Federal Judge Rules Against Blue Cross — Anti-Trust Suit Moves Forward, Could Cost Tens of Millions

Tuesday, May 08, 2018


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Blue Cross & Blue Shield of RI could be hit for tens of millions

A federal court case filed by Massachusetts healthcare company Steward Healthcare against Blue Cross & Blue Shield of Rhode Island received a major boost recently when federal court Judge Will Smith, in a highly detailed and condemning decision, rejected Blue Cross’ motion to dismiss the suit.

The implications of the decision set the stage for a case that could be worth tens of millions for Steward according to attorneys close to the case. The anti-trust suit against Blue Cross carries with it treble damages. The implications could be massive for Blue Cross.

Blue Cross has been under fire recently for violating the tenets of its tax stabilization agreement with the city of Providence and rate hikes.

Smith’s ruling also ties both Lifespan and Thundermist to the effort to block Steward from entering the market.

“Smith pointed to evidence in the record suggesting that a rival hospital – Lifespan – and a large physician group – Thudermist – may have actively assisted BCBS-RI in its alleged goal of keeping Steward out of Rhode Island. In any event, the evidence on the conspiracy claim, like the monopolization claim, was such that a reasonable jury could decide for Steward, making summary judgment inappropriate,” according to attorney James M. Burns of Ackerman, LLP.

Smith's decision references, “Remarkably, in spite of the fact that Thundermist’s patients would be sent to CNE - Lifespan’s primary competitor - Lifespan agreed to annually pay Thundermist $150,000, which replaced annual payments from Landmark that would cease upon terminating the Landmark arrangement. “

The case centers around a time when the Steward Healthcare moved into the Rhode Island market in an effort to purchase Landmark Hospital in Woonsocket.

Steward owns ten different healthcare hospitals across Massachusetts and looked to expand into Rhode Island.

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Blue Cross SWAT Team

The 101-page decision raised questions about Blue Cross’s actions and unveiled a SWAT team approach that Blue Cross Blue Shield used to block the entrance of Steward into the market.

The internal SWAT team at Blue Cross was called the “Red Team.”

Steward's entrance into the market may have created more competition and drove down prices for consumers.

“AVP Winfrey also approved the idea of analyzing Steward’s prospective threat in the first round of the Red Team’s analysis. (Id.) In that analysis, the Red Team included “a map to show just how well positioned [Steward is] in the southeast part of MA . . . they have St. Anne’s, Good Sam’s, Morton, Norwood . . . they basically have RI bordered. Then Landmark would be the tip of the spear,” wrote Smith in his decision citing an internal email.

“Blue Cross expressed concern about ACOs [Accountable Care Organizations] and risk-based contracting, which could strip some or all of an insurance company’s traditional functions, and the profits associated with insurance companies bearing risk,” Smith cited.

“The evidence that Blue Cross’s alleged refusal to deal with Steward harmed competition is plentiful. Steward presents evidence that Blue Cross’s “Red Team”41 – the group of employees and consultants who considered business threats – identified and analyzed Steward’s potential competitive impact,“ wrote Smith.

The worry was Steward could partner with another insurer such as Tufts, and “risks to BCBSRI” of a Steward ACO partnering with Tufts to offer a new, less-expensive, higher-quality product to Rhode Island.

Blue Cross Denies Allegations

Blue Cross had filed a motion for summary judgment to reject Steward's claims and dismiss the case.

“Blue Cross & Blue Shield of Rhode Island is disappointed with the Court’s decision to deny our motion for summary judgment. We remain confident, however, that Steward Health Care’s claims are without merit, and that we will prevail at trial. We will continue to defend our mission to provide high-quality, affordable health insurance to Rhode Islanders,” said Jill Flaxington of Blue Cross to GoLocal in an email.

Now, the stakes of the case are even greater. Sources close to the case tell GoLocal that the trail is expected to move forward aggressively this summer and jurors could be selected as early as June or July.


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