Blue Cross Blue Shield settlement concerns linger as date of final approval nears

Nearly 15,500 healthcare providers are known to have withdrawn from the record-setting Blue Cross Blue Shield antitrust settlement, retaining the option to pursue separate litigation.

The number was listed in an April court filing as the parties move toward a July 29 hearing at which the presiding court is scheduled to consider final approval of the settlement. The same date is the deadline for settlement participants to file claims for a share of the $2.8 billion settlement fund (minus an estimated $754 million for attorney fees and expenses, plus up to $100 million in administrative expenses). Providers had to give notice of opting out by March 4.

Along with payouts to participating hospitals, the settlement includes injunctive relief, such as transparency and other improvements to the BlueCard program for providers submitting claims to out-of-market Blue plans. Plaintiffs’ attorneys from the law firm of Whatley Kallas, LLP, have calculated the value of the relief at $17.3 billion over 10 years.

Concerns expressed

Questions about the settlement terms have focused on the scope of the release, meaning the waiver of the right to bring future legal claims against Blue plans if those claims are functionally similar to the settled issues.

If courts interpret the release terms broadly, providers could be hamstrung in pursuing future legal action against the Blues and thus could lose some of the leverage they have to ensure fair dealings.

A formal objection to that aspect of the settlement was lodged in court by an HCA Healthcare affiliate that operates medical centers in the Dallas area. The objection stated that the release was “unreasonably ambiguous, and HCA anticipates that the Blues will try to use it to prevent HCA from asserting claims that are substantively unrelated to the ones asserted in the [litigation].”

In a recent court filing, the plaintiffs’ attorneys said the release complies with doctrine forbidding participants in class-action settlements from filing future legal claims that are based on “identical factual predicates” to the settled issues.

They also said the settlement makes clear that future legal claims can be filed if they arise in the ordinary course of doing business, including the question of whether a Blues plan denied or underpaid a service claim.

An objection filed by out-of-network emergency department physician groups stated that ordinary course of business should be better defined, noting that a Blues plan theoretically could say paying for out-of-network services in some circumstances is not part of its ordinary course of doing business. Settlement participants thus might be barred from litigating such a practice.

The plaintiffs’ attorneys countered, “If a release cannot be approved because a party could try to invoke it with an argument that is frivolous and incorrect, no release could ever be approved.”

A case to watch

Regarding the scope of the released legal claims, advocates are warily eyeing a recent ruling involving a parallel settlement reached on behalf of Blues subscribers.

A Blue plan — Anthem Health Plans of Virginia — requested that the presiding court prevent a healthcare logistics company, which participated in the subscriber settlement, from pursuing a complaint under the Employee Retirement Income Security Act of 1974 (ERISA).

The same judge overseeing the provider settlement, R. David Proctor of the Northern District of Alabama federal court, considered the logistics company’s argument that ERISA claims arising in the ordinary course of business can still be brought. Anthem argued that the company’s legal claim was invalid because it stemmed from a complaint about the BlueCard program, which was a central issue in the class action.

Proctor agreed, enjoining the employer from further prosecuting its claims unless it omits the BlueCard allegations.

Doug Wolfe, the co-founder and managing partner of Wolfe Pincavage, LLP, which is not involved in ongoing or prospective opt-out litigation, said the development speaks to a larger concern.

“Considering that some [health] systems do more business with the Blues in a year than the money being paid as part of this settlement, a broad interpretation of the release would be catastrophic for hospitals,” Wolfe said.

Edith Kallas and Joe Whatley, co-lead counsel for the plaintiffs in the class action, said the decision in the Anthem Virginia situation is narrowly tailored.

The subscriber’s complaint “included a direct challenge to the Blues’ exclusive service areas,” they wrote in comments to HFMA. “The ruling is consistent with what we told class members and the press about the settlement. … The first example of factual predicates included in the release is a challenge to exclusive service areas.”

Examining funding sources

In urging final approval of the settlement, Whatley Kallas wrote that the “number of opt-outs does not detract from the overall favorability of the settlement. The settlement class is a large class of most of the providers in the country, and it was inevitable that some of them would opt out; some individual litigation had been filed against the Blues even before the settlement was announced.”

Proctor is trying to gauge whether opt-out providers are receiving outside funding as they look to litigate their own cases against the Blues. Among the 15,448 providers that were known to have submitted notice of their intent to opt out as of March 24, eight lawsuits against the Blues have been initiated, according to the court. Three suits led by large health systems were filed immediately after the opt-out deadline.

“It has come to the court’s attention that some (if not many) of the opt outs may be receiving third-party funds in connection with their requests for exclusion,” Proctor wrote.

Such funding typically comes from investment firms in return for a share of any ensuing monetary award.

A reason for the court’s interest in those arrangements leading up to a final assessment of the settlement, Proctor wrote, is that “in fulfilling its responsibility to determine whether the proposed provider settlement is fair, adequate and reasonable, the court requires information regarding whether a party opting out of the settlement is doing so because they have concerns about the settlement’s fairness, or whether there might be some other motivation, such as having given a financial interest in its claims in this litigation to another party.”