A New Orleans jury has found that Blue Cross and Blue Shield of Louisiana shortchanged a local surgical center more than $400 million on thousands of breast reconstruction surgeries, a massive award against the state’s largest health insurer after a seven year legal fight.
St. Charles Surgical Hospital and Center for Restorative Breast Surgery, a privately owned surgical center on St. Charles Avenue known as a specialist in rebuilding the breasts of cancer patients, convinced a jury in Orleans Parish Civil District Court that Blue Cross committed fraud when it authorized some 7,800 surgeries from 2015 to 2023 and then paid only about 9% of the bills.
The state civil court jury deliberated for less than two hours Friday before rendering its unanimous verdict in the suit, the third attempt by the surgery center to seek payments after two earlier cases were dismissed in federal court.
“The whole purpose was to underpay my clients,” said attorney James Williams, who represents the hospital. “Blue Cross had a policy of slow pay, low pay or no pay.”
In court documents, Blue Cross denied that it acted fraudulently, arguing that because the hospital is not a member of its provider network, it had no contractual obligation to pay anything.
“We strongly disagree with the jury’s verdict,” the company said in a prepared statement. “We will quickly appeal and expect to be successful.”
Fight between doctors and insurance companies
The case, which Louisiana insurers said could have repercussions in the local market, underscored the vast differences between what doctors believe they should be compensated for providing care and what insurance companies are actually willing to pay. It also delved into the complicated relationship between insurers and doctors’ groups, particularly when doctors decline to join insurance networks.
In the U.S. health care marketplace, insurance companies create networks of doctors and hospitals, which agree to offer discounts on their stated rates for procedures in return for access to the patients that are covered by those insurers’ plans. Patients who go to providers outside of their insurance company’s network typically agree to pay higher out-of-pocket costs.
In Louisiana, 93% of all doctors and hospitals belong to a Blue Cross network. But St. Charles Surgical Hospital, which was founded by Dr. Frank Dellacroce and Dr. Scott Sullivan in 2003, wasn’t part of the Blue Cross network, having opted out more than a decade ago.
The surgery center treats about 1,000 cancer patients a year, performing cutting-edge reconstructive surgical techniques. Dellacroce said they have developed a national reputation for procedures like the Apex Flap breast reconstruction and the 4D nipple. More than 80% of their patients come from outside the state.
Problems between the hospital and Blue Cross began in 2007, when Dellacroce and Sullivan said they dropped out of the Blue Cross network because they felt reimbursement rates were too low.
In the years that followed, the hospital continued to treat Blue Cross patients because the surgeries were authorized by Blue Cross. But the surgeons only received a fraction of the charges they billed, Williams argued in court.
Williams also argued that the local Blue Cross engaged in “repricing” reimbursement rates the hospital had negotiated with Blue Cross companies from other states that insured the hospital’s out-of-state patients.
In court documents, Blue Cross argued that authorizing a treatment does not guarantee payment. Insurers do not have a set reimbursement rate that they pay out-of-network providers. Rather, they negotiate individual deals with brokers or employers.
The company also denied that it engaged in repricing, though it has agreements with out-of-state Blue Cross plans that it helps administer and that determine how much it will pay on a claim.
The company said that does not amount to fraud, and also noted in court documents that it successfully defended two similar suits brought by the hospital against it in federal court in the early 2010s.
For Blue Cross, the jury award, if upheld on appeal, could be a major financial hit. The nonprofit insurer, which tried unsuccessfully to sell itself last fall and, again, earlier this year to for-profit Elevance Health, had a cash balance of some $1.8 billion as of last year, meaning that the $421 million award would represent nearly a quarter of its total surplus.
The award is one of the largest ever in a state that is known for its large jury awards, according to insurance industry experts, who fear it could have a chilling effect on the market and potentially drive up premiums.
“This verdict is baffling and makes no sense,” said Wesley Watkins, president of the Louisiana Association of Health Underwriters, which advocates for the insurance industry. “If insurance companies were on the hook to pay whatever any provider charged, no provider would ever belong to a network and rates would be sky high.”
“If every provider says, I’m not going to join a network, I want my charges paid in full, you won’t have health insurance in the state of Louisiana anymore,” he added.
Blue Cross fought unsuccessfully to have the case, which was filed in 2017, dismissed from Orleans Parish Civil District Court. The trial, overseen by Judge Sidney Cates, began earlier this month and lasted three weeks, during which the jury heard from dozens of witnesses.
The jury award was based on a total $506.7 million billed by the hospital during the eight-year-period minus $85.3 million that was paid by Blue Cross and, to a lesser extent, patients.