Blue Cross investigation is expanded

Look at hospital agreements moves beyond Michigan

March 29, 2011

A probe of alleged anti-competitive agreements between Blue Cross Blue Shield companies and hospitals has been expanded by the U.S. Justice Department beyond Michigan, where an antitrust lawsuit that alleged the agreements raised hospital prices was filed last year.

CareFirst BlueCross BlueShield, Maryland's largest insurer, confirmed to the Wall Street Journal that it received a civil investigative demand from the Justice Department but declined to comment further.

Federal and state investigators also have sent civil subpoenas to Blue Cross Blue Shield units in Kansas, Missouri, Ohio, West Virginia, North Carolina, South Carolina and the District of Columbia, a person familiar with the matter said.

Gina Talamona, a department spokeswoman, confirmed to Bloomberg the investigation has widened to include "various parts" of the country. She declined to comment on which states investigators are focusing on.

The Justice Department has been looking for ways to cut medical costs as the government sets up the health-care system established by legislation signed a year ago this week by President Barack Obama.

In October, the department sued Blue Cross Blue Shield of Michigan. Last month, the department pressured United Regional Health Care System in Wichita Falls, Texas, to agree to stop entering into contracts with insurers that make it harder for them to work with rivals.

The expansion of the Blue Cross Blue Shield investigation is important because "they're using exclusionary practices to hold competitors at bay," said David Balto, an antitrust attorney and senior fellow at the Center for American Progress, a Washington-based policy group that generally favors Democratic initiatives.

The department's Michigan complaint said Blue Cross negotiated contracts with 70 of the state's 131 general acute- care hospitals that led to higher prices for the insurer's competitors. In some cases, the hospitals charged rivals 30 percent to 40 percent more than Blue Cross, the department said at the time.

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