Montgomery hospital sues state’s largest insurer: ‘Blue Cross Alabama must be stopped.’

Jackson Hospital in Montgomery is suing Blue Cross Blue Shield of Alabama, saying the insurance provider caused the hospital’s bankruptcy through years of underpayment.

If Jackson closes, approximately 1,800 employees would lose their jobs and wait times at surrounding emergency rooms would increase exponentially, according to the lawsuit.

“Doing what is necessary to keep Jackson Hospital open is literally a matter of life or death,” the lawsuit says. “Blue Cross Alabama knows all this. But Blue Cross Alabama does not care.”

Jackson Hospital says it anticipates requesting judgment against Blue Cross in excess of $250 million.

In a statement to AL.com, Blue Cross said they have ‘worked in good faith’ with Jackson, and ‘repeatedly increased Jackson Hospital’s reimbursement rates in recognition of its financial difficulties.’

The statement also suggested “mismanagement” at Jackson. “Although Blue Cross customers make up only 25% of the patients that Jackson Hospital treats, Jackson Hospital’s Texas lawyers seek Blue Cross customers to pay for the hospital’s mismanagement,” the insurance company said.

In the lawsuit filed Thursday, the Montgomery hospital said the state’s largest insurance provider has underpaid them compared to the national average, saying Alabama hospitals receive among the lowest pay in the country from Blue Cross.

The complaint says the underpayments “have destabilized Alabama’s healthcare system.”

Jackson also claims the hospital was underpaid compared to other hospitals around the state. The hospital said the health insurance company has paid them 30-40% less than they pay Baptist Health, also in Montgomery, for comparable services, according to the lawsuit.

“If an individual suffers a heart attack in Montgomery, Alabama and is rushed by ambulance to Jackson Hospital for life-saving care, that individual’s life is not worth less than a similar heart attack patient who is transported to the other hospital in Montgomery,” the lawsuit said.

“But this indefensible practice (i.e., deciding whose life is worth more) is exactly what Blue Cross Alabama is doing through its discriminatory, unfair, and unlawful setting of reimbursement rates. Enough is enough. Blue Cross Alabama must be stopped.”

Jackson alleges that the low payments have forced the hospital into bankruptcy and prevented them from providing “critical” health care services to their patients.

The lawsuit further alleges that Blue Cross refused to match the same rates they pay other hospitals despite knowing the hospital “is in imminent danger of closing.”

“Blue Cross Alabama is now trying to nail the coffin shut for Jackson Hospital,” the lawsuit said.

“With full knowledge of the dire consequences, Blue Cross Alabama continues its discriminatory attack on Jackson Hospital and refuses to pay Jackson Hospital the same rates Blue Cross Alabama already pays another hospital in the same city, for the same services.”

In a statement to AL.com, Blue Cross said:

“We know this is a challenging environment for both patients and healthcare providers. The cost of healthcare – what providers charge, including Jackson Hospital, continues to rise rapidly each year. We are obligated to our premium paying employers and families to provide high-quality, cost-effective healthcare. We know our members come to us by choice and we don’t take that for granted.”

Jackson called Blue Cross Blue Shield of Alabama a ‘monopoly’ that gives them the power to “unilaterally and unfairly” set reimbursement rates.

“The insurance giant has become one of the most powerful and profitable corporations in Alabama – sitting on billions in reserves, paying executives multi-million-dollar salaries/bonuses, and posting hundreds of millions in annual surpluses while hospitals across Alabama (like Jackson Hospital) struggle to stay open and patients go without critical care,” the lawsuit alleges.

Blue Cross countered those claims in a statement.

“It is – and has been for many decades – one of the most efficient health insurance companies in the country paying out more than 90% of every premium dollar to hospitals and other healthcare providers,” a spokesperson said. “Our personnel costs – salaries and all benefits for our more than 3,000 Alabama-based employees – are less than 4% of our revenue. In the past five years Blue Cross has paid more than $400 million in taxes into the Alabama General Fund.”

The hospital has been working to secure $293 million from state, local and federal governments to stay open since it filed for bankruptcy in February after defaulting on $60 million in bonds.

So far $187 million has been committed. In November, Jackson asked Blue Cross to contribute $91 million toward their goal, but was instead offered $35 million, according to Action 8 News.

The effort to get full funding hit another setback earlier this week when the Montgomery County Commission voted against providing Jackson with an additional $7.5 million in funding. The commission already voted in October to give $10 million.

The lawsuit is asking for Blue Cross to pay Jackson the same as what it pays other hospitals in the Montgomery region, saying underpayments have been discriminatory and have resulted in “antitrust injury.” The hospital also filed an emergency injunction asking a judge to compel Blue Cross to immediately pay them at the same rate as Baptist in particular.

“Jackson Hospital is already in the midst of bankruptcy proceedings, and it continues to hang on by a thread,” the lawsuit says. “Put simply, Jackson Hospital is at imminent risk of having to close its doors and cease operations if Blue Cross Alabama is permitted to continue its unlawful conduct.”