in-network level.” It adds that Tier 1 doesn’t include the Level 1 trauma center at University Hospital in Newark or the Level 2 trauma center at Capital Health Regional Medical Center.

Horizon failed to show that OMNIA met the network adequacy standards for areas served by public transit, according to the appeal.

OMNIA jeopardizes the stability and quality of the New Jersey hospital system as a whole, the appeal argues, since Tier 2 hospitals could close from the loss of patients; consumers could be mistakenly believe the Tier 1 label indicates the quality of care that patients receive; and relegates many hospitals located in underserved communities to Tier 2.

The lawsuit also knocks Horizon for not making transparent the weights and scores used to determine which hospitals it included in Tier 1. “The lack of transparency is particularly troublesome when tied with DOBI’s rushed approval” of OMNIA, it says.

Finally, the lawsuit notes that the Tier 2 hospitals have $3 billion in tax-exempt bonds that are at risk of default if the hospitals close.

Horizon spokesman Thomas Rubino said in a statement that “New Jersey has some of the highest healthcare costs in the nation and consumers are demanding relief. It is unfortunate that these lawsuits aim to preserve the high-cost status quo in New Jersey, which is neither sustainable nor acceptable.”

The OMNIA plans are based on the OMNIA Health Alliance, a new arrangement between Horizon and a core group of Tier 1 hospitals that are committed to working together to shift from paying providers based on the volume of services they provide toward paying them to keep patients healthy.

The OMNIA plans serving the State Health Benefit Program will launch on December 26, while the commercial OMNIA plans, including those offered through small employers and the federally operated individual insurance marketplace, will launch on January 1.

A DOBI spokesman declined to comment on the lawsuit.

Saint Peter's University Hospital in New Brunswick is pursuing a separate lawsuit seeking to block OMNIA.

Much of the hospitals’ filing was focused on the timing of the appeal, which was required to be filed within 45 days of the decision. While the decision was 63 days ago, the hospitals say they didn’t receive a notice about it until DOBI officials released it on October 5, the day of an eight-hour hearing on OMNIA held by the Senate Commerce and Health, Human Services, and Senior Citizens Committees. Yesterday marked 45 days since the hearing.

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