Commercial Litigation Update

In a major win for healthcare providers, on September 20th a Louisiana state court jury awarded $421 million in favor of an out-of-network provider in its long dispute with Blue Cross Blue Shield of Louisiana (“BCBS of Louisiana”). BCBS of Louisiana is the largest insurer in the State of Louisiana.

Payors have developed a reputation for underpaying or denying payment to providers altogether. This is especially true for providers who do not have contracts with insurance companies and, as a result, are out-of-network. Meanwhile providers who have contracts with  insurance companies, i.e., in-network providers, are subject to preferential contract rates and in exchange are supposed to be paid in a timely manner. However, many providers have learned this is not what happens. Out-of-network providers, in particular, face an uphill battle to get reimbursed for the medically necessary services rendered to patients. The out-of-network provider in this case experienced just that.

Since there is no contract between the provider and payor in an out-of-network context, the provider submits its billed charges to the payor. Many states have balance billing laws that preclude the provider from seeking payment from the insured directly. Knowing that the provider has limited recourse, insurance companies will often either not pay or pay slowly. St. Charles Surgical Hospital and Center for Restorative Breast Surgery (“St. Charles”) is well-known for its treatment of cancer patients. After not being appropriately reimbursed for the services rendered to patients, St. Charles filed its lawsuit in Louisiana state court in 2017. According to St. Charles, BCBS of Louisiana would authorize surgeries, the providers would perform those surgeries pursuant to the authorizations, and then the insurer would not render the appropriate payment. The case involved about 7,000 procedures that were performed on an out-of-network basis. St. Charles claimed that BCBS of Louisiana only paid approximately 9% of the total amount billed for these services. St. Charles’s claims against the insurance company were for fraud and abuse of rights. The insurance company’s defense included arguments that authorizing medical treatment did not guarantee payment at those rates. Rather, BCBS of Louisiana negotiated individual deals for out-of-network reimbursement with brokers or employers.

Following up on our prior discussion of Studio 417, Inc., et al. v. The Cincinnati Ins. Comp., a different federal judge in the Western District of Missouri recently ruled in Zwillo V, Corp. v. Lexington Insurance Co. that a Kansas City restaurant could not recover for COVID-19 business interruption losses under an insurance policy and, in the process, questioned the reasoning of Studio 417, Inc. and other recent decisions.

The owner of a restaurant in Kansas City (the “Insured”), purchased a commercial property insurance policy from Lexington Insurance Company (the ...