Blue Cross contributed to hospital's insolvency, lawsuit says

Landmark Medical Center has sued Blue Cross Blue Shield of Rhode Island, alleging the insurer failed to negotiate reasonable reimbursement rates to cover the hospital's costs and has, therefore, contributed to its insolvency.

The suit contends the hospital is powerless against the monopoly strength of Blue Cross, which is the state's largest insurer, and has been forced to accept reimbursements so inadequate that they"“threaten Landmark's very existence," reports the Providence Journal.

In 2008, Landmark became insolvent and has been under court supervision ever since. The lawsuit comes just days before the deadline for prospective buyers to bid on the hospital, notes GoLocalProv.

Landmark alleges that Blue Cross' market conduct and past executive compensation violated state law that established it as a nonprofit with a charitable mission, becoming instead "a powerful monopoly designed primarily to accumulate wealth." Additionally, Landmark accuses Blue Cross of breach of contract for reneging on a verbal agreement in 2003 to make good on past underpayments after an audit.

The suit asks the court to order Blue Cross to negotiate reasonable reimbursement rates, to pay Landmark an unspecified amount for past underpayments and to compel Blue Cross to reduce its administrative expenses.

Laura Calenda, Blue Cross spokeswoman, told the Providence Business News that Landmark failed to mention that in prior contract negotiations they demanded an unreasonable 25 percent increase on Blue Cross' commercial business, and that Landmark owed Blue Cross more than $4 million in back debt. Further, more than 50 percent of Landmark's revenues are derived from Medicare and Medicaid, whose rates and shortfalls are the responsibility of the federal government, not Blue Cross.

"Less than 3 percent of BCBSRI's total membership seeks care at LMC, accounting for only 25 percent of Landmark's revenues," Calenda said. "Yet in an attempt to offset inadequate government rates, years of mismanagement and a failed investment in an unnecessary heart center, LMC continues to demand that BCBSRI overpay them on our commercial business."

To learn more:
- read the Providence Journal article
- see the Providence Business News story
- access the GoLocalProv piece

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