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A Look at the Recent Verdict Against Blue Cross Blue Shield of Louisiana

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On September 20, a jury ruled in favor of St. Charles Surgical Hospital and the Center for Restorative Breast Surgery in their case against Blue Cross Blue Shield of Louisiana for failure to fully pay for services rendered, awarding the plaintiffs over $421 million. Joe Aguilar, Managing Partner, HMS Valuation Partners, speaks with Matthew Sherman, Partner, Chehardy Sherman and Williams, about the genesis of the case, the main arguments at play, how the plaintiffs won those arguments, and some key takeaways. Sherman was one of the attorneys who represented the plaintiffs in St. Charles Surgical Hospital, LLC et al vs. Louisiana Health Service & Indemnity Company et al. Sponsored by HMS Valuation Partners.

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Speaker 1:

Support for A HLA comes from HMS valuation Partners, which is one of the largest and most experienced healthcare valuation firms nationally founded in 1996. They have been providing consistent valuation and compensation consulting services exclusively to the healthcare industry. Their clients include healthcare leaders at multinational hospital systems, large and small physician groups, law firms, and healthcare service entities across 47 different states. For more information, visit hms value.com .

Speaker 2:

Welcome to another conversation with ALA's speaking of Health Law Podcast. Uh, today's topic , uh, will be on a recent case, which yielded a significant verdict of $421 million against Blue Cross Blue Shield of Louisiana for failure to fully pay for services rendered by a privately owned surgical center. Uh , my name is , uh, Joe Aguilar. I'm the managing partner of HMS Valuation Partners. Um, I , uh, we, we are a healthcare valuation firm and consulting firm with 28 years of service to health systems, hospitals and law firms. Um, myself, I have , um, specialization in physician compensation arrangements, a PP compensation arrangements, hospital based professional services. Um, and not only , uh, do I do evaluation work and consulting work, but I'm also nurse practitioner for 20 years. Uh , today I'm , I'm fortunate , uh, enough to be joined by , uh, one of the esteemed attorneys who actually tried the case. We'll be talking about Matthew Sherman, of she Hardy Sherman and Williams out of New Orleans. Matt , um, why don't you share more , uh, about yourself and and your firm?

Speaker 3:

Thank you, Joe, and thank you all for having me. Um, my name is Matthew Sherman. I am an attorney at Shehar Sherman Williams Law Firm. Um, my father and a group of attorneys started the firm about 30, 35 years ago. Since that time, they started off with about eight to 10 lawyers. Uh, since then, we have grown to approximately 40 lawyers now. We have offices in Jefferson Parish, which is just right, right outside of New Orleans. We have a downtown New Orleans office, as well as an office on the North Shore , uh, in Hammond. Our firm specializes in pretty much every area of the law, but I have , uh, focused my time solely on litigation, and we handle, you know, healthcare litigation, commercial litigation, successions, anything , uh, anything that comes up. So this was a very special case to us, and we, you know, excited to talk about it.

Speaker 2:

Awesome. Well, let's, I guess start from the beginning. 'cause it, it was , um, I know it , it was a bit of a rollercoaster ride for you guys. Um, so I guess start from how it all began.

Speaker 3:

So we , the , the plaintiffs, our clients were, as you said, the St . Charles Surgical Hospital , uh, which is a specialty hospital located on St . Charles Avenue , uh, in the heart of uptown New Orleans. And also the other plaintiff was the physician group that operates within the hospital. Uh, that entity is called the Center for Respiratory Breast Surgery. Uh, the hospital and the center were both founded by doctors Frank Dero and Scott Sullivan. And they're truly the world leaders and pioneers in what they do , uh, with breast reconstruction surgery after , um, uh, a patient goes through, you know, numerous other surgeries and breast cancer treatment, and they've dedicated their whole careers to doing this. So it's, it's one of, if not the only hospital in the world at this point, that is solely focused on breast cancer treatment. And so it was an absolute just honor and privilege , uh, to work with them. They've been clients of our firm for, for years before I even started there. But this case focused on issues that they were having with Blue Cross and Blue Shield of Louisiana, that it was not, did not involve any out-of-State Blue Cross entity or the Association. And years and years before , uh, February of 2017, which is when the lawsuit was filed , uh, they had had been having issues with, with Blue Cross for underpayments or no payments at all , uh, for their treatment of their patients. Both the center and the hospital are out of network providers. And so we filed this lawsuit in state court in Orleans Parish, as I said, in February of 17. And we spent about five to six years purely fighting over where the case was gonna be, ultimately tried. We wanted the case in state court. Uh, blue Cross did everything they possibly could to have the case removed up to federal court. And I think we went, we, we went to the Federal Eastern District Court in Louisiana. We went up to the United States Fifth Circuit. We've been, went back down to the Federal District Court back up to the , uh, federal Fifth Circuit, then back to state court, and then up and down between the state appellate court and the State Supreme Court numerous times , uh, fighting over jurisdictional and procedural issues. But ultimately the case was remanded and stayed back in the state court, which is Civil District court for Orleans Parish, where the case was ultimately tried.

Speaker 2:

And , and , and so yeah , you mentioned the fact that , um, there was underpayment. Um, I think if I'm correct, I read in , in the, in the case notes that , um, over the period of time you guys looked at, there were some, you know, 8,000 or so surgeries and, and the payments on the bill were averaged about 9% on the charges. Is that,

Speaker 3:

That that sounds about right. Um, that , that there were about seven to 8,000 claims at issue. Um, because it was considered a continuing tort in Louisiana, under Louisiana Law. We were able to bring claims starting in January of 2015 through April of 2023, roughly about that time. And there was 7,000 , uh, claims or procedures that were at issue. And, you know, basically what what ended up, you know, limiting us at trial was that we had to bring claims only for fraud and abuse of rights, which is a , a special doctrine in Louisiana. But, but the , the case was about fraud. And , and we had to prove whether or not Blue Cross of Louisiana committed fraud. And the jury , uh, unanimously found on, on the issue of liability, that, that they committed fraud and they committed abuse of rights. And it , we, you know, we've alleged and we proved that it was a scheme of fraud that started the minute that the hospital and the center reached out and made contact with Blue Cross. Uh, during the authorization process, all the way through the appeals process, there was just multiple policies, internal secret, you know, hidden to us , um, lied to us about what the existence of such policies , um, and that these policies were used to target and, and to , um, ultimately underpay or no pay our clients. And so , uh, there was a lot of evidence that the jury considered, and again, ultimately , um, when, when the 12 jurors decided and voted on the issue of fraud, it was a unanimous decision on that issue. And ,

Speaker 2:

And share a little bit more about that in the sense that , um, obviously for our listeners, providers have the ability to choose to be either in network or out of network . Um, and if they choose to be in network , um, they're basically agreeing to a set of , um, contract terms , um, one of which being the fee schedule. Um, and then, but those who are out of network , um, you know, obviously aren't , um, um, bound or don't , don't have the privilege. Uh , but I guess you could look at both directions of, of those, of that contract language specific to the fees. However , um, the, there is a , an implied understanding of of how , of , of authorization for the services and for reimbursement. Um, I guess speak a little bit about that , uh, in terms of how that , um, played out with regards to your arguments of the case.

Speaker 3:

So at , at one point, well, before the lawsuit was filed, the, the center and the hospital were both in network providers with Blue Cross. Okay. And what ultimately happened was they, they have patients that come in all from all around the country, but really all over the world. And they were being paid more when they treated these out-of-State patients by the other Blue Cross entities. And so they ultimately decided it was in their best interest to go out of network when they did that in retaliation, basically. Then Blue Cross Louisiana started taking over and handling all those claims. But, but, but you're exactly right. When, when you're in network , there's an agreement, there's a written contract between the provider and Blue Cross agreeing to the terms of, of payment, agreeing to the fee schedule, and, and, and just the relationship between the parties . When you're out of network , like our clients, you have no written contracts, so you have no specific agreement on what the fee is gonna be, and you don't have any , um, restrictions on how you're gonna practice medicine, which was important to our doctors. They didn't want to be handcuffed by the insurance company on how they were gonna treat these women that came into their center. And, and, and you can see that if you walk into the hospital, it looks like the Ritz Carlton, and they take pride and they spent a lot of time and money and effort to , to have that feeling. And they didn't want insurance companies to tell them, you know, what they can and can't do. And, you know, ultimately our, our argument, and then of course the jury agreed, was that when we submitted a request for an authorization, that the, when Blue Cross authorized that procedure as medically necessary, that there was an agreement that they would reimburse us , um, you know, for our bill of charges, and that they lied and they , uh, you know, they, they misrepresented numerous things throughout the process that ultimately was, was for the fraud , you know, found for the fraud. But once there was that authorization agreement, and they continued to act as if they were gonna pay us like that, then the jury found that, that they should pay us, you know, what we billed for our charges, and we can talk about that eventually. But, but the bill of charges they found were reasonable and they were fair, and because there was no agreement, you know, in network agreement on the , on the prices, that that's what they're responsible for.

Speaker 2:

And I think that what , what's interesting, and, and even, and I think about this as a provider as well as a consultant, is that, you know, the prior authorization process is meant , um, for , um, you know, providers to appeal to the insurer , uh, as to an indicate why a particular procedure is medically necessary, and then if they receive, you know , uh, that authorization, I think it's also implied that remuneration will be made for those services. So , um, you know, I it , and it sounded as if your clients went through that process consistently for each of the , their procedures that they were doing. Um, that

Speaker 3:

Yeah, that, that's absolutely correct. There is uncontested evidence at trial that it was our policies, our client's , is that they would not perform any procedure with , without an authorization. Um, they wouldn't, you know, whatever it was, they, it wouldn't happen unless the , the Blue Cross had authorized the procedure. Um, and there is evidence that, you know, from Blue Cross has own medical director and representatives that once you get something authorized, you should expect to be paid for that service. Uh, why else would you have the authorization? So, you know, it, it, I do think it's important to note that, that this case and the facts of this case are very specific to the parties and the relationships. This is, I , you know, blue Cross is trying to make this out to be some healthcare changing, you know, the healthcare world's gonna be on its head now because of this, and that's just absolutely not true. This is, this is specific to the facts of this case and the conduct between these parties. It , this is not gonna affect, you know, anything with, with the overall insurance industry or healthcare industry going forward unless, unless Blue Cross continues to commit fraud like the jury thought . So , um, you know, it , it was, it was interesting from to to learn as you go, you know, you hear these stories about insurance companies having these policies. Well, in this case, they existed. Uh, they had with a targeted policy that they denied being in existence, that was in existence at the time of the denial. And it was a written policy , uh, that, that targeted our clients. They had what's called a blocked policy, that was a written document that existed during the relevant timeframe, and then they had specific policies against our clients and the doctors in the hospitals about how they were gonna pay 'em . And then we found out that there was a cost savings spreadsheet that they kept where they tracked their savings. And, you know, lo and behold, after asking a thousand times for that document , we still haven't seen that document today. It's never been produced. So, you know, very, very specific to, to our clients and, and, you know, it was, it was ultimately a great result.

Speaker 2:

Yeah, because I , it's not, it's not, again, it's not uncommon for, for providers, especially highly specialized providers to, to remain out of network or, or, and then when you think about those that are in surgery, a lot of times they're , um, pioneering particular, you know, procedures or , or , or methodologies and , and caring for their patients that require, you know, carrier based type pricing. And it doesn't lend itself to being in network . So it, it's, it's definitely not an uncommon thing out there. But I think what, what , um, I'm reading in the case, as you mentioned it being specific to , to this situation is that , um, the reimbursement for these services fall far short of, of what is typical net , um, paid in the out of network reimbursement world , um, which , uh, from our experience, it's anywhere from, you know , 50 to 70% of charges,

Speaker 3:

Right? Oh , yeah. Like you said, I think it was somewhere between seven and 8% . Yeah. Um, you know, and, and not even close to, to the bill of charges and what , you know, what they authorized and approved upfront .

Speaker 2:

Yeah. Yeah. And, and again, I mean, like in reading on , uh, the physicians, you know, <inaudible> that are , um, pulling patients , um, not only regionally, but nationally, and I'm , I would guess I , I don't , I don't know this for certain that they had even some international patients, it , it , it , it , it , it, if there isn't a poster child for a practice that really , um, le lends itself to being out of network , it's, it's this one

Speaker 3:

That , that coincidentally, I went last night , um, to a fundraiser or a dinner for a local organization called Restoration. And they, they, you know, formed years ago nonprofit , and they, they help provide, I think they said about a hundred thousand dollars so far this year to women going through breast cancer. And the clients are, you know, the, the most sought after , uh, clients in the world for this. And they, you know, they, they're involved in all these organizations and, you know , three different breast cancer survivors got up on the , on the stage last night in tears talking about what these, you know, doctors have done for 'em. And , um, you know, if , if we were to have called patients or former patients to come testify about how great these doctors in this facility is, the, the Superdome would've been filled. Um, and , and so that, and , and that, and that, that was one of the arguments at trial that, that they should be out of network and that they blue cross's actions and underpayments and no payments were almost a retaliation for them being outta network and an attempt to force them to go in network . Yeah . And luckily, you know, our clients continued to , to fight this and, and never backed down and, and folded and went in network . And they, they wanted their day in court. They waited a long time. And, and it was, you know, obviously very rewarding to them to, to see the jury , uh, you know, fine, fine for them.

Speaker 2:

Yeah. Well, I mean, I , you know , um, it's, as a women's health nurse practitioner, I think , I think this resonates with me as well , um, which is why I wanted you the share and have this conversation. But , uh, I think , um, you know, what about the patients , uh, you know, what impact has this been on the patients , um, financially , um, with , uh, some of these , um, I think you called it or I think, or either, either you called it or I read it where it was , uh, no pay , slow pay or low pay , um, practices.

Speaker 3:

Right. That, so my, the , my partner James Williams, who, who was the lead trial attorney at the trial, that was one of his main quotes is low pay , no pay , slow pay , no pay or , uh, you know, low pay . Yeah. And, and it, it was absolutely interesting that, you know, during their opening statements, blue Cross's attorneys were talking about how the members and the patients are their family and they're there to protect them . And then, yeah , first witness that get calls up, you realize that Blue Cross is pointing the finger at the patient saying that the patient's responsible for this bill. Mm-Hmm . And you know, it , that the evidence came out that, you know, these, this amount, this disputed amount that was owed was still on, on the client's books. And that this payment, if, if the jury, you know, found in our favor would cancel out those, those dents Mm-Hmm . <affirmative> . So this helped the patients and benefited the patients because, you know, blue Cross was trying to point the finger at them . So , um, yeah, it was interesting to watch Blue Cross defenses develop.

Speaker 2:

So , and so, I , I'm , I'm always curious about this too, because when we look at practices or, or like surgical centers like yourself, we're obviously looking at, at reimbursement and revenue cycle , um, with , was this just picked up by their normal revenue cycle management processes , um, that , um, payments were just not , uh, in par with or on par with the other insurers?

Speaker 3:

Yeah, we, I mean , we, we both sides, blue Cross had their expert and we had an expert, and they looked at , um, you know, they looked at what the other, you know, blue, not Blue Cross, excuse me, our , the hospital and the center they are in network with, with some providers in, in the local area. Mm-Hmm . <affirmative> . And so, you know, blue Cross came out and said, you know, we want those contracts because we think that's a relevant way of seeing whether or not we underage you all. Sure. And so we hadn't produced those contracts because as you're probably aware, they're all, you know, they all contain confidentiality clauses. So anyway, the judge ordered us to produce them, and then all of a sudden their expert got silent on the issue because when he looked at what Blue Cross paid us to the average amounts of what the other provider providers paid us, they were in the hole by, you know, over a hundred million dollars or so. So , um, that was one way to, to measure the damages. And then, you know, ultimately there was extensive evidence at trial that the bill charges of our clients were, were very fair and reasonable and consistent and sometimes even lower than the national , um, benchmarks. And, and so, you know, the jury, ultimately that $420 million is based upon our client's bill charges and then a credit for what was paid and , and allowed.

Speaker 2:

Interesting. Yeah. I , it's , um, as , as, as I, you know, that's, that's not insignificant. Uh, you know, ev even when you think about , um, the, the value of an a practice , um, like this, it , uh, the , the amount that's paid on these out of network bills , um, can be very material to their bottom line , uh, to their ability to stay open to their ability to provide the care that they're providing. Um, so it's , um, it , it's, it's definitely something that , uh, needs to be observed. But like , as you said , um, it , it's interesting when you think about the averages out there being, like I said, between 50 and 70%, but yet in, in this instance now, was it a situation I , what, what percentage of other providers were in network versus out network in Louisiana? So how did, how did your clients compare , um, to other similar practices in Louisiana? So

Speaker 3:

Blue crosses either CEO or vice President testified , uh, these are rough numbers, but that in Louisiana, I think, you know, 95% of providers are in network, and 97% of hospitals are in network. So our clients are kind of the one of the last ones standing on, you know , what , on based upon Blue Cross and who's in network and out of network .

Speaker 2:

Got it. Got it. Okay. But again , uh, they're , they're, they're that unique , um, center that just happens to be in New Orleans. Uh , that's right. It is, it is what it appears. And they have many of those , um, across the country. Um , that's right. So, so where does it stand now? Um, what, what are, what are the next steps?

Speaker 3:

So Blue Cross just filed a motion for new trial with the , uh, trial court, and then at once that's heard, if, if we prevail there, then my understanding is that they will appeal it and that they intend to, to fight this all the way up to Louisiana Supreme Court. So , um, you know, still a lot of work to be done, but , um, you know, we're hoping that, that the appellate courts see it the same way that, that the jury did.

Speaker 2:

Yeah. Yeah. And, and how , how are your, how, how are your clients , um, holding up through this process?

Speaker 3:

You know, they , they, they waited a long time to, to get to where we were on September 20th was a Friday where the, the jury came back. So, you know , they certainly feel vindicated, but they're prepared to, to go all the way to the end. They waited, you know, and fought for, for over eight years or eight years or so. So they know that, that it's not over yet. And that know , they're gonna keep fighting till till , till the last ruling, you know, comes in. But they, they look , they, they obviously feel very , uh, very proud and vindicated and, and , uh, you know, the jurors before they even left the courtroom were, were hugging and, and, and, you know, telling the doctors, thank y'all for all you do. So, you know, that , that the evidence was overwhelming at trial in , in , in favor of , of our clients.

Speaker 2:

Interesting. Well , um, I think that , um, yeah, it, it , it is, it's, it's an, it's an issue I think resonates with a lot of people , um, in the , in the sense of the balance of between, you know, payers and providers. Um, but I think it, it sounded as if, based on the evidence that you guys put forth, that the , that , that there was , um, a , a dramatic imbalance , um, which , uh, appeared to not , um, fall unnoticed to the, to the jurors.

Speaker 3:

Right. Absolutely.

Speaker 2:

Well , um, I, I , uh, I don't know if you have any other takeaways that , um, that you , with regards to your experience on this case , um, that might be relevant to our listeners.

Speaker 3:

No, I think, I think we've covered it. I , I , you know, it's important if you're out of network to that the insurance companies know what they're gonna pay you just because you're at that , that was proven at trial that this entire time when our clients are asking them, how much are you gonna pay us, you know, for these services? And, and they would never tell us the answer. They had a fee schedule , just like they do for in-network providers. So the insurance companies, at least Blue Cross Louisiana, they know how much they're gonna pay out of network providers. And so, you know, they, they should have told us that they, they knew it, they didn't tell it, they withheld it, and that was part of the fraud and the coverup. So, you know, if you are out of network provider demand and continue to, to request in writing the amount of reimbursements and how much you're gonna be paid and continue to ask because they know what they're gonna pay you. So

Speaker 2:

The thing , I think that's an a , an an an a critical point , uh, like you said, because if you're gonna take, if you're gonna be out of network , you're not covered by a contractual fee schedule. So it behooves you to ask those questions and get that in writing. And, and I think your insight in saying that insurers have that amount , uh, that they're willing to pay, I think is is, is so important for people to hear.

Speaker 3:

That's right. Absolutely.

Speaker 2:

Well, I , I , I, I'd like to thank everyone for, for listening , um, and thank the American Health Law Association for providing this venue for this discussion. Matt, thank you , uh, for all the , uh, I'm sure sleepless nights that went through over these last , uh, seven, eight plus years , uh, working the case. Uh, and , uh, and wish you well , uh, going forward on it , um, and , uh, sharing all the specifics that you are , that you shared surrounding it. Um, and , uh,

Speaker 3:

Thank you all for having us, for having me .

Speaker 1:

Thank you for listening. If you enjoyed this episode, be sure to subscribe to a HLA speaking of health law wherever you get your podcasts. To learn more about a HLA and the educational resources available to the health law community, visit American health law org .