A New Orleans jury has found that Blue Cross Blue Shield of Louisiana owed a local surgery center more than $400 million for thousands of breast reconstruction surgeries, a huge settlement for the state’s largest health insurer after a seven-year legal battle.
St. Charles Surgical Hospital and Breast Repair Center, a private surgery center on St. Charles Street that specializes in breast reconstruction for cancer patients, convinced a jury in Orleans Parish Civil District Court that Blue Cross fraudulently approved about 7,800 procedures from 2015 to 2023 and then paid only about 9 percent of the billed amounts.
A state civil court jury delivered a unanimous verdict in the case Friday after deliberating for just under two hours, marking the surgery center’s third attempt to seek damages after two lawsuits were dismissed in federal court.
“The objective was to underpay my client,” said James Williams, an attorney representing the hospital. “Blue Cross had a policy of late, low or no payment.”
Blue Cross denied fraud, arguing in court documents that it was not contractually obligated to pay because the hospitals were not members of its provider network.
“We strongly disagree with the jury’s verdict,” the company said in a prepared statement. “We will promptly appeal and look forward to succeeding.”
Doctors vs insurance companies
The case, which Louisiana insurers said could have an impact on the local market, highlights the wide gap between what doctors believe they should be paid for providing care and what insurers are actually willing to pay. It also delves into the complicated relationship between insurers and physician groups, especially when doctors opt out of insurance networks.
In the U.S. healthcare market, insurance companies create networks of doctors and hospitals and agree to offer list price discounts for procedures in exchange for access to patients covered by the insurer’s plan. Patients who visit providers outside the insurer’s network typically agree to pay higher out-of-pocket costs.
In Louisiana, 93 percent of doctors and hospitals belong to the Blue Cross network, but St. Charles Surgical Hospital, founded in 2003 by Dr. Frank Dellacroce and Scott Sullivan, was not part of the Blue Cross network, having left it more than a decade ago.
The surgery center treats about 1,000 cancer patients a year using cutting-edge reconstructive surgery techniques. Dellacroce said it has gained a national reputation for procedures such as Apex flap breast reconstruction and 4D nipples. More than 80 percent of its patients come from out of state.
The trouble between the hospital and Blue Cross began in 2007, when Dellacroce and Sullivan said they dropped out of Blue Cross’ network because they felt reimbursement rates were too low.
The hospital continued to treat Blue Cross patients because the surgeries were authorized by Blue Cross, but Williams argued in court that surgeons only received a fraction of what they were charged.
Williams also alleged that the local Blue Cross was “repricing” the hospital’s reimbursement rates that it negotiated with Blue Cross companies in other states that insure patients there.
Blue Cross argued in court documents that approving treatment doesn’t guarantee it will be paid, because insurers don’t set the reimbursement rates they pay out-of-network providers, and instead negotiate them individually with brokers and employers.
The company also denied having any involvement in price refixing, even though it has contracts with out-of-state Blue Cross plans, helps manage them and decides how much they pay for claims.
The company argues that this isn’t fraud, and noted in court documents that it won two similar lawsuits brought by hospitals in federal court in the early 2010s.
If the jury’s decision is upheld on appeal, it could be a big financial blow to Blue Cross. The nonprofit insurer, which tried unsuccessfully to sell itself to for-profit Elevance Health last fall and then again earlier this year, had a cash balance of about $1.8 billion last year, so the $421 million award would make up nearly a quarter of the company’s total surplus.
Insurance industry experts say the settlement, one of the largest ever in a state known for its large jury awards, has raised concerns it could have a chilling effect on the insurance market and lead to higher premiums.
“This decision is baffling and makes no sense,” said Wesley Watkins, president of the Louisiana Association of Healthcare Underwriters, which advocates for the insurance industry. “If insurance companies had to pay every bill no matter what provider billed, no provider would be in-network and rates would be sky-high.”
“If every provider said, ‘I’m not in network, I want you to pay the full fee,’ there would be no more health insurance in Louisiana,” he added.
Blue Cross unsuccessfully fought to have the lawsuit, which was filed in Orleans Parish Civil District Court dismissed, in 2017. The trial, overseen by Judge Sidney Cates, began earlier this month and lasted three weeks, during which jurors heard testimony from dozens of witnesses.
The jury’s award was based on the total of $506.7 million billed by the hospital over an eight-year period, minus the $85.3 million paid by Blue Cross and, to a lesser extent, by patients.