Becker's Hospital Review

22 Financial Management T wo federal antitrust lawsuits advancing in a federal court in Alabama are alleging Blue Cross and Blue Shield insurers are functioning as an illegal cartel by divvying up markets to avoid competing against one another, according to The Wall Street Journal. This case has garnered significant media attention for several reasons. While many antitrust lawsuits have been brought against Blue Cross entities, this one has not been dismissed at the stage of a motion to dismiss, thus lending the suit significant momentum. The lawsuits against BCBS come in the wake of a growing trend of consoli- dation of insurance companies over the last decade; Cigna, Aetna, United Healthcare and different Blue Cross entities today each hold fairly strong market positions in different states or regions. Compared with their posi- tions a decade ago, these major insurers have much stronger footing among providers and employers across the country. Additionally, the case against BCBS has attracted nationally recognized law- yers on the plaintiffs' side. However, it should be noted that the case is still in its early stages, as no judgments have been made on the merits of the case. Here are 13 key points on the BCBS antitrust case. 1. The plaintiffs. One of the lawsuits against BCBS was brought on behalf of healthcare providers, and the other on behalf of individual and small- employer customers. A federal judicial panel in Alabama has consolidated the two lawsuits into a single claim. The cases allege that BCBS' networked structure of insurance groups violates the federal antitrust law. 2. The defendants. Both lawsuits name all 37 BCBS companies, which cover nearly a third of Americans, and the BCBS Association as defendants. 3. Both lawsuits allege BCBS' "cartel-like" operations limit com- petition. The customers claim they are being forced to pay inflated pre- miums due to BCBS' illegal market division and other actions by the Blue Association, such as imposing limitations on the amount of non-Blue brands business insurers can do. The healthcare providers claim reduced competi- tion results in lower reimbursement. 4. The Blue Association denies these allegations. "This is a model that has withstood scrutiny over our entire history. There's no smoky room involved, there is no dividing up," Scott Nehs, JD, general counsel of the Blue Association told The Wall Street Journal. 5. U.S. District Judge R. David Proctor declined to dismiss the case last year, despite the defendants' attempt to have the case thrown out. Judge Proctor said the plaintiffs "have alleged a viable market-allocation scheme," according to the report. 6. Both the providers' and customers' lawsuits have moved on to the discovery phase and the plaintiffs are seeking class-action status. If a settlement isn't reached, the lawsuits could take years to resolve. So far, it is unclear whether the parties are involved in settlement negotiations at this time, according to the report. 7. Both plaintiff groups are being represented by prominent at- torneys. The legal team for the health insurance customers includes David Boies, who previously represented federal antitrust regulators against Micro- soft. The providers' case is being led by Whatley Kallas, a firm that has won high-profile settlements from insurers in the past on behalf of physicians, according to The Wall Street Journal. 8. BCBS' licensing model. The BCBS Association licenses its brand to in- surers. As part of the licensing agreement, companies are generally given ex- clusive rights to use the BCBS name and logo within demarcated territories. 9. BCBS defends its licensing practices. BCBS and the Blue Association says its licensing deals merely codify decades-old trademark rights and "do not constitute an agreement to do anything unlawful," according to The Wall Street Journal. The Blue Association noted in a court brief that federal regulators have known about the insurer's licenses for a long time and have never previously tak- en antitrust action. The association has also said its arrangements are intended to ensure its members focus on building the Blue brand and help build competition by helping Blue companies ally with one another against national insurers. 10. Critics find fault with this defense. "The fact that someone's been do- ing something for a long time doesn't make it right, and doesn't make it legal," Joe Whatley, a lead attorney for the provider plaintiffs, told The Wall Street Journal. 11. Many antitrust experts say the cases have groundbreaking potential. Mark Hall, a law professor at Wake Forest College, told The Wall Street Journal the lawsuit presents "some surprisingly strong claims," describ- ing it as a "sort of antitrust law 101 that direct competitors can't agree to divvy up their territory." 12. The case will be determined by the judicial interpretation of BCBS' network's structure, according to Barak D. Richman, a Duke law professor. The court will assess whether the network represents a franchise or is motivated by a conspiratorial design to reduce competition. "You'll be looking for cartel-like behavior or the protection of intellectual property," Mr. Richman told the The Wall Street Journal. "That will probably be the most significant evidentiary test." 13. However, the two plaintiffs "appear to be arguing conflict- ing outcomes," Glenn Melnick, a professor at the University of South- ern California, told The Wall Street Journal. According to Mr. Melnick, the two plaintiffs alleging BCBS' antitrust violations have diverging interests, as higher reimbursement rates to healthcare providers would most likely lead to more expensive insurance premiums for customers. n The Blue Cross Blue Shield Antitrust Case: 13 Key Points By Tamara Rosin WellStar Calls Off Merger Talks With Emory By Ayla Ellison M arietta, Ga.-based WellStar Health System, the largest non- profit system in Georgia, scrapped plans to merge with At- lanta-based Emory Healthcare in June. The two systems be- gan discussing the prospect of joining forces in February. "After a few months of discussion and review with Emory University, the WellStar board of trustees has determined a new strategic direction," said Gary Miller, chair of the WellStar board of trustees, in a statement re- leased to the Atlanta Business Chronicle. "WellStar has declined to enter the next stage of discussions with Emory University." Emory University showed disappointment over WellStar's decision. The system released a statement saying, "Emory continues to believe that the proposed combination of Emory Healthcare and WellStar Health System would serve our communities well as a way to extend the benefits of our renowned academic medical center to a larger population of patients in Metro Atlanta, as well as the state of Georgia and beyond." With the deal called off, WellStar has plans to explore integration oppor- tunities with other potential partners, according to the report. n

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