Insurer Sues Out-of-Network Hospitals for Waiving Patient's Out-of-Pocket Expenses

Horizon Blue Cross Blue Shield of New Jersey (Horizon) filed separate lawsuits against two out-of-network hospital providers, claiming that both providers were waiving the coinsurance, deductibles and other out-of-pocket expenses that patients were contractually required to pay for out-of-network providers. Horizon Blue Cross Blue Shield of New Jersey v. IJKG LLC., No. ESX-C-125-09 (N.J. Super. Ct. filed May 14, 2009); Horizon Blue Cross Blue Shield of New Jersey v. Newton Memorial Hospital, No. ESX-C-141-09 (N.J. Super. Ct. filed May 28, 2009).

In both complaints, Horizon prophesies that “the hospital’s fraudulent practices threaten to erode the economies achieved by network health insurance and send the cost of health in New Jersey in an upward spiral.” Both hospitals, the Bayonne Medical Center (Bayonne) and Newton Memorial Hospital (Newton), were previously contracted with Horizon as in-network providers, but due to a number of reasons, including low payment rates, decided to disassociate themselves with Horizon, in addition to other insurance networks.

Bayonne sent a letter to patients in which it said it “will consider the legally required insurance payment amount for out-of-network services to be full payment…We do not intend to bill you for out-of-network hospital services.” Horizon asserts that Bayonne submitted claims for charges in excess of the amount it had agreed to accept as full payment. Both complaints contain seven counts against the hospitals, including insurance fraud/violation of the New Jersey Insurance Fraud Prevention Act (IFPA), tortuous interference, common law fraud, negligent misrepresentation, unjust enrichment and conversion. Horizon demands that Bayonne stop its “fraudulent” billing practices and also demands reimbursement of monies collected by those practices, as well as compensatory and punitive damages, treble damages under the IFPA and attorney’s fees.

Horizon also filed an answer and counterclaim to the suit filed by Newton against Horizon alleging retaliation by Horizon for terminating its contract with the insurer. Newton Memorial Hospital v. Horizon Healthcare Services Inc., No. SSX-L-302-09 (N.J. Super. Ct. filed April 14, 2009). The counterclaim states that Newton “sought to maintain its revenue stream by tricking Horizon insureds into using its high-cost services” and prevented Horizon from contacting its members to inform them of less expensive services at competing hospitals. In addition, Horizon alleges Newton and a number of its attending physicians and staff have “engaged in a pattern and practice of blocking Horizon from determining the medical necessity and appropriateness of care provided by Newton” by refusing Horizon’s request for medical status of members so that the insurer could determine if the patients could be transferred to an in-network facility.