Judge rules OMNIA lawsuit can go to trial

By Anjalee Khemlani
Hackensack | Mar 15, 2018 at 7:45 pm

With his latest decision, Superior Court Judge Robert Contillo opened the door Thursday for a trial in the case involving three hospital systems suing the state’s largest health insurer.

“Today’s decision by the court to allow the hospitals’ lawsuit to proceed to trial is a clear indication that the hospitals have a strong case against Horizon (Blue Cross Blue Shield of New Jersey) and its ill-conceived OMNIA plan,” said attorney Michael Furey, who represents CentraState, Holy Name and Valley Health.

Contillo agreed to let the case continue on the count of good faith and fair dealing, and ruled in favor of the hospitals’ request for specific performance metrics. However, he dismissed claims of libel and defamation, as well as breach of contract.

The case — which has lost four of the original seven plaintiffs over time as Horizon convinced them to sign on to its unique value-based program in exchange for dropping the lawsuit — hinges on the impacts of what the plaintiffs believe is a volume-steering tactic through the creation of a tiered network.

The hospitals that are suing were not offered the opportunity to be Tier 1 providers in the OMNIA plan.

Horizon rolled out the plan in late 2015, dividing the state’s hospitals into two groups: Tier 1 and Tier 2. Patients who visit Tier 1 hospitals pay lower copays than those who visit Tier 2 hospitals. The Tier 1 hospitals are largely made up of the larger suburban health systems and the largest independent physician group. Tier 2 hospitals are mostly comprised of urban or safety net hospitals, and a significant number of Catholic hospitals.

Kevin McArdle, spokesman for Horizon, said in a statement the decision was a win for the insurer.

“Today’s ruling is a win for Horizon’s members. What started over two years ago as a case brought by seven hospitals with six claims has been reduced to three hospitals with one claim.

“While the court is allowing a narrow issue to proceed, the court’s opinion casts serious doubt over the hospitals’ ultimate ability to succeed on this claim at trial. Horizon will continue its fight to offer affordable health coverage options to consumers.”

Details of some metrics used to rank hospitals were included in Contillo’s Thursday decision. The suit requests justification of the tiering through a specific performance metric.

The details of the metrics were part of a closely guarded McKinsey & Co. report that Horizon has said was used as the basis for the tiering.

The hospitals maintain the tiering was determined prior to the existence of the McKinsey report and is a way for the insurer to neutralize the leveraging power of the large systems.

In his decision Thursday, Contillo cited part of the report, revealing certain metrics.

“In March 2014, in order to identify which hospitals were best-suited to embark on a pioneering transition to value-based care, Horizon retained McKinsey & Co. Inc. to conduct an analysis and make recommendations,” the court document read.

The final report from McKinsey was produced on May 20, 2014.

In the report, McKinsey gave hospitals a “partnership score” on a scale of 0-5 on six criteria.

Those six criteria include:

  • Leadership mindset/commitment, 25 percent weight;
  • Clinical quality, 25 percent weight;
  • Consumer attractiveness, 20 percent weight;
  • Financial resources committed to population health, 10 percent weight;
  • Service offering across the care continuum, 10 percent weight; and
  • Scale, 10 percent weight.

“At the conclusion of the evaluation process, Hackensack received the highest partnership score in Bergen County (3.6), followed by plaintiff Valley Hospital (3.3) and plaintiff Holy Name (3.1),” the court document read. “In Monmouth County, Barnabas received the highest partnership score (3.6), followed by plaintiff CentraState (3.0).”

“As clarified by witnesses from both Horizon and McKinsey, there was no ‘minimum standard’ or ‘cutoff’ as to what score satisfied the criteria,” Contillo wrote in his decision.

Cost of care was not a factor used to determine the tier members, but McKinsey did say that Horizon’s purpose was to build strategic partnerships that translate to premium advantages and lower cost of care.

“Current working assumption is that the product needs to have a medical cost reduction that would lead to a 10 percent lower premium than Horizon HMO,” according to Contillo’s decision.

Some Tier 1 hospitals have previously admitted they agreed to participate in Tier 1 with the promise of higher volume in exchange for lower rates.

The plaintiffs, all Tier 2, claim that, with the implementation of the new network, patients are steered away from their hospitals when physicians send patients with OMNIA insurance cards to Tier 1 hospitals, Furey said in a statement.

“We are gratified the court has recognized there is substantial evidence supporting our claim that Horizon breached its duty to act in good faith in the way that it selected its alliance partners, excluded the hospitals from Tier 1 status, and steered its insureds away from plaintiffs and other Tier 2 hospitals in favor of the largest systems. The court agreed there was evidence supporting the hospitals’ claims that Horizon had pre-selected the alliance partners, adopted a selection process that favored Horizon’s pre-selections, and abandoned or de-emphasized the cost of care in the selection process.

“OMNIA is not a true ‘value-based plan,’ as Horizon advertises. Rather, OMNIA is part of Horizon’s strategy to align the largest hospital systems in the state with itself rather than one of its competitors. In doing so, Horizon is sacrificing the independent hospitals in New Jersey by aggressively steering its insureds to the large hospital systems through its OMNIA network and away from the independent hospitals. As this case proceeds to trial, we look forward to presenting the sufficient evidence of what happened and we are confident that our lawsuit will prevail. The public will finally be able to learn the truth surrounding OMNIA rather than what Horizon chooses to tell the public.  It will also become clear that health care costs are not being reduced by favoring the most expensive hospitals and by not permitting high-quality, less-expensive independent hospitals to participate.”

Anjalee Khemlani | akhemlani@roi-nj.com | AnjKhem