Michigan Blue Cross Defends Demand For Hospitals' Lowest Price

Blue Cross Blue Shield of Michigan is defending a demand that contracted hospitals to give it their lowest contracted rates, after a new lawsuit by the Justice Department challenged this practice, known as "most favored nation," according to a report by American Medical News.

The lawsuit, filed Oct. 18, alleges Michigan Blue Cross' contracts with hospitals in the William Beaumont Health System, for example, require the hospitals to charge "significant competitors" of Blue Cross at least 25 percent more.

Blue Cross claims that locking in low prices is "a tool that Blue Cross uses to protect the affordability of health insurance for millions of Michiganders," said Spokesman Andrew Hetzel. Critics, however, contend "most favored nation" clauses give the insurer a competitive advantage and can contribute to higher healthcare costs by driving up the prices of competitors.

"These kinds of anti-competitive [most-favored-nation clauses] affect health care delivery and costs in a very fundamental way," said Christine Varney, assistant attorney general in charge of the Justice Department's Antitrust Division. "Any time a dominant provider uses anti-competitive agreements, the market suffers. This cannot be allowed in Michigan. And, let me be clear, we will challenge similar anti-competitive behavior anywhere else in the United States.

However, some antitrust experts contend similar arrangements may not be challenged if insurers have substantially less market power than the Michigan Blue Cross, which controls 63 percent of the state's combined PPO and HMO market.

Following the Justice Department lawsuit, a class action lawsuit on behalf on consumers and employers was filed against Blue Cross of Michigan, also citing the "most favored nation" clause.

Read the AM News report on payors.

Read the Justice Department's release on its lawsuit.

Read more coverage on antitrust and "most favored nation."

-Conn. Attorney General Informs Sec. Sebelius of Anthem's 'Most-Favored' Clauses

-BCBS of Michigan Abandons Plans to Purchase Physicians Health Plan After Threat of Antitrust Suit

-7 Thoughts on How Antitrust Laws Could be Changed to Accommodate ACOs

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