Blue Cross Blue Shield of Michigan will face antitrust litigation challenging its reimbursement rates for local anesthesiologists, a federal judge in Detroit ruled last week, a year after the same judge tossed out the case.
Judge Terrence G. Berg ruled that Anesthesia Associates of Ann Arbor could refile its initial complaint with some minor modifications against the Detroit-based insurer, alleging it schemed to pay anesthesiologists below market rate and colluded with hospitals to bar anesthesiologists that charged more than BCBSM’s reimbursement rate.
The judge did strike down a claim in the lawsuit that alleged a conspiracy between hospitals and BCBSM to maintain rates regardless of its impact to care.
The claims that are moving forward allege BCBSM created a monopsony by becoming the state’s largest insurer and dictating market prices to a point that lead to a mass exodus of anesthesiologists in the state and thus endangering patients.
“We were pleased that the court agreed with one of our positions on their litigation, and that we remain confident in winning as the case proceeds,” BCBSM said in an emailed statement to Crain’s.
A4 is represented by Boies Schiller Flexner LLP of of New York. The Boies Schiller firm is chaired by David Boies, who was special counsel in the Microsoft antitrust lawsuit in 1998 and represented former vice president Al Gore in the 2000 presidential recount in Florida.
“A4 is a group of dedicated anesthesiologists who brought this action to stop Blue Cross Blue Shield of Michigan’s tortious and anti-competitive practices that are driving doctors out of Michigan and decreasing the quality of care available for Michigan patients,” lead attorney on the case Jonathon Schiller said in an emailed statement to Crain’s. “This is certainly an issue of great concern to Michigan patients, and we look forward to presenting our federal and state law claims to a Detroit jury and holding BCBS-MI to account for its actions.”
A4 is asking the courts to prevent the Blues from interfering with any of its contracts, halt efforts to restrain trade in violation of the Sherman Antitrust Act and maintain monopsony power over anesthesia services in Michigan.
Lawyers for A4 are also asking the court to award unspecified treble damages for Blue Cross’ “tortuous conduct” that would seek to destroy A4 financially by inducing Livonia-based Trinity Health to terminate its contract. A4 is now back at Trinity and works with several hospitals, including Trinity Health Ann Arbor Hospital, McLaren Lapeer Regional Hospital and Garden City Hospital.
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“Pursuant to this conspiracy, Michigan hospitals agreed with BCBSM, and each other, to bar anesthesiologists from hospital facilities unless those doctors accepted BCBSM’s uniform reimbursement rate, without any upward or downward negotiation,” the lawsuit reads. “This conspiracy restrained trade through group-boycott conduct and other restraints. BCBSM enforces these illegal boycotts and price-fixing agreements by steering work away from any hospital if an anesthesiologist there seeks a different rate from BCBSM. Because anesthesiologists require access to medical facilities to practice medicine,1 this conspiracy forces anesthesiologists to accept BCBSM’s published rate.”
The suit alleges this has led to a shortage of anesthesiologists.
“Because Michigan anesthesiologists’ only choices are to accept BCBSM’s reimbursement rate or to leave the state and practice elsewhere, many have chosen to depart (or not enter) the state, leaving Michigan, as of April 2021, with nearly one hundred unfilled anesthesiology positions,” the suit reads. “This lack of anesthesiologists has reduced the overall supply of anesthesiology services in Michigan available to patients, as demonstrated by the fact that hospitals have been forced to close surgery departments for lack of qualified anesthesiologists to staff them. Despite there being so many open positions available for anesthesiologists in Michigan, the majority of the University of Michigan’s anesthesiology graduates leave the state to work elsewhere, rather than work in Michigan at BCBSM’s suppressed, below-competitive rate.”
It’s unclear what hospitals have closed surgery departments do to a shortage or whether the shortage is, in fact, caused by BCBSM’s rates.
There is, however, a national and state shortage of anesthesiologists and Michigan became the 20th state earlier this year in allowing certified registered nurse anesthetists to work in operating rooms without the supervision of an anesthesiologist. The new rule is a more permanent continuation of emergency executive orders signed by Gov. Gretchen Whitmer during the pandemic to assist overrun hospitals.
The A4 lawsuit stems from a negotiation breakdown between the practice and BCBSM in Oct. 2020. A day after BCBSM declined to renegotiate with A4, Trinity Health Michigan CEO Rob Casalou invoked a clause in its five-year contract to terminate A4 in 180 days. Trinity said after that period, the eight-hospital regional health system would hire its own employed anesthesiologists.
The lawsuit alleges Trinity was induced by BCBSM to terminate the contract.
The original suit against BCBSM was tossed by the judge last year due to a lack of evidence for predatory pricing. The suit alleged a monopoly, which would mean higher prices for consumers. That’s not the case for a monopsony, which drives down competition.
A4 has vehemently defended its operations in several disputes with hospitals and insurers over the years.
In 2019, a similar dispute erupted between A4 and Trinity Health in which Trinity terminated A4’s contract. A4 had threatened to terminate several payer contracts, including Priority Health, Aetna and Blue Cross, because it hadn’t had a reimbursement increase in at least six years.
Trinity Health sued to prevent A4 from putting its patients in a “surprise billing” situation. A4 countersued to prevent Trinity from recruiting its anesthesiologists and certified registered nurse anesthetists. Trinity and A4 settled various lawsuits and reached a new five-year agreement. The agreement allowed A4’s anesthesiologists to continue treating patients at Trinity Health’s five Southeast Michigan hospitals.
A4 also had a contract dispute with eight-hospital Beaumont Health over how much Beaumont reimburses A4 for anesthesiology services. A4 contended Beaumont paid the group below its operating costs and that it lost money every day. A4 terminated its contract with Beaumont March 2020.
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