Fight Over How Horizon Created OMNIA to Be Appealed to NJ Supreme Court

A group of hospitals left out of the preferred tier in a value-based healthcare initiative from New Jersey’s largest insurer will take its fight to the state Supreme Court, in an effort to pry loose details about how the system was created.

The case will be closely watched, as a court known for precedent-making decisions will be asked to rule just how much transparency is required when setting up tiered health plans–which have become commonplace under the Affordable Care Act (ACA) but can create winners and losers within given markets.

Horizon Blue Cross and Blue Shield of New Jersey (BCBSNJ) scored a major victory today, when a unanimous state appellate court reversed 2 separate rulings that asked the insurer to provide confidential details to hospitals suing over how it set up its OMNIA health network in September 2015. Horizon, New Jersey’s largest insurer with 3.8 million enrollees, created OMNIA to address high rates, especially in the small group and individual markets, and at the end of January 2016 had enrolled 234,000 people.

OMNIA is both a tiered network and a population health Alliance, consisting of 6 large health systems and a physicians’ group. OMNIA partners agree to accept lower payments in exchange for higher volume. In turn, patients who use the preferred tier hospitals and doctors, known as Tier 1, pay lower premiums and lower out-of-pocket costs. Horizon added other hospitals to Tier 1 to meet state geographic network requirements.

The fallout over OMNIA has been significant, however. More than a dozen Tier 2 hospitals, either alone or in a group, have sued Horizon, claiming the insurer breached its contracts by not giving them adequate opportunity to compete for Tier 1 status. These entities tend to be smaller and outside large systems; they include all but 1 of the state’s Catholic hospitals (although 2 have since dropped their litigation). Disputes over discovery in those lawsuits led to today’s ruling.

“The Appellate Court’s ruling is another in a long line of wins for the consumers of New Jersey,” said Robert A. Marino, Chairman and CEO of Horizon BCBSNJ. “The status quo is simply not sustainable and we should all be working together to address the cost- crisis in health care. Horizon’s goal is, and will always be, to provide high quality, affordable health coverage to New Jerseyans who are demanding, and who deserve, nothing less.”

Steven M. Goldman, a former state insurance commissioner and attorney for most of the hospitals, said today that the ruling favors “secrecy over consumers’ need for transparency.” Despite the unanimous ruling in the discovery matter, he predicted success based on the underlying merits, and said the case has already revealed that Horizon did not select Tier 1 partners based on the criteria it presented to the public. Goldman said the hospitals would appeal the discovery ruling, but an attorney for Horizon said the NJ Supreme Court is under no obligation to hear the case.

Michael O. Kassak, attorney for Horizon, said on a conference call with reporters that Horizon agreed to provide some information that was related to the contractual disputes, but not other materials it deemed “proprietary” and “irrelevant.” Among the items Horizon is permitted to withhold are portions of a McKinsey & Co. consulting report relating to hospital scoring and shared savings, as well as the Alliance agreements and a template for it. Saint Peter’s University of New Brunswick, which sued separately from others, is not permitted to have rate agreements for its crosstown competitor, Robert Wood Johnson University Hospital.

Saint Peter’s statement said it would proceed only on the central dispute involving its Horizon contract. “While we believe the experienced trial judge made the correct decision on the proper scope of discovery, the appellate court confirmed that discovery will proceed on the contract and other claims and Saint Peter’s is entitled to the documents sought but subject to certain redactions. Discovery therefore will actively proceed so that Saint Peter’s can prove the rightfulness of its claims,” said Jeffrey J. Greenbaum, attorney for the hospital.

After trial courts ordered it to turn over several confidential documents, Horizon appealed and won today, in part because the appellate panel looked ahead to the contractual claim itself and found it wanting. The ruling states that Horizon gave the Tier 2 hospitals 60 days’ notice that OMNIA would begin operation and, “based on the plain language of the Agreements, the hospitals' claims appear to rest on the slenderest of reeds.”

Disputes over what constitutes “transparency” are arising around the country as the ACA fuels the creation of tiered networks to drive down costs. To some, transparency means giving requiring providers to give out more information about what they charge for different services; for others, it calls for health plans to disclose criteria used to put providers in networks. The umbrella of transparency also calls for protecting consumers against surprise medical bills, if they use an in-network hospital, but are inadvertently treated by an out-of-network specialist. Bobbi Brown and Luke Skelley, writing recently in Health Catalyst, note that transparency in healthcare means different things to different people–and achieving it between payers and providers has historically been challenging for competitive reasons, although this is changing.

Horizon has previously released more than 3 dozen criteria it said it used to select OMNIA partners, but litigants were seeking information about how relative scoring, and the appellate judges said that was off-limits. In testimony earlier this year before a Senate committee hearing bills related to the OMNIA network, Ward Sanders, president of the New Jersey Association of Health Plans, suggested that such criteria might be released only to regulators.

As Kassack said, the judges found that “Horizon has the discretion to choose our providers.”

Goldman said consumers and providers should have more access to information, given Horizon’s unique not-for-profit status. "New Jersey healthcare consumers have a right to understand the basis for Horizon’s claims to deliver quality healthcare through OMNIA,” he said. “We would think that if Horizon did not have something to hide, it would make this information available to the Hospitals and the public.”

Tom Wilson, director of public affairs for Horizon, said of the hospitals continuing the litigation, “The attorneys for these hospitals should apologize to consumers for their failed effort to defend the indefensible, sky-high cost of health care in New Jersey. The high-priced lawyers, lobbyists, and PR firms working to obstruct Horizon’s effort to lower the cost of health care are serving no one but themselves.” 

This is the second major setback for the hospitals this month. Earlier, the appellate court ruled that the NJ Department of Banking and Insurance correctly interpreted state insurance regulations when it approved the OMNIA network in September 2015.