Dive Brief:
- A group of hospitals filed a lawsuit on Monday in Pennsylvania alleging that Highmark Inc. and its subsidiary Keystone Health Plan West Inc. broke a contract by cutting the hospital's Medicare Advantage reimbursements by 2% at the beginning of 2014. Highmark began reducing payments to make up for federal budget reductions, or sequestration, which in March of last year cut CMS payments to all Medicare Advantage carriers by 2%.
- Highmark notified the hospitals in fall of 2013 that they would be cutting payments, something insurers have been doing nationwide, a company spokesperson told the Pittsburgh Business Times.
- But the hospitals—Butler Memorial, Conemaugh Valley Memorial, Excela Health, Jameson, St. Clair Memorial, Washington and Windber hospitals and Indiana Regional Medical Center—are claiming that Highmark’s contracts require a change in agreement before that type of reduction can be made.
Dive Insight:
There is no hard data regarding the number of insurers that are making cuts to providers in response to sequestration, but another similar suit was filed this summer against American Progressive Life and Health Insurance Co. by Pennsylvania's Susquehanna Health System. Highmark and the hospitals that sued have apparently tried to resolve the issue through negotiations, but have been unsuccessful.
Medicare Advantage rates are negotiated through a contract, not set by Medicare. Edward Weisgerber, a partner at K&L Gates, which represents the hospitals, told InsuranceNewsNet.com that "the Center for Medicare & Medicaid Services has taken the position that passing that 2% along is not a federal mandate because they've already recovered their money. The hospitals' position is the contract they have with Highmark does not permit (it) to unilaterally withhold the 2%."
