Jefferson Health says it has incurred nearly $100 million in financial losses this year because of policy changes by Independence Blue Cross in a lawsuit filed this week.
The lawsuit, submitted Wednesday in Philadelphia Court of Common Pleas, detailed five policy shifts — including two impacting when IBX pays higher inpatient rates for hospital stays — that Jefferson says amount to breaches of the current contract between the region’s largest health system and its largest insurer.
“IBX has attempted to use policy changes to — over time — effectively rewrite the contract” and pay less than agreed to in the contract, Jefferson’s lawsuit said.
The suit comes less than six months before its IBX contract expires Dec. 31, adding pressure to negotiations over a new deal. Jefferson said it cared for more than 300,000 people with IBX insurance last year.
In the last year, the nonprofit health system has shown its willingness to challenge major insurers at a time of increasing financial strain on both insurers and healthcare providers nationally.
IBX introduced a series of payment changes impacting both commercial and private Medicare plans this year as it faces intense pressure from employers to slow the growth of healthcare expenses and from the federal government, which is trying to trim spending in Medicare Advantage plans.
Independence declined in an email to comment on the claims in the lawsuit: “We value our provider partners, honor our contractual commitments with them, and regularly discuss any issues. It’s unfortunate that Jefferson chooses to do this in the public arena but if you’ve kept up with the news you can see this is typical of their playbook.”
A series of reimbursement shifts
The biggest financial impact came from IBX’s requirement, effective June 1, that certain procedures be performed in lower-cost freestanding ambulatory surgery centers, rather than in hospital outpatient departments, which often get paid twice as much for the same work.
Jefferson estimated damages from the ambulatory surgery center rule at $35.4 million.
Two policies affecting when IBX pays inpatient rates cost Jefferson a combined $35.5 million, according to the complaint.
Jefferson sued Aetna in April over a similar policy that reduces payments for Medicare Advantage plans if Aetna considers patients not sick enough to qualify for full payment.
The complaint says a policy that eliminated payment for hospital readmissions up to 30 days after discharge cost Jefferson $18.3 million. Since 2017, Penn Medicine has had a contract with IBX that does not pay Penn when patients return to the hospital within a month of being discharged.
Finally, Jefferson said IBX has failed to pay more than $7.2 million owed under a controversial federal drug discount program known as 340B.
“After trying to work directly with Independence Blue Cross to resolve these breaches of contract, we have been forced to take this action on behalf of our patients,” Jefferson’s vice president for payer relations, Allison Yudt, said in an email. “This action is the result of a pattern that has repeated itself time and again.”
IBX said in its statement that it “acts in the best interest of our customers and members and protects their access to high quality affordable care.”
Jefferson’s harder line with insurers
Jefferson has expanded through acquisitions from three hospitals to 33 since 2015. The most recent acquisition was Lehigh Valley Health Network two years ago, creating a network that stretches from South Jersey to near Scranton.
Amid significant losses in recent years, Jefferson has been taking an aggressive approach with insurers when it believes they are paying it less than contractually required.
This year, Jefferson’s Lehigh Valley Health went out-of-network with UnitedHealthcare for commercial and Medicare Advantage plans. Last year, Jefferson went out-of-network with Cigna for a few weeks before reaching a deal.
