Settlement participation in Blues litigation may pose concerns for hospitals, attorney says

As the deadline fast approaches for hospitals to decide whether to participate in a record-setting class-action settlement with Blue Cross Blue Shield, competing views of the situation remain.

By March 4, hospitals have to alert the settlement administrator if they want to opt out of the $2.8 billion agreement, which also includes injunctive relief said to be worth significantly more.

Some legal experts who have spoken out against the settlement have an obvious stake in the matter because they are in line to represent hospitals that opt out and pursue their own antitrust litigation against the Blues.

One attorney who said he does not fall into that category but nonetheless has concerns about the settlement is Doug Wolfe, managing partner and co-founder of the Miami-based healthcare law firm Wolfe Pincavage. He said his firm will have no role in any lawsuit brought by providers that opt out.

“I would advise the hospitals to evaluate the release language in the settlement because there’s some ambiguity as to what the hospitals are giving up,” Wolfe said.

Release language refers to the stipulation that settlement participants must forgo future litigation against the Blues if the prospective legal claims overlap with the settled issues.

Given the stakes and the complexity of the case, providers are encouraged to seek impartial legal expertise if they want to consider opting out.

Cause for concern?

Language on page 18 of the settlement agreement describes the scope of the release of future legal claims by participating providers.

It states, in part:

“Nothing in this Release shall release claims, however asserted, that arise in the ordinary course of business and are based solely on … claims regarding whether a Settling Individual Blue Plan properly paid or denied a claim for a particular product, service or benefit based on the benefit plan document, Provider contract, or state or federal statutory or regulatory regimes (including state prompt pay laws).”

Wolfe thinks that language has loopholes that could be exploited in ways that leave hospitals with limited legal standing in future disputes with the Blues.

“There’s some ambiguity that a creative defense lawyer could use to broaden the scope of what was intended by the release,” he said.

The lead attorneys for the plaintiffs, Joe Whatley and Edith Kallas of the law firm Whatley Kallas, say such concerns are unwarranted.

“We believe the scope of the release here is narrowly tailored and, combined with the ordinary-course-of-business exclusion from the release, preserves the ability for providers who participate in the settlement to continue to challenge improperly adjudicated and denied claims,” Whatley and Kallas wrote in comments to HFMA.

Their assurance partly stems from separate but related litigation that was initially settled in 2020 for $2.67 billion on behalf of Blues plan subscribers.

Both the district court that decided that case and the U.S. Court of Appeals for the 11^th Circuit “have emphasized the limited scope of the release in the Subscriber Plaintiffs’ settlement with the Blues, which is substantially identical to the release in the Provider Plaintiffs’ settlement,” Whatley and Kallas wrote.

Wary of future restrictions

Perhaps a bigger issue than the specific types of legal claims included in the release, Wolfe said, is that the release language covers future conduct by the Blues. The settlement document states that released legal claims “include but are not limited to” those that arise after the effective date of the settlement.

Whatley and Kallas pointed out that the factual predicates of the settled legal claims, which dictate the types of claims that are off limits in the future, hinge on:

• Market allocation conspiracy
• Price-fixing/boycott conspiracy (i.e., all Blues plans get the same rate or price with the provider that the local Blue obtains).

“These two conspiracy theories provide the polestar in terms of determining which claims are released and which are not,” they wrote. “We should note that we regularly represent hospitals and health systems in making claims against payers based upon violations of provider agreements and plan documents, all of which are claims that are expressly exempted from the release. We have never seen any such claims that rely on any of the factual predicates involved in the Blue Cross Antitrust Litigation.”

They emphasized that the release language includes a carve-out for legal claims that “arise in the ordinary course of business.”

A key question is not the language in the settlement but rather how courts may interpret the provision in future litigation, Wolfe said.

Counsel for the Blues could argue, “This is a broad release that applies to factual allegations that overlap with the factual allegations in this [hypothetical future] lawsuit,” Wolfe said. “And that it applies to more than just an antitrust violation, it applies to any lawsuit where you allege facts that were asserted in this case. It’ll be interesting to see what a court does with that.”

Where things stand

Providers that billed a Blues plan during the 16-year period and that do not opt out of the settlement will automatically be included and can stake a claim to their share by July 29.

They will also be in line to benefit from injunctive relief that, according to a news release from Whatley Kallas, will be worth more than $17 billion thanks to process improvements mandated for the Blues. The average administrative cost savings per BlueCard Claim is projected at $7.55, Whatley and Kallas said in their email.

One question that has come up is how easily the Blues can make the improvements available only to providers that stay in the settlement, and whether applying disparate business processes based on a provider’s settlement participation would subject the Blues to future allegations of anticompetitive conduct.

In a Feb. 7 court hearing, counsel for the Blues confirmed that the plans are incorporating measures to offer the injunctive relief based on settlement participation, Whatley and Kallas said in their comments.

Examples of how that could work, they said, include password protection for the cloud-based transformation requirements and denying providers access to a newly required BlueCard executive liaison if they are on a list of opt-outs.

“It should be noted that the Blues continue to defend the legality of their conduct and have said they will litigate any opt-out litigation, just as they are doing with respect to the subscriber opt-outs that were filed almost four years ago,” Whatley and Kallas wrote. “Advising class members that they will get this relief regardless of whether they participate in the Settlement is reckless and contrary to the Blues’ and [the] Court’s own statements on the matter.”

A high-stakes decision

The $2.8 billion settlement fund would be reduced by $754 million in legal fees and expenses, according to a proposal filed by Whatley and Kallas, as reported by Reuters. The fee amount of $657 million, or 23.47% of the settlement, is short of the 25% share they were entitled to request under the settlement agreement.

As proposed, the share would be equal to the percentage obtained by the lead attorneys in the Blue Cross Blue Shield subscriber case. Administrative expenses previously reported to be roughly $100 million also will be deducted.

From the net amount, hospitals and facilities are in line to receive 92% and individual providers the remaining 8%. If all hospitals that have served Blues members stay in the settlement, the 92% would be spread out among several thousand facilities, with allotments based primarily on billed charges.

In their comments to HFMA, Whatley and Kallas acknowledged that the settlement, like most class-action resolutions, includes a “confidential ‘blow’ provision that allows the defendants the option to terminate the settlement if certain triggers are met,” such as if enough providers opt out.

Wolfe complimented the work of the plaintiffs’ attorneys in the 12-year litigation and quipped that he may be persona non grata in the legal profession for raising questions about the settlement, but he wants to ensure hospitals are in position to make an informed decision.

Ultimately, he would “just caution hospitals to really scrutinize the language of the release and make sure that whatever they’re giving up justifies whatever they’re getting — as far as [ensuring] the [monetary] claim that they’re going to make in the class action supports the release that they’re giving up — and that they’ve done their cost-benefit analysis.”