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Reports: Horizon Skewed Quality, Costs on New Plan

Posted in Hospitals and Institutions, Litigation, Private Insurers, State Matters

Day Pitney’s Michael Furey was quoted in a July 24 article, “An inside look at how Horizon used hospital costs – and quality – in plan to change N.J. health care,” which was published on and also appeared in the July 29 edition of The Star-Ledger under the headline “Reports: Horizon Skewed Quality, Costs on New Plan.” The article focused on confidential reports and related documents obtained by Advance Local Media, publisher of The Star-Ledger, in connection with a lawsuit brought by three New Jersey-based hospitals alleging that Horizon Blue Cross Blue Shield of New Jersey breached its obligations by limiting its selection of Tier 1 hospitals to the largest hospital systems.The materials, prepared by McKinsey & Company, were developed to help Horizon establish a new line of insurance products called OMNIA, which launched in November 2015. According to the article, the three hospitals involved in the ongoing litigation — CentraState Medical Center, Holy Name Medical Center and Valley Hospital — are losing millions of dollars a year and are at risk of having to cut services or merge to stay afloat.

The article reported that McKinsey had initially recommended that hospitals other than the large systems be Horizon’s partner hospitals because they provide excellent care at average or less-than-average cost. The plaintiff hospitals were in this group, according to the report. Horizon, however, rejected the recommendation and requested that McKinsey not consider a hospital’s cost of care in making recommendations.

Horizon claimed, according to the report, that the cost of care would be irrelevant to the value-based care plan that Horizon wanted to introduce. The plaintiff hospitals argue that such reasoning allowed Horizon to pick the largest and most expensive hospitals as its OMNIA Alliance and Tier 1 partners, which had always been Horizon’s plan. The Tier 2 hospitals tend to be smaller and less expensive.

Day Pitney represents the three plaintiff hospitals. Mike told The Star-Ledger it has been three years since OMNIA made its debut, and yet it appears hospitals are still paid the same old way. He questioned, when does the value pricing begin?

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