U.S. District Court dismisses City of Pontiac antitrust lawsuit on Blues' hospital contracts

April 2, 2012

DETROIT — The U.S. District Court in Detroit on March 30 dismissed the civil lawsuit filed by the City of Pontiac against Blue Cross Blue Shield of Michigan because the city failed to allege in its pleading any basis to find that Most Favored Nation clauses in Blue Cross contracts harmed competition among insurers or that BCBSM violated antitrust laws. Filed last year, the City of Pontiac lawsuit piggybacked on litigation by the Department of Justice that seeks to restrict BCBSM's ability to receive the best possible discounts for hospital services on behalf of its customers.

"Our hospital contracts save millions of dollars for Blue Cross customers and they help maintain and improve access and quality of health care in Michigan," said Jeffrey Rumley, BCBSM vice president and general counsel. "The law is clear that antitrust laws may not be used to sue an insurer because it fairly negotiates discounts with hospitals to hold down health care costs for its members. That is exactly what the City of Pontiac attempted to do."

Hospitals that were named with Blue Cross as co-defendants were also dismissed from the lawsuit.

"Blue Cross is succeeding in Michigan by providing more health care value for customers' dollars. Our discounts – fairly negotiated with hospitals – are part of that value," said Andrew Hetzel, BCBSM vice president of corporate communications. "Our hospital contracts are a vital part of our mission to provide Michigan residents with statewide access to quality health care at a reasonable cost."

BCBSM will vigorously defend its ability to negotiate the deepest possible discounts with Michigan hospitals for its members and customers. Because BCBSM represents more members in Michigan than its competitors do, it expects Michigan hospitals to give the company better volume discounts than they give to competitors. Negotiated hospital discounts are an important tool that BCBSM uses to protect the affordability of health insurance for millions of Michigan residents. The cumulative savings effect of BCBSM discounts with hospitals and professional providers and pharmacies, and other medical providers, was around $13 billion in 2009 alone.

"We are pleased that Judge Hood dismissed this misguided lawsuit. We will defend the principal case brought by the Department of Justice and will show that our discounts with hospitals are beneficial to health care consumers and far from anticompetitive," said Rumley. "As the largest private purchaser of health care services in Michigan, we deliver the patient volume that allows us to negotiate fairly with hospitals for the best pricing. This pricing, plus the access we provide, benefits Michigan health care consumers."

BCBSM is working to provide more health care value for the dollar and has seen significant success in holding down health care cost growth in Michigan. The White House issued a report in 2010 that showed Michigan's rate of growth in family health care premiums was the lowest in the country over the prior 10 years. Additionally, reports and statements by the Michigan Office of Financial and Insurance Regulation conclude that Michigan has a competitive health insurance market.

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