BCBS Plans Defend against Antitrust Class Actions

Back at the end of July, a class action lawsuit was filed against Blue Cross Blue Shield of Alabama (BCBS Alabama), the Blue Cross Blue Shield Association (the "Association"), and multiple BCBS Plans for antitrust violations.  The lawsuit was filed on behalf of a retired chiropractor, Jerry L. Conway, by Whatley Kallas, a Birmingham-based health law firm. 

This isn't by far the first time that a BCBS entity has been targeted for anticompetitive practices.  There have been several other complaints on different grounds, the more recents triggered by Department of Justice and state investigations concerning BCBS Michigan's use of "most-favored nation clauses", a practice not uncommon among insurers.  This triggered several additional suits against BCBS Plans on the same grounds. In addition, BCBS Tennessee settled potential HIPAA violations with HHS this past March. 

However, this class action is much different: the Conway complaint alleges that the defendants, 45 Blue Cross Plans, as well as the Association, completely dominate their respective geographic market to the complete lack of meaningful competition. The argument presented by this class action, and a novel one, is essentially that the very nature of the license agreements and other rules and regulations of membership in BCBS is a deliberate conspiracy to reduce competition and allocate market shares in violation of federal antitrust laws. With antitrust law, the issue isn't just whether a particular entity or group of entities dominates a given market, but rather, whether they are doing so through improper means.  Without these horizontal agreements to not compete and implement other anticompetitive practices, the complaint alleges, the individual plans would not have dominant market shares in their states or areas of a state to begin with and would be potential competitors of each other.  The class of allegedly affected health care providers would therefore then have better rates and better terms but for this restraint on competition.

Other similar class-actions were filed against BCBS North Carolina and the Association, as well as BCBS Alabama, earlier this year, alleging similar conduct, in addition to challenges to most-favored-nation clauses.  However, the previous class actions were filed on behalf of companies and beneficiaries of BCBS Plans, not heath care providers, making this the first filed on behalf of providers.

The BCBS Plans and the BCBS Association will undoubtedly do everything in their power to have this new complaint dismissed for any number of reasons.  The plaintiff must additionally prove that a class action is appropriate and be granted class certification before the action can proceed. Class action certification in and of itself is a time-consuming and lengthy process, and if denied, would be difficult for this lawsuit to go forward due to the number of defendants named and their considerable resources, as well as the more limited resources of the individual plaintiff health care providers seeking to establish themselves as a class.

Given the previous suits filed against BCBS Alabama on similar grounds, it is possible that the Conway class action will be consolidated with them.  In addition, given the fact-specific nature of antitrust suits in general as well as the novel nature of the argument being presented, the class action(s) will undoubtedly present a variety of additional hurdles for the plaintiffs, as well as defendants, to navigate.

Even though the Conway complaint alleges harm to rival health plans as well as individual consumers as a result of the alleged anticompetitive practices, the more immediate benefits if the plaintiffs are successful would likely be to health care providers themselves, presumably in the form of their increased ability to negotiate better terms for rates and increased access to patients in a more competitive market.  Given that these license agreements have been in operation for some time, it is remarkable that there has not been a challenge to these practices earlier. 

The Birmingham Business Journal reports BCBS Alabama spokesperson Koko Mackin has stated the BCBS Alabama Conway and other class action suits have "no merit."  However, at the very least, the complaints are a far-cry from being frivolous or ill-conceived and represent, at least on the surface, potentially valid antitrust concerns, with reputable attorneys and the companies and individuals they represent buying into these arguments. 

The IRS/DOJ/FTC Weigh-in on ACOs

Following the release of the CMS proposed ACO rule, the IRS has released a notice requesting comment whether existing guidance for tax-exempt organizations seeking to participate in the Medicare Shared Savings Program as ACOs is sufficient and whether additional, and what, guidance may be needed. 

Released along with the CMS Proposed ACO Rule, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) joint Proposed Antitrust Policy Statement is available regarding antitrust enforcement for ACOs.  The proposed statement sets forth and requests public comment on a proposed "safety zone" for certain ACOs as well as an expedited review process.  It coordinates antitrust competition analysis with CMS's review of ACO applications to ensure necessary guidance is available for the formation of procompetitive ACOs.

For some "light" weekend reading, check out all the documents related to the coordinated efforts of the agencies:

CMS Proposed ACO Rule

CMS/OIG Joint Notice of Potential Fraud and Abuse Waivers

DOJ/FTC Proposed Antitrust Policy Statement

IRS Solicitation of Comments


"Soon" becomes Now - CMS releases long-awaited ACO Rules

The long wait is finally over.  The Centers for Medicare and Medicaid Services finally released the much anticipated Accountable Care Organization (ACO) proposed rules today after lengthy delays and promises that the rules would be out "soon."  The proposed rules set forth the requirements for the Medicare Shared Savings Program and are expected to clarify many questions about how ACOs will operate and receive incentive payments under the Shared Savings Program. 

The HHS Office of the Inspector General (OIG) has also released a notice and request for public comment on proposed fraud and abuse waivers for application of Stark, the Anti-kickback Statute and certain civil monetary penatlies (CMP) law provisions to ACOs. The Secretary is authorized to waive these laws as necessary to implement the Shared Savings Program.  The Federal Trade Commission (FTC) and the Department of Justice (DOJ) are also expected to weigh in on the antitrust implications for ACOs.  

The Antitrust Headache: What ACOs, AT&T and Blue Cross have in Common

So what exactly do a nation-wide health insurer and the second (potentially now first) largest U.S. wireless provider have in common? Upcoming battles over the antitrust implications of their actions and a not-so-beautiful friendship with the DOJ. 

For AT&T, its headache began last weekend when it announced its plans to buy T-Mobile for $39 billion, giving it effectively a 40% share of the current wireless market share and raising questions from network coverage to increased quality of service, pricing and competition.  AT&T and T-Mobile predict that the quality of calls would improve, coverage would be expanded, and more individuals would have access to faster wireless data connections as a result of the merger.

In a completely unrelated market and action, Blue Cross Blue Shield health insurance plans in the District of Columbia, Kansas, Missouri, North Carolina, Ohio, South Carolina and West Virginia recently found themselves on the receiving end of a U.S. Department of Justice (DOJ) subpoena.  The subpoenas come as part of a lawsuit filed last year by the DOJ against Blue Cross Blue Shield of Michigan alleging the insurer entered into agreements to raise hospital prices. 

Far from immune, health care providers and other stakeholders looking to form and operate Accountable Care Organizations (ACOs), the AT&T and Blue Cross cases serve as a reminder of the significant risk of antitrust scrutiny that such collaboratives can be subject to.  The development of such ACOs through hospital and physician joint ventures and similar relationships has the potential to create substantial market power and may encourage monopoly and price-fixing activity, thus coming under the watchful eye of the DOJ.  The DOJ and FTC are expected to address this matter soon in joint collaboration with the forthcoming proposed ACO regulations from CMS (see Statement of Sharis A. Pozen, Chief of Staff, Antitrust Division. before the Subcommittee on the Courts and Competition Policy, Concerning Antitrust Enforcement in the Health Care Industry (December 1, 2010)).

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