A jury has ordered Blue Cross of Louisiana to pay $421m to a hospital specializing in a much sought-after type of breast reconstruction, primarily for cancer survivors. The insurer "preapproved" surgeries for thousands of patients, but then held back 92% of the payments it owed, with CEO Steven Udvarhelyi insisting that "authorization never says we’re going to pay you":
https://www.documentcloud.org/documents/25882446-steven-udvarhelyi-deposition/#document/p1/a2630959
In a characteristically brilliant and deep investigative story, Propublica's T Christian Miller explains how Blue Cross of Louisiana colluded with other Blue Cross franchises around the country to steal hundreds of millions of dollars by denying claims they'd already approved:
The hospital at the center of this controversy is the Center for Restorative Breast Surgery in New Orleans, founded by two surgeons, Frank DellaCroce and Scott Sullivan. DellaCroce and Sullivan are pioneers of an advanced form of breast reconstruction called "autologous tissue reconstruction," which eschews implants in favor of the patient's own fat to construct new breasts. While other surgeons perform this surgery, DellaCroce and Sullivan are acknowledged as national leaders, having invented many innovative techniques and trained many of the other surgeons who perform the procedure. As a result, patients travel from all over America to the Center for Restorative Breast Surgery.
DellaCroce and Sullivan's procedure is extremely precise and labor-intensive, and it comes at a high cost. Accordingly, patients seek pre-approval from their insurer before undergoing the procedure, and in Louisiana, that usually means calling up Blue Cross, the state's largest insurer. Despite pre-approving the procedure, Blue Cross of Louisiana has held back over 90% of the payments it owed to the hospital.
Rather than throwing their patients into the Blue Cross meat-grinder, DellaCroce and Sullivan carried the unpaid balance on its books, repeatedly suing Blue Cross for the unpaid amount. Finally, last week, the a jury ordered Blue Cross to pay $421m to the hospital (Blue Cross is appealing).
The case dragged Blue Cross's sleazy behavior – normally confined to bureaucratic memos and telephone denials – into the public, and boy is it ugly. Blue Cross's official excuse for denying the claims was that it was acting in the best interest of the millions of Louisianans it insures: DellaCroce and Sullivan are simply too expensive – it's not realistic for people in an insurance pool to expect that kind of care. However, Blue Cross executives repeatedly signed one-off, "single case agreements" so that their own wives could get the procedure from DellaCroce and Sullivan.
In addition to this argument, Blue Cross insisted that the fact that it had pre-approved all of these procedures did not oblige it to pay for them after the fact. Rather, an "approval" is a bureaucratic, heavily disclaimed term of art that means, maybe we'll pay for this and maybe we won't. In court, however, the company was forced to admit that an "approved" procedure has to be paid for in all but the most exceptional instances, for example, when the patient cancels their insurance between getting approved and going in for surgery.
The insurer also claimed that there were checks and balances to prevent arbitrary claims denials, but then Blue Cross executive VP Paula Shepherd acknowledged that "an appeal is not available to review an underpayment." As Miller writes, "The insurer simply issued an edict — the payment was correct."
Meanwhile, Blue Cross didn't just save money by denying the claims it had approved – it made money. Other Blue Cross organizations in different states would pay 16% kickbacks to the Louisiana Blue Cross, splitting the take every time it denied a payment.
All of this added up to means, motive and opportunity to engage in unbelievably sleazy – and fraudulent – behavior. Overall, Blue Cross paid $43m on $500m worth of invoices from the hospital. In 60% of claims, it paid nothing.
Blue Cross is one of the nation's largest health insurers, and Blue Cross's argument for stiffing this hospital is the argument for letting insurers buy one another up and grow to unimaginable scale. In David Dayen's amazing 2020 book Monopolized, he lays out the procession of America's morbid health care monopolization:
https://pluralistic.net/2021/01/29/fractal-bullshit/#dayenu
First, we allowed pharma companies to merge to monopoly, which gave them the power to screw hospitals with sky-high drug prices. So the hospitals defensively merged into regional monopolies with the power to negotiate those prices down, but this also gave them the power to overbill insurers. So the insurers also merged until they could resist the hospital chains' pricing power and force rates down.
And indeed, 97% of doctors and hospitals have a negotiated rate with Blue Cross of Louisiana (remember, it's the state's largest insurer). But DellaCroce and Sullivan haven't joined the Blue Cross network, because the rates the insurer offered wouldn't even cover the costs of the surgeries.
The theory that monopolies will defend us from other monopolies is a disastrous example of "the old lady who swallowed a fly" strategy. For the strategy to work, everyone has to be a monopolist, otherwise they'll get steamrollered – on their wages, their care, or their compensation.
And of course, patients don't get to merge to monopoly (that's what governments are for, and we know how Blue Cross feels about single payer care). Workers don't get to merge to monopoly either (that's what unions are for, and no one hates a union more than a health care monopolist).
Blue Cross's position – the position of the entire for-profit health industry – is that they should be able to grow as large as they can, at the expense of us, the patients. In other words, they are economic tumors – so no wonder they're on the side of breast cancer.
Blue Cross? 😠
Blue Shield? 😩
Blue Shell. 🤩