Trio of Hospitals Continues Legal Challenge to Omnia Insurance Network

Lilo H. Stainton | April 21, 2017 | Health Care
Lower-cost plan a hit with consumers, but litigating hospitals say Omnia gave preferential treatment to large facilities

horizon OMNIA
Nearly 18 months after they filed suit against Horizon Blue Cross Blue Shield to reveal details of how it formed its Omnia insurance network, hospital leaders and their attorneys may get to review documents and correspondence they believe are at the heart of their case.

But officials with Horizon, the state’s largest health insurance provider, said the drawn-out litigation is only distracting from more important battles: protecting federal funding for healthcare and working together to control costs while improving patient care.

Michael Furey, an attorney representing the three hospital systems that remain in the lawsuit —four others dropped out after they reached agreements with Horizon — said he expected to begin taking depositions in May from several large hospital systems that were among those that received a preferential listing in the Omnia plan. Furey said the goal is to learn more about any advance conversations they had with Horizon regarding participation in the network. The depositions relate to claims pending in New Jersey Superior Court, in Bergen County.

The two sides are scheduled to begin arguing separate but related appeals in New Jersey Supreme Court on June 20, Furey said. The hospitals are seeking to overturn a June 2016 decision by a lower court that allowed Horizon to limit access to a consultant’s report it used to help craft the Omnia network; Horizon has argued the report contains privileged information and trade secrets.

Horizon litigating ‘in secrecy’?

The debate will also involve arguments related to a separate claim filed by Saint Peter’s University Hospital to challenge an earlier decision related to discovery; while this complaint was filed separately, the Saint Peter’s claim relates to its placement in Tier 2 and has been considered along with the arguments from other hospitals.

“Horizon has tried to conduct this litigation in secrecy,” said Furey, who represents the remaining plaintiffs: CentraState Healthcare System, Holy Name Medical Center and Valley Health System (Capitol Health System, Trinitas Regional Medical Center, St. Luke’s Hospital and JFK Medical Center dropped out of the litigation over the past year or so as they reached agreements with Horizon.) “What we’re trying to do is bring out how these decisions were made,” Furey added.

But officials with Horizon, which covers some 3.8 million people, insist they have been open about the process that led to Omnia’s rollout in September 2015. And the lower-cost plan seems to have been a hit with customers, as more than 85 percent of those who chose a Horizon product picked Omnia during the recent enrollment period for plans sold on the small business and individual insurance market.

“Horizon has been more transparent than any insurer about the criteria we used to establish our tiered network and the Appellate Court was right last summer when they said that the hospitals’ claims ‘appear to rest on the slenderest of reeds’,” said Horizon spokesman Thomas Vincz, referring to the decision from last June.

“With the future of health care facing such uncertainty at the federal level, it is unfortunate that there are only three hospitals that continue their fight to prevent hundreds of thousands of New Jerseyans from obtaining high quality, affordable health insurance,” Vincz added. Horizon, which celebrated its 85th anniversary earlier this month with a host of prominent officials, has also been fending off attempts by Gov. Chris Christie to tap into its reserve fund to pay for public health programs, particularly efforts to battle addiction.

Tiered plans — a model that is gaining traction nationwide, as healthcare consumers seek greater savings — provide consumer discounts in exchange for using a select group of providers. Insurance companies can save by negotiating lower rates with this sub-group and the providers can theoretically make up the difference by treating more patients, attracted by the lower costs. The Omnia plan also includes a wellness component that rewards doctors who keep patients healthier.

Select hospitals in Tier 1

While Omnia was not the first tiered plan in New Jersey, Horizon’s product attracted controversy soon after it launched. Horizon’s network includes all but a handful of hospitals statewide and the company designated a select group — now some three dozen facilities — as Tier 1 facilities, where patients were eligible for discounts, and put the rest in Tier 2, where Horizon members would pay their normal out-of-pocket costs.

The most vocal Omnia critics were a group of Tier 2 hospitals — primarily smaller, stand-alone facilities or faith-based providers — who said they were not given fair consideration for the preferred, Tier 1 status. A group of seven hospitals filed suit in November 2015 challenging Horizon’s process for compiling the tiers and claiming the move would harm both their reputation and their bottom line, as patients went elsewhere. (The group also sued the state for its role in approving the Omnia plan, a case that was dismissed last fall.)

Since then, several hospitals dropped out of the litigation and Horizon filed a lawsuit of its own challenging what it termed the hospitals’ “smear campaign” against Omnia and a recent claim asking a judge to delay some aspects of the case until the court made a decision on other motions. But earlier this month a Superior Court judge in Cape May ruled against Horizon, allowing the litigation to continue.

The plaintiffs hope to begin next month deposing executives with Barnabas Health, the state’s largest healthcare system, created last year when Robert Wood Johnson Health System merged with RWJ/Barnabas Health, and Hackensack University Health System, which joined Meridian Health last June to become Hackensack Meridian Health. The plaintiffs are also seeking documents from Meridian Health. This quest is aimed at determining what conversations these powerful provider groups had with Horizon before the insurance company formally assembled the Omnia network, Furey said.

“Our contention that Horizon had pre-selected these systems for Tier 1 positions before they ever began their scoring of the hospitals” with assistance from consultant McKinsey and Company, Furey said. “We’ve learned a lot of protocols Horizon set up are biased in favor of the large systems.”

Claims of economic damage

These protocols are likely part of a report McKinsey generated to help Horizon craft the network, which is at the heart of the June 20 court date, Furey explained. The debate that day will also focus on early agreements that Furey said Horizon struck with certain providers —and related communication between the insurance company and hospital executives.

A ruling in December that led up to the depositions also narrowed the scope of the case. Superior Court Judge Robert Contillo, of Bergen County, agreed to let the court consider how Horizon’s decisions on Omnia may have violated its contract and negotiations’ process with some of the Tier 2 hospitals. But the judge dismissed a handful of the hospitals’ claims related to economic damages they suffered as a result of their Tier 2 status.

Since the beginning, some of the plaintiff hospitals had complained that a shift in patient volume to Tier 1 facilities could eventually drive them out of business. But Furey said if the hospitals are victorious in their other claims they could still recover these economic losses in the damage phase of the trial, in which they are asking for financial relief and an invitation to participate as Tier 1 providers, among other things.

But Vincz, with Horizon, suggested the legal battle misses the larger point. “All of us who play a role in health care have an obligation to work toward the goal that OMNIA is achieving: lowering the cost of health care for New Jerseyans while improving quality outcomes and making care more patient-centered.”