NJ Supreme Court Rules Against Horizon in Fight With Hospitals

Horizon must reveal details on how it chose hospitals that will benefit from its OMNIA health plan.

A gavel. Photo: Joe Raedle/Getty Images

The state Supreme Court ruled Monday that New Jersey’s largest health insurance company, Horizon Blue Cross Blue Shield, must turn over a report it used to create its controversial OMNIA plan to four hospitals who are challenging that plan in court.

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Horizon argued that it should not have to disclose the report as part of the discovery process in the case, and an appeals court had sided with the company in a previous ruling. But the Supreme Court overturned that decision on Monday and ordered Horizon to share the report with the four hospitals suing it.

The report was written by the consulting firm McKinsey & Co. to help create policies that offered discounts to customers who used certain hospitals classified as “Tier One”; the four hospitals challenging the plan are all classified as “Tier Two” under the OMNIA plan.

The insurer argued the report and related documents contained confidential and proprietary information. The Supreme Court’s decision means Horizon will have to divulge details on how it chose the “Tier One” hospitals favored by its OMNIA plan.

Under OMNIA, consumers get a discount on out-of-pocket costs if they received care at seven large New Jersey hospitals designated as “Tier One.” Those hospitals agreed to financial concessions on reimbursement in return for sharing in the savings expected from OMNIA and an increase in patient volume.

More than a dozen hospitals deemed to be “Tier Two” sued Horizon, arguing that the designation puts them at an economic disadvantage. Most of those hospitals have since dropped out of the suit, but the four hospitals left — Holy Name Medical Center, Valley Health System, CentraState Healthcare System and Saint Peter’s University Hospital — claim that Horizon’s method of classifying hospitals breached their network hospital agreements. This group of hospitals requested that the McKinsey report be released, suggesting it will show “Tier One” hospitals were unfairly selected.

“The Supreme Court’s decision today is an important step in unraveling the secrecy surrounding the OMNIA plan by forcing Horizon to disclose important information regarding its selection process as detailed in the McKinsey report and the agreements Horizon has reached with the large hospital systems,” Michael K. Furey, an attorney representing three of the hospitals, said in a statement. “This information will show that Horizon knew the harmful consequences of its tiered ranking system to Tier 2 hospitals before the selection process was completed and whether OMNIA is the value based care program Horizon has trumpeted to the world.”

Horizon claims it chose “Tier One” hospitals based on quality and touted the OMNIA plan as a way to provide high-quality health care at a lower cost. In a statement Monday, a Horizon spokesman suggested there will be nothing nefarious found in the McKinsey report and related documents and noted that the hospitals suing recently entered a tiered system with another insurer, QualCare.

“The hospitals suing to block OMNIA might be disappointed to discover — after almost two years of litigation so far — that the company, on behalf of its 3.8 million members, simply developed a lower-cost, high-quality product that is fully consistent with the objectives of the Affordable Care Act,” Horizon spokesman Kevin McArdle said in a statement. “And it has worked, insuring nearly 70,000 previously uninsured New Jerseyans. It is more than a little curious that the hospitals suing to block OMNIA on the one hand seem to have recognized the value of Horizon’s approach to lowering the costs of health care on the other having now entered into the very same kind of tiered network arrangement with QualCare.”

Horizon is the same company that wound up in the middle of New Jersey’s government shutdown earlier this month, although that had nothing to do with the OMNIA plan. It is by far the largest health insurance company in New Jersey, covering 3.8 million policyholders in a state with 9 million residents.

The Supreme Court ruled that the appellate panel wrongfully considered the merits of the case when it denied the hospitals’ request for Horizon to turn over the McKinsey report. “We conclude the Appellate Division exceeded the limits imposed by the standard of appellate review,” Judge Clarkson Fisher wrote in the court’s opinion.

Fisher is himself an Appellate Division judge, not a Supreme Court justice. He and another judge had to be brought up from the Appellate Division since four Supreme Court justices — Anne Patterson, Faustino Fernandez-Vina, Lee Solomon and Walter Timpone — did not participate in the case. Those justices did not give reasons for sitting out the case. Patterson’s former law firm, Riker Danzig, was representing one of the parties on appeal and the justices often recuse themselves in cases in which their former law firms are before the court.

The case will now return to state Superior Court.

NJ Supreme Court Rules Against Horizon in Fight With Hospitals