Aetna sues Michigan Blues for artificially raising market rates

Aetna is suing Blue Cross Blue Shield of Michigan for using its market dominance to implement most-favored nation clauses with hospitals that forced them to charge Aetna as much as 39 percent more than the Blue Cross rate, reports the Wall Street Journal.

Blue Cross rewarded hospitals with higher payments when they charged its competitors higher rates, implementing an "anticompetitive scheme aimed at thwarting competition by increasing the rates that Aetna and other competitors would pay for hospital services," according to the Detroit News. These claims echo allegations the Department of Justice made last year when it filed an antitrust suit against Blue Cross.

"As the Blues began enforcing the most-favored nation clauses, our ability to negotiate deals with some of the hospital systems so they were either as good as the Blues in Michigan or even better, in some cases, didn't materialize," Bill Berenson, Aetna's president of the Michigan market, told the Detroit News. "So that hampers the ability to offer a competitive product in the marketplace. It artificially raises the premium level in the marketplace."

At the heart of the issue is Aetna's nearly $400 million acquisition of HMS Healthcare, the second-largest hospital and doctor network in Michigan, in 2005. At that point, Aetna had better hospital rates than Blue Cross, but then Blue Cross began pursuing special deals with Michigan hospitals that told Aetna they had to charge it higher rates because they "had no choice due to pressure from Blue Cross," reports the Detroit Free Press. For example, Beaumont's three Detroit-area hospitals charged Aetna at least 25 percent more than they charged Blue Cross.

Blues spokesman Andy Hetzel called the allegations "sour grapes," saying Aetna's $400 million investment was small compared with the $13 billion a year Blue Cross saves its members on hospital and other provider contracts, the Free Press notes. "Blue Cross is improving quality and efficiency in its contracts with providers that provide significant discounts that help manage health costs for our members," Hetzel said.

Although the lawsuit doesn't request a specific amount of damages, it says Aetna should receive three times the amount of damages it allegedly sustained. Aetna also wants Blue Cross to end its sweetheart contracts with hospitals, reports The Detroit News.

To learn more:
- read the Wall Street Journal article
- check out the Detroit Free Press article
- see the Detroit News article

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