Deadline nears for deciding whether to partake in $2.8 billion Blue Cross Blue Shield settlement

In less than two weeks, healthcare providers face a deadline to decide whether to stay in a record-setting settlement stemming from a class-action lawsuit against Blue Cross Blue Shield (BCBS).

The $2.8 billion settlement, a portion of which is available to any provider that furnished items or services to a Blues plan member between July 2008 and October 2024, was touted as the largest ever for a healthcare antitrust case.

Providers that intend to opt out must advise the settlement administrator of their choice by March 4. Taking no action will keep a provider in the class and nullify the right to pursue further claims against BCBS regarding the issues that spurred the litigation, which began in 2012.

Central to the class action was a complaint that by dividing the country into exclusive service areas, Blues plans engaged in anticompetitive practices that affected reimbursement. Similar concerns drove claims litigated on behalf of Blues customers, who previously were awarded a $2.67 billion settlement.

Given the stakes of the decision and the complexity of the case, providers are encouraged to consult with counsel if they want to assess whether to decline their share of the settlement pool.

A big choice

The decision hinges on whether the allotted payout and accompanying injunctive relief would be more consequential than the damages that could be obtained by pursuing a separate case against BCBS, net of the costs the provider would incur. The latter option carries risk regarding the time span of any such litigation, the outcome and, assuming a successful result, uncertainty over the timing of the payout amid likely appeals.

“There is a substantial question whether the potential individual recovery for Settlement Class Members is large enough to warrant the burden, expense (both temporal and monetary), and risk of prosecuting individual Sherman Act [antitrust] claims,” wrote the presiding judge, R. David Proctor of the Northern District of Alabama federal court, in his preliminary approval of the settlement.

In a footnote attached to that statement, the judge added, “A looming question that has cast its shadow over this litigation is whether a jury could be convinced that, with the skyrocketing costs of healthcare, medical providers are underpaid in their reimbursement rate.”

Proctor also wrote, “If the individual providers were to bring their own actions, the court suspects that the Blues would litigate each one to its conclusion rather than enter into piecemeal settlements. The prospect of resolving this case on a class-wide basis has produced the strongest settlement and achieved results that would not have been possible in individual litigation.”

Possible counterarguments

In a webinar hosted by the Massachusetts Health and Hospital Association (MHA), attorneys with Zuckerman Spaeder said their calculations after consulting with economists indicate BCBS’s actions reduced reimbursement by between 5% and 10% over 16 years, depending on the market.

Nationwide, damages thus could exceed $100 billion before being tripled, as is mandatory under antitrust law. Even at the low end of the range, the attorneys noted, a provider’s actual damages easily could dwarf its share of the settlement amount.

The key step, they said, is for a provider’s legal representatives and in-house finance experts to assess how much the adjusted allowed amount will be, based on the provider’s BCBS claims for the 16-year period. That figure is essentially the numerator in each provider’s settlement formula. They then should consult with the plaintiffs’ attorneys as to roughly how many hospitals are expected to stay in the settlement, thereby getting a sense of the formula denominator.

It could be that a hospital views a potential payout of well into seven figures as “found money” that it’s willing to settle for, especially given the uncertainty of going after a bigger number, Cy Smith, partner with Zuckerman Spaeder, said in the MHA webinar.

“That’s a completely reasonable decision to make, but we also want you to take the second step, and it’s to compare that claim to your alternative,” Smith said, adding that opting out would free a provider from being bound by a one-size-fits-all settlement.

He also warned against assuming settlement payments will be disbursed promptly, given the possibility of drawn-out appeals. For example, the settlement in the BCBS subscriber lawsuit was delayed for four years during a process that wound up at the Supreme Court.

In dispute

Of note is that Zuckerman Spaeder is going to be representing “some number” of hospitals that opt out of the settlement, according to the presentation. The firm also played a lead role in winning the BCBS class-action lawsuit on behalf of subscribers.

Whatley Kallas, the lead firm in the provider class action, asked the court in late January to prevent Smith and Zuckerman Spaeder from representing opt-out providers in any related litigation against BCBS. Smith is alleged to have made false or misleading statements while using his insider role from the BCBS subscriber case to promote disparaging viewpoints about the settlement.

In his own court filing, Smith denied having a conflict of interest, misusing confidential information or making misrepresentations to providers in the settlement class.

In theory, if enough hospitals opt out of the settlement and pursue their own cases, BCBS could seek to renegotiate the settlement. That threshold has not been made public.

Promising to make changes

Injunctive relief for providers in the settlement class arguably is a more significant outcome than the monetary settlement. That relief includes, among other provisions:

• Enhanced access to BlueCard Program member benefits and eligibility information, preauthorization requirements and claims-status tracking
• Assurance that clean, fully insured claims will be paid within 30 days, subject to penalties and interest for failure to do so, and that additional information will be provided promptly as needed to correct claims
• Contracting changes to allow “contiguous area” contracts to cover all in-state Blues Plan members and to incorporate settlement-class hospitals that are within a 60-minute drive of an “anchor” sister hospital that contracts with BCBS in the contiguous area

According to a press release from Whatley Kallas, the value of the injunctive relief is $17.3 billion. Roughly $16.3 billion stems from the anticipated process improvements in resolving issues with BlueCard claims.  

“The significant improvements to the BlueCard Program may not be the type of relief a court could award even if Provider Plaintiffs were to prevail at trial,” the court wrote in preliminarily approving the settlement. “Only through settlement with all of the Blue Plans could such an outcome have been achieved.”

During the MHA webinar, attorneys with Zuckerman Spaeder questioned whether hospitals that opt out of the settlement truly will be excluded from all benefits of the required business process changes, given the difficulty of targeting some of the changes only to certain hospitals.

Next steps

For providers that stay in the settlement, the next key date is July 29, the deadline to file a claim.

Of the settlement fund, more than $750 million has been requested for attorney fees and expenses. Among the remainder, 92% is slated to go to hospitals and other facilities and 8% to medical professionals, based on an assessment of the relative share of the impact incurred by those two groups.

Specific payouts will be determined based on a provider’s allowed amount as determined by its BCBS claims, modified by factors such as the market share of the Blues plan in the provider’s geography.

The default method for calculating a provider’s allowed amount is to authorize analysts representing the class to use claims information in a proprietary database spanning 2008 through 2014, with the amount for the full 16-year period extrapolated using the Consumer Price Index (CPI) for hospital and related services.

Alternatively, the provider can submit data for the years 2015-24 and/or 2008-14. Due to a lack of accessible data, this alternative approach is mandatory for providers in Arizona, Iowa, Louisiana, Maryland, New Jersey, South Dakota, Washington, D.C., Puerto Rico and parts of Virginia, as well as any provider that was not operating before 2015.

Once the adjusted allowed amount is determined for each claimant, providers will be able to review their final tally prior to distribution of the settlement fund.