NJ Judge Won't Grant Hospital Injunction in Horizon Dispute

There was no Christmas miracle for a hospital that hoped to join the preferred tier in New Jersey’s largest health insurer network before coverage began last weekend.

But the Christmas Eve preliminary hearing revealed more details about how Horizon Blue Cross Blue Shield built its controversial OMNIA network. Apparently being the only preferred hospital in a market was important.

Judge Frank Ciuffani denied St. Peter University Hospital’s request to be placed in Horizon’s preferred tier, because it would be “extraordinary” to take this step without a full hearing. St. Peter’s, located in New Brunswick, argued that it will suffer irreparable harm, including lost revenue and damaged relationships with patients, once the OMNIA plan takes effect.

The judge told both sides to return January 4, 2016, to schedule depositions and a full hearing, Ciuffani told the parties he wants the matter resolved quickly.

Benefits under OMNIA start Saturday for some public employees covered by the plan, and on January 1, 2016 for everyone else. Horizon attorney Michael Kassak said today OMNIA will cover 3% of the market.

“Horizon is pleased that the court has refused this effort by St. Peter’s to change the implementation of Horizon’s OMNIA health plans. This is good news for the thousands of individuals who have purchased OMNIA health plans to date,” said Horizon spokesman Thomas Vincz.

Since it was unveiled September 10, 2015, Horizon’s OMNIA plan has drawn fire from mayors, legislators, and hospitals that were not included in the preferred network, known as Tier 1. OMNIA is both a tiered network, which was approved by state regulators, and a population health alliance, which is designed to move away from traditional fee-for-service healthcare delivery as called for under the Affordable Care Act.

Around the country, population health contracts are becoming more common in managed care, as providers work with patients to stay on their medication, get health screenings, and take other steps to avoid major health crises that result in multi-day hospital stays. Providers then share in the savings that result from such activity.

In the case of OMNIA, these agreements came with another element: those in the preferred network would also charge lower rates in exchange for having more patients routed their way. St. Peter’s attorney Jeffrey Greenbaum argued that depositions revealed that giving Tier 1 exclusivity to St. Peter’s competitor in New Brunswick, Robert Wood Johnson, was key to getting the RWJ agreement. Like most of the other OMNIA partners, RWJ is a large, multi-hospital system, while St. Peter’s is a standalone hospital.

In addition to the question of whether St. Peter’s would meet the bar to get an injunction, the hearing centered on 2 questions: How important is market exclusivity to OMNIA partners? And how does each side interpret the 60-day notice in St. Peter’s contract with Horizon?

Greenbaum argued the following:

• The 60-day notice existed for St. Peter’s to be given a “fair shake,” during which it could respond to Horizon’s selection criteria and point out errors. Greenbaum went through a series of pieces of incorrect or outdated information he said were revealed in depositions. He accused Horizon of creating “a process to justify the result they wanted,” which favored large health systems at the expense of small, independent hospitals.
• St. Peter’s and RWJ New Brunswick have different areas of expertise, Greenbaum said, and the OMNIA network will not collapse if New Brunswick has 2 Tier 1 hospitals. He argued there are areas along the Jersey shore with overlapping Tier 1 hospitals. “Exclusivity seems to be only when they want it, but not all the time,” he said.

Kassak, representing Horizon, said St. Peter’s has completely misinterpreted the meaning of the 60-day notification requirement, and that it merely exists so that hospitals can alert consumers heading into open enrollment of their status. St. Peter’s, he said, “is reading things into the contract that are simply not there.”

He said exclusivity was extremely important—not just to RWJ but also to Horizon, because if anticipated savings were not realized, this would affect rates in the future. When rates are inadequate in a given year, they must be raised in the following year, Kassak said, and “the product is not priced competitively anymore.”

The OMNIA matter is being watched nationwide, since New Jersey’s legislature has reacted harshly to this attempt to use narrow networks to implement population health. Two senators introduced a 4-bill package that would tightly proscribe terms for regulating narrow networks. Hospitals in other states that fear behind left out of similar efforts will likely examine contracts or seek protection from being forced into less-preferred tiers.

The hearing had been set for December 17, 2015, and St. Peter’s CEO Ronald Rak said Horizon was responsible for the delay.

“They are engaging in a tactic of stalling and not producing evidence. We now are in a position where we have to wait for a final hearing to have justice rendered to our hospital.”

St. Peter’s challenge is 1 of 3 involving OMNIA; a group of 17 hospitals has sued to overturn the original approval by the NJ Department of Banking and Insurance, while a smaller group claims Horizon’s marketing of OMNIA as a high quality, low-cost plan has damaged their hospitals.