IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF MISSISSIPPI

JACKSON DIVISION

SOUTHSHN OlSTPIiCT OC M188I6CIPPI

P 1L

OCT 182(113
J. T. NOBtW. C?.6f<
ay

BLUE CROSS BLUE SHIELD OF

MISSISSIPPI, A MUTUAL INSURANCE COMPANY

vs. CIVIL ACTION NO.:

QEPUTV

PLAINTIFF

GOVERNOR PHIL BRYANT, in his Capacity as Governor of the State of Mississippi

DEFENDANT

PETITION FOR TEMPORARY RESTRAINING ORDER, PRELIMINARY INJUNCTION, PERMANENT INJUNCTION, AND DECLARATORY RELIEF

Pursuant to 42 U.S.C. 1983. Blue Cross Blue Shield of Mississippi, A Mutual Insurance

Company ("Blue Cross") files this petition seeking declaratory and injunctive relief regarding the unconstitutional executive action threatened and/or taken by Mississippi Governor Phil Bryant.
Blue Cross seeks a temporary restraining order and a preliminary injunction enjoining the enforcement of the unprecedented and unconstitutional executive action at issue which threatens

to force Blue Cross, a private party, to enter into contracts with other private parties. Further, Blue Cross seeks declaratory and permanent injunctive relief once its claims are fully adjudicated. In support of its petition, Blue Cross states the following:
INTRODUCTION

Mississippi Governor Phil Bryant has mandated that Blue Cross, a private party, enter into contracts with ten HMA-owned hospitals, other private parties. The Governor purportedly
has taken this unprecedented action to protect Blue Cross subscribers' access to health care. This executive action is flawed and improper on numerous levels.

01657856

Contrary to the Governor's and HMA's assertions, the dispute between Blue Cross and

HMA is a contractual disagreement between private parties and does not prevent any
Mississippian from having access to health care. Blue Cross cannot prevent any Blue Cross
subscriber from walking into any HMA hospital, or any other hospital in the State, to receive

health care. Further, Mississippi Insurance Commissioner Mike Chaney has testified that the
exclusion of the ten HMA-owned hospitals from Blue Cross' provider Network will not deny

Blue Cross subscribers access to health care. Rather, the dispute between Blue Cross and HMA
centers on the exorbitant prices that HMA charges Mississippians for health care provided at

HMA's hospitals. HMA hospitals charge their patients significantly more than other local-area
network hospitals chai'ge their patientsin some cases more than double the charges.

Blue Cross offered to reimburse HMA hospitals in the same manner that it reimburses

virtually every other hospital in Mississippi for medical services provided to Mississippians. HMA rejected Blue Cross' offer and has sued Blue Cross in an action presently pending in
Rankin County Circuit Court seeking to obtain reimbursement for HMA hospitals at a rate

several multiples higher than the rate that Blue Cross reimburses virtually every other hospital in Mississippi. HMA's motive is clear^to maximize profits in order to facilitate the pending sale of its hospitals in Mississippi to Community Health Systems, a for-profit hospital organization
based in Franklin, Tennessee. When Blue Cross exercised its right to terminate its contracts with

the HMA hospitals, and after rejecting Blue Cross' offer to reinstate four HMA hospitals, HMA,
its attorney, and its lobbyists convinced the Governor to attempt to require Blue Cross to return all ten of the HMA hospitals to Network status.

The Governor's attempt to act under the color of State authority to dictate the business

practices of private parties is an unprecedented act that disregards multiple fundamental rights

01657856

protected by both the United States Constitution and the Mississippi Constitution. The Governor

has no constitutional or statutory authority to either compel private parties to enter into a
contract, or to mandate the terms of such a contract, including price. Thus, Blue Cross

respectfully requests that the Court enjoin the Governor from taking any action to force Blue Cross to enter into contracts with ten HMA-owned hospitals and to declare any such action
unconstitutional. PARTIES

1.

Plaintiff Blue Cross is a mutual insurance company licensed to do business in

Mississippi, having its principal place of business at 3545 Lakeland Drive, Flowood, Mississippi. 2. Defendant Governor Phil Bryant (the "Governor"), in his official capacity only, is

the Governor of the State of Mississippi and may be served with process at the Sillers Office
Building, 550 High Street, Jackson, Mississippi 39201.
JURISDICTION AND VENUE

3.

This Court has jurisdiction over Blue Cross' federal claims pursuant to 5 U.S.C.

8912 and 28 U.S.C. 1331, 2201 and 2202. The Court also has jurisdiction over Blue Cross'

state law claims pursuant to 28 U.S.C. 1367(a), as the state law claims are part of the same case
and controversy as the federal claims. Venue is proper in this Court pursuant to 28 U.S.C.
1391(a).
FACTS

4.

Jackson HMA, LLC ("CMMC"), Biloxi HMA, LLC ("Biloxi"), Brandon HMA,

LLC ("Crossgates"), Amory HMA, LLC ("Gilmore"), Madison HMA, LLC ("Madison"),
Natchez Community Hospital, LLC ("Natchez"), Clarksdale HMA, LLC ("Northwest"), River Oaks Hospital, LLC ("River Oaks"), Alliance Health Partners, LLC ("Tri-Lakes"), and ROH,

01657856

LLC ("Woman's") (collectively, "HMA") are all engaged in the business of operating hospitals

for profit within the State of Mississippi.

5. HMA entered into contracts with Blue Cross, each of which was renewed over the

course of years (collectively "Agreements"). As such, each HMA-owned hospital became a

Blue Cross Network provider. A Network provider is a health care provider who has entered
into a contract with Blue Cross. The Network provider is paid a higher percentage of the

allowed medical reimbursement than a provider who does not have a contract with Blue Cross,
based on a Blue Cross members' contract. In consideration, the Network provider agrees to

follow certain company polices, files the member's claim and does not balance bill the member
for the amount in excess of allowed charges. In addition, the insured has a lower coinsurance payment if he/she obtains treatment from a Network provider. For example, in most instances,

the insured only has a 20% coinsurance payment obligation for the allowed charges at a Network
provider. 6. The Agreements include tliree Attachments:
a. Attachment A is the Policies and Procedures Manual, which includes

payment rules and calculation examples ("Payment Rules");

b. Attachment B is the Payment Program, which contains the individualized

negotiated inpatient and outpatient reimbursement factors ("Payment

Program"); and

c. Attachment C is the Ambulatory Payment Classification, which provides

outpatient payment amounts by service ("Outpatient Rates").
7. Every single Blue Cross Network hospital operates under the exact same Pavment

Rules as every other Blue Cross Network hospital in its catesorv. The Blue Cross Participating

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Hospital Agreements fall into three categories: Fair Market Price, Per Diem and Percentage of
Charge based on the nature of the hospital. Eight of the HMA hospitals operate under the Fair
Market Price Agreement, and two operate under the Per Diem Agreement. The Payment Programs are negotiated by the individual Network hospital.

8.

Effective for calendar year 2011, each of the HMA hospitals signed the negotiated

Payment Programs. In addition, the Payment Rules went into effect. 9. In the fall of 2011, Blue Cross submitted its Payment Program proposals as well
HMA rejected Blue Cross' Payment Program

as the Payment Rules effective for 2012.

proposals. Consequently, in 2012 HMA was paid under the Payment Program each hospital had

in place for 2011, and under the Payment Rules established for every Blue Cross Network hospital for 2012. HMA accepted payments under this arrangement for the entire vear of 2012.
10. In the fall of 2012, the same annual Network hospital process began again for

Payment Program proposals and Payment Rules effective for 2013. HMA again refused Blue

Cross's Payment Program offer. However, in January of 2013, Madison accepted Blue Cross'
Payment Program proposal for 2013 and, therefore, was paid under its individualized 2013
Payment Program. Each of the nine remaining HMA hospitals was paid under its individualized

2011 Payment Program. All of the HMA hospitals were paid under the Payment Rules effective
for all Blue Cross Network hospitals in the same category in Mississippi for 2013. HMA
accepted these payments for more than six months.

11.

On June 18, 2013, the HMA hospitals sued Blue Cross alleging, in part, breach of

contract for insufficient payments. See Jackson HMA, LLC dba Central Mississippi Medical
Center et al v. Blue Cross Blue Shield, et al, originally in Hinds County and transferred to

Rankin County Circuit Court, No. 2013-226. In that action, the HMA hospitals seek to be paid

01657856

using Payment Rules different from every other Blue Cross Network hospitalthey want to be
paid more.

12.

Pursuant to the terms of the Agreements, each of the parties had the right to

terminate the Agreement, with or without cause. On June 25, 2013, Blue Cross exercised that

contractual right and sent notice of termination of the Agreements to HMA.

13. Following receipt of Blue Cross' notice of termination, HMA embarked on a

massive public relations campaign to provide to the public misinformation concerning Blue
Cross' termination of the Agreements and HMA's pending state court lawsuit. HMA also sought
to influence state-wide and local elected officials to assist it in its otherwise private dispute with
Blue Cross.

14.

On September 16, 2013, HMA and Blue Cross appeared at a joint hearing before

the Insurance Committees of the Mississippi House of Representatives and Senate.

At the

hearing, Butler Snow attorney and HMA officer, Paul Hurst, made his unfounded allegations
about the loss of access to care. Insurance Commissioner Mike Chaney testified that the

Mississippi statutes do not allow for his office to intervene unless there is a problem with access
to care. He testified that his office had reviewed the networks, that there was not a violation and

that this is a contractual dispute between two private parties.

Chaney testified:

Specifically, Commissioner

I have no authority and I don't think any insurance commissioner in the United States has authority to intervene in network disputes unless there is a problem with access to healthcare. And in Mississippi, that's - that actual code is being passed out now. And we have looked at the networks. We finished the surveys Friday of this week and we have provided the Senate and House hearing members a copy of this access report. But I will tell you this: From what we see, there's no violation of the law that we have today. This is strictly an issue that I have said appears to

01657856

be legal, the contractual dispute, but unfortunately you have ten hospitals that are on the HMA and those ten hospitals are affected very greatly.
See Exhibit 1, Transcript of Chaney's Testimony at Legislative Hearing at pp. 66-67.

15.

The HMA hospitals became non-Network effective September 1, 2013. The non-

Network status does not affect the Mississippi State and Public School Employees Health Plan
and does not affect Network benefit payments under the Federal Employee Health Benefit Plan
until November 4, 2013.

16.

On October 14, 2013, Blue Cross offered to reinstate four HMA hospitals-

Gilmore in Amory, Northwest in Clarksdale, Tri-Lakes in Batesville, and Woman's-into the

Network. The offer was made noting payments would be made pursuant to the same

Agreements and payment terms under which they had accepted payments for eighteen months before they filed suit. The offer was not contingent on those hospitals foregoing their rights to

seek reimbursement of the alleged underpayments which are the subject of the pending state
court lawsuit. HMA rejected the offers. 17. On October 17, 2013, the Governor sent Blue Cross a letter stating that unless

Blue Cross advises him by 5:00 p.m. on October 18, 2013 that it "will return the ten affected hospitals to network status and to the status quo as it existed prior to their termination[,]" he
intends "to issue an executive order to begin addressing this threat to BCBS enrollees and access

to healthcare generally." See Exhibit 2, October 17, 2013 Letter from Governor Bryant to Carol
Pigott.

18.

The Governor states that given Blue Cross' market position, he is concerned "that

the hospitals' exclusion from the BCBS network will do serious harm to BCBS enrollees and
patients of these hospitals and reduce access to care in the State generally." Id. He says he has

become convinced "that the exclusion of the hospitals from the BCBS network may not be
01657856 7

within the limits of the law." Id. (emphasis added). The Governor claims he is "concerned that

this situation may raise serious issues under Mississippi's antitrust laws." Id. (emphasis added).
Based on these issues, he has asked the Mississippi Department of Insurance whether it intends

to "act immediately to return the ten affected hospitals to the BCBS network." IdJ If not, he
"[i]ntends to issue an executive order to that end." Id. According to the Governor, his duty to
see that the laws are faithfully enforced "requires [him] to act now to enforce the law." Id. He
claims that "[a]ny further delay risks irreparable harm and a loss of the access to care." Id.
19. According to the Governor, "[t]he threat to patients that [he] feels compelled to

address can be avoided only if all ten of the affected hospitals are returned to the BCBS network
immediately." Id. He states that he is not taking sides in the Blue Cross/HMA litigation and that he has no opinion about the lawsuit. However, "[a]s far as [he] is concerned, until that dispute is
settled by the parties or resolved bv a court. BCBS mav simply return the hospitals to the status

quo as it existed before their contracts were terminated, i.e., BCBS may continue to interpret and
apply the contracts as BCBS understands them." He claims his only concern is patient access to
care.

20.

The Governor's sudden interest in access to health care is interesting given that he

blocked approximately 300,000 Mississippians from participating in the Medicaid program.

Instead, the Governor's actions appear to be motivated by politics and money. The Governor

and members of his staff have stated that this dispute is an "economic development issue" for
Rankin County.

' By letter dated October 17, 2013, the Governor asked Insurance Commissioner Chaney to rethink his
position that the Department of Insurance does not have authority to act to immediately require Blue Cross to enter into a contract with HMA to return HMA's ten hospitals into Blue Cross' Network. See

Exhibit 3. The Insurance Commissioner apparently has declined the Governor's invitation to change his position that the Department of Insurance has absolutely no authority to interfere in a contractual dispute between private parties.
01657856 8

21.

In addition, the Governor has a conflict of interest in taking this action because a

member of his immediate family is a lawyer at Butler, Snow, O'Mara, Stevens & Cannada, PLLC ("Butler Snow"), the same firm which represents HMA against Blue Cross and for whom
Paul Hurst, who serves as Senior Vice-President of Governmental Relations for HMA, is a

lawyer. Moreover, upon information and belief, the Governor has received nearly half a million

dollars, collectively, in political contributions from HMA, Butler Snow, Capital Resources (a
lobbying firm that represents HMA), and Beth Clay (a lobbyist who represents HMA) and her
clients.

22.

The Governor's executive action violates the Due Process Clause of the

Fourteenth Amendment to the U.S. Constitution and 14 of the Mississippi Constitution; the
Equal Protections Clause of the Fourteenth Amendment to the U.S. Constitution and 14 of the Mississippi Constitution; and the Contracts Clause of Article 1, Section 10 of the U.S.

Constitution and Article 3, Section 16 of the Mississippi Constitution. "[N]o Governor, or for that matter, any governmental official, can exercise power beyond their constitutional authority."
Barbour v. State ex rel Hood, 91A So. 2d 238, 239 (Miss. 2008) (citing Fordice v. Bryan, 651
So. 2d 998, 1003 (Miss. 1995) (citation omitted)).

23.

Blue Cross' refusal to enter into a contract in the face of an illegitimate demand

such as that identified in the Governor's letter is protected. As stated in the Amended Complaint

filed on the Governor's behalf regarding "Obamacare":

For the purposes of a substantive due process analysis there is no meaningful distinction between a person who asserts the right to contract or associate with another private entity and a person who asserts the right not to enter a contract or to associate with another private entity. Refusal to enter into a contract in the face of an illegitimate demand for a contract is subject to protection under the Fifth and Fourteenth Amendments to the United States Constitution. Just as a person has a First Amendment Constitutional right, in certain circumstances, to be free from exercising freedom of speech,
01657856 9

Plaintiffs in this matter have the Constitutional right to be free from entering a private contract or an involuntary association. See Bryant, et al. v. Holder, et al. Civil Action No. 2:10cv76KS-MTP, S.D. Miss, at [Dkt. No. 4] (wherein the then-Lieutenant Governor was a plaintiff in the action filed against the Attorney
General of the United States). Governor Bryant also has publically stated: "I am of the opinion
that the more we get the government out of health care, the better off we would be." See

http://blog.gulflive.eom/mississippi-press-news/2013/08/gov_phil_bryant_says_mississip.html.
24. Contrary to the Governor's claim that he is simply requiring Blue Cross to

"return the hospitals to the status quo," what he is calling for is a mandatory injunction. A mandatory injunction compels the performance of an affirmative act and, therefore, does n^ maintain the status quo. The Governor states that "until that dispute is settled by the parties or

resolved by a court, BCBS may simply return the hospitals to the status quo as it existed before
their contracts were terminated, i.e., BCBS may continue to interpret and apply the contracts as
BCBS understands them." See Exhibit 2. In other words, according to the Governor, even

though Blue Cross might be one hundred percent successful in its litigation with HMA, it must
contract with HMA in the meantime. Such an order, in effect, gives HMA a mandatory

injunction against Blue Cross without requiring HMA to meet the high burden of demonstrating
to the Rankin County Circuit Court that it is entitled to such relief

25.

This is not about access to healthcare. Access to quality healthcare is available to

every Blue Cross member. Blue Cross members may go to any hospital they desire. More

importantly, every Blue Cross policy covers emergency care and pays Network level benefits for
emergency care even at non-Network hospitals. 29 CFR 2590.715-2719A(b).

26.

As noted above, four HMA hospitals were offered to be reinstated into the

Network on October 14, 2013. The offers were rejected out of hand, demonstrating that the
01657856 10

HMAs' concern was not about access, but about HMA profits and a pending sale to another multi-billion dollar company. The remaining six HMA hospitals (CMMC, Crossgates, Madison, River Oaks, Woman's, Natchez and Biloxi) are all in cities with other acute inpatient hospitals in
the Blue Cross Network.

27.

The Governor's own State Health Plan states no shortage of access exists. See

Exhibit 4, Mississippi State Health Plan 2014, at Chapter 5 pgs. 1-2 ("A statewide glut of

licensed acute care beds complicates planning for community hospital services. There are far
more hospital beds than needed. ... The Department urges each hospital to voluntarily reduce the licensed bed capacity ....").
28. By alleging concerns about access to healthcare, HMA is simply attempting to

leverage its political power to gamer a contractual benefit greater than every other Mississippi
Blue Cross Network hospital. Blue Cross has an obligation to maintain healthcare costs for its
members, which means paying fair prices, not prices demanded by HMA.

29.

Based upon the cost reports submitted by HMA to the Mississippi Division of

Medicaid and Centers for Medicare and Medicaid Services ("CMS"), the Mississippi HMA

hospitals had total charges of $3,603,418,420 in 2011 and $4,144,299,743 in 2012. This same

information indicates that the ten HMA-owned hospitals apparently had net income of over $90,000,000, even after paying HMA home office overhead of over $34,500,000. One of the
issues Blue Cross has attempted to address with the HMA hospitals through the contracting

process is their excessively high charges. HMA area hospitals charge their patients sienificantlv
more than Blue Cross' other Network hospitalsin some cases, several multiples higher. The

more HMA hospitals charge, the more they get paid. Blue Cross and other payors must be able
to establish payment structures to curb this "high charge" abuse.

01657856

11

30.

The overcharging by the HMA hospitals is reflected in data from the Centers for

Medicare and Medicaid Services ("CMS"). CMS maintains a Medicare Provider Analysis and
Review ("MEDPAR") file which contains data from claims for services provided to beneficiaries
admitted to Medicare certified inpatient hospitals and skilled nursing facilities. CMS also

maintains data related to outpatient charges for Medicare patients. The following are examples
from 2012:

Overall Charge per Case: River Oaks $70,723 and CMMC $68,565 vs. St. Dominic

$29,557 and MS Baptist $36,367

Major Joint Replacement/Reattacliment of Lower Extremity: Rankin/Crossgates $111,050 and CMMC $108,759 vs. MS Baptist $38,864 and UMC $52,085
Percutaneous Cardiovascular Procedure: CMMC $113,331 vs. St. Dominic $38,339 and UMC $56,425

Heart Failure & Shock: Rankin/Crossgates $58,642 and River Oaks $57,815 vs. St.
Dominic $18,865 and UMC $21,409 Emergency Room: River Oaks $2,410.78 and CMMC $2,094.25 vs. St. Dominic
$537.07 and UMC $828.82

MRI/MRA Brain/Head/Neck: River Oaks $6,748.07 and CMMC $6,509.89 vs. UMC $3,975.48 and St. Dominic $3,567.92 Respiratory System with short term ventilator: Biloxi Regional $115,144 vs. Wayne General $15,047

Major Bowel with comorbid complications: Crossgates $349,683 vs. Forrest General
$62,587

Hardened Arteries: CMMC $34,325 vs. St. Dominic $9,571

See also Exhibit 5, Emily Le Coz, The big shell game. The Clarion-Ledger (Jackson, MS) Oct. 6,
2013, at Al.

31.

The HMA hospitals have argued that total charges do not matter. Total charges

do matter, and enable HMA to manipulate Blue Cross' and governmental payment systems.

32.

For the reasons discussed herein. Blue Cross is entitled to a temporary restraining

order and injunctive and declaratory relief preventing the enforcement of the Governor's
unlawful executive action.

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12

COUNT I

APPLICATION FOR TEMPORARY RESTRAINING ORDER, PRELIMINARY

INJUNCTION AND PERMANENT INJUNCTION

33.

Blue Cross incorporates by reference into this Count all allegations contained in

Paragraphs 1 through 32 set forth above. 34. In accordance with Federal Rule of Civil Procedure 65(b), Blue Cross respectfully

requests entry of a temporary restraining order, not to exceed fourteen (14) days, against
Defendant.

35.

Blue Cross respectfully submits that the Court should grant its request for a

temporary restraining order and a preliminary injunction for the following reasons: a. Blue Cross is substantially likely to prevail on the merits of its claim.

b. The entry of such an order is necessary to prevent irreparable harm. If the

Governor is not enjoined from taking this unlawful action, Blue Cross' constitutional rights under (i) the Due Process Clause of the Fourteenth
Amendment to the United States Constitution and 14 of the Mississippi

Constitution, (ii) the Equal Protection Clause of the Fourteenth Amendment

to the United States Constitution and 14 of the Mississippi Constitution, and (iii) the Contracts Clause of Article 1, Section 10 of the United States Constitution and Article 3, Section 16 of the Mississippi Constitution will be
violated, and the threat is imminent. Moreover, Blue Cross will suffer

irreparable harm if it is forced to comply with the Governor's executive

action pending a determination of the constitutionality of the action. Specifically, if Blue Cross is required to pay the HMA hospitals as if they are Network providers and this Court or the court in the HMA/Blue Cross action
01657856 13

subsequently determines such treatment was not required, Blue Cross would

have no remedy to recover such payments. It is impossible to quantify the

damages represented by such losses.

c. The threatened harm to Blue Cross' business operations substantially outweighs any theoretical harm the Defendant might suffer. Granting an

injunction on the enforcement of the executive action until its constitutionality

can be determined will, therefore, not harm the State.

d. The entry of this request is consistent with public policy and in the interest of the public. The injunction will further the public interest by ensuring that private parties and persons are not forced to contract in violation of their
constitutional rights guaranteed by the United States Constitution and the
Mississippi Constitution.

36.

In accordance with the requirements of Federal Rule of Civil Procedure 65(c),

Blue Cross stands ready to post reasonable bond.

37.

Further, upon notice and hearing, to be conducted within fourteen (14) days. Blue

Cross, for the purpose of preventing immediate and irreparable harm, loss and damages, would request that the temporary restraining order be converted to a preliminary injunction.

38.

Blue Cross respectfully submits that it has met its burden under Federal Rule of

Civil Procedure 65, and submits that the Court should immediately enter a temporary restraining
order precluding Defendant from enforcing his executive action.
COUNT 11

REQUEST FOR DECLARATORY JUDGMENT

39.

Blue Cross incorporates by reference into this Count all allegations contained in

Paragraphs 1 through 38 set forth above.

01657856 14

40.

Pursuant to 28 U.S.C. 2201, Blue Cross brings this action for a determination:
a. That Defendant has acted in violation of the Equal Protections Clause of the
Fourteenth Amendment to the U.S. Constitution and 14 of the Mississippi
Constitution;
b. That Defendant has acted in violation of the Due Process Clause of the

Fourteenth Amendment to the U.S. Constitution and 14 of the Mississippi

Constitution; and c. That Defendant has acted in violation of the Contracts Clause of Article 1, Section 10 of the U.S. Constitution and Article 3, Section 16 of the

Mississippi Constitution. An immediate, actual controversy exists as a result of the Governor's action.
DUE PROCESS CLAUSE

41.

Blue Cross incorporates by reference into this Count all allegations contained in

Paragraphs 1 through 40 set forth above.

42.

The executive action amounts to an arbitrary, irrational abuse of power that has

the effect of depriving Blue Cross of its constitutionally protected fundamental right to contract.

No compelling state interest is advanced by the action, and the action is not the least restrictive
method available to effectuate any compelling state interest.

43.

The executive action also deprives Blue Cross of its liberty and property rights

without procedural due process.

44. Moreover, the executive action is void for vagueness, as it fails to provide the

kind of notice that will enable ordinary people to understand what conduct it prohibits and
authorizes, and even encourages, arbitrary and discriminatory enforcement.

01657856

15

45.

Accordingly, the executive action violates the Due Process Clause of the

Fourteenth Amendment to the U.S. Constitution and 14 of the Mississippi Constitution.

EQUAL PROTECTION CLAUSE

46.

Blue Cross incorporates by reference into this Count all allegations contained in

Paragraphs 1 through 45 set forth above.

47.

Blue Cross has been intentionally treated differently from others similarly

situated, and there is no rational basis for the difference in treatment.

48.

The differential treatment of Blue Cross flows from an illegitimate animus

towards Blue Cross by the Defendant. 49. The classification created by the executive action impinges upon the exercise of

Blue Cross's fundamental right to contract, and, therefore, is subject to strict scrutiny. It cannot

be upheld, as it is not precisely tailored to serve a compelling state interest. Rather, it is

discriminatory, capricious, unreasonable, and impracticable.

50.

Accordingly, the executive action violates the Equal Protections Clause of the

Fourteenth Amendment to the U.S. Constitution and 14 of the Mississippi Constitution.

CONTRACTS CLAUSE

51.

Blue Cross incorporates by reference into this Count all allegations contained in

Paragraphs 1 through 50 set forth above.

52.

The Governor's executive action, ordering that the ten HMA-owned hospitals be

returned to the Blue Cross Network, substantially impairs the terms of the contracts between Blue Cross and HMA by, in effect, deleting the bargained for right to terminate the contract with
or without cause. HMA has not even sought this relief in their pending state court lawsuit.

53.

There is no significant and legitimate public purpose at issue here. Moreover, the

Defendant's adjustment of the rights and responsibilities of parties is not based upon reasonable
01657856 16

conditions and is not of a character appropriate to the public purpose cited by the executive
action.

54.

Accordingly, the executive action violates the Contracts Clause of Article 1,

Section 10 of the U.S. Constitution and Article 3, Section 16 of the Mississippi Constitution.
COMMON LAW OF CONTRACT

55.

Blue Cross incorporates by reference into this Count all allegations contained in

Paragraphs 1 through 54 set forth above.

56.

Under Mississippi law, a contract entered into under duress that is not the product

of voluntary, mutual assent is unenforceable.

57.

Accordingly, for this additional reason, the executive action mandating that Blue

Cross enter into a contract against its will and under duress violates Mississippi law and public
policy and should be declared unenforceable.
REOUEST FOR RELIEF

ACCORDINGLY, Blue Cross respectfully requests all relief as referenced in this

Petition, including but not limited to, the following:

a.

That this Honorable Court issue a temporary restraining order as to Defendant;

b.

Upon a hearing, pursuant to Rule 65, to be conducted within fourteen (14) days of

the issuance of the temporary restraining order, that the Court make such temporary restraining
order permanent and grant temporary injunctive relief or, in the alternative, permanent injunctive
relief as to the protect Blue Cross from the Defendant's unconstitutional executive action; c. That, after the claims are fully adjudicated, this Honorable Court declare the

executive action unconstitutional and permanently enjoin its enforcement;

01657856

17

d.

That Blue Cross be granted leave to amend this Petition as evidence and justice

may so require; and

e.
proper.

That this Honorable Court grant such other and further relief as it deems just and

This the 18th day of October, 2013.

Respectfully submitted,
BLUE CROSS BLUE SHIELD OF MISSISSIPPI,
A MUTUAL INSURANCE COMPANY

Attorneys

OF COUNSEL:

R. David Kaufman, Esq. (MSB No. 3526) Cheri D. Green, Esq. (MSB No. 4988) Brunini, Grantham, Grower & Hewes, PLLC
Post Office Drawer 119

Jackson, Mississippi 39205 Telephone: (601) 948-3101

Facsimile: (601)960-6902

01657856

18

EXHIBIT 1

Public Hearing, 8/16/2013

1 2 3
4 5

LEGISLAm/E HEARING ON HWVBLUE CROSS

6
7

8 9 10 11 12 13 14 15 16
17

BEFORE THE HOUSE AMD SENATE INSURANCE COVMrTTEES

JOINfr LEGISLATIVE HEARING

located at 400 High Street, Jackson, Mississippi

Held at the state Capitol Building in Room 216,

begnning at 10:00 a.m. on Monday, Septent)er 16th,

18 19

PRESIDING CmiRNEN:

HOUSE CHAIRMAN: SENATE CHAIRMAN:

|VR. GARY CHISM |VR. VIDET CARMICHALE

20
21 22

REPORTOD BY:

Metro court Reporting Services

Jackson, MS
709 Windward Road

BARBARA L. CRAWTORD, CTR #1182 39206

23 24 25

CavpiJTER-AIDED TRANSCRIPTION BY

METRO REPORTING (601) 368-9616

EXHIBIT
1

Public Heanng, 8/16/2013

1 TABLE (F QONTBJTS

2 3

4
5

Title & Appearances

6
7

Contents

SPEAKERS:

Mr. Paul Hurst

10

Dr. Chris click

20

11 12
13
14

Dr. Joe Bailey Dr. Jitmiy Keeton

Dr. Shani Meek
Dr. Michael Havens

31 35
39
45

15

Mr. Charles Pace

49

16
17

Mr. Chris Shapley

Mr. Paul Hurst

52
57

18
19

insurance Comtiissioner Mr. Mike chaney

65

20
21 22 23 24 25

Certificate Page

75

GCMUTER-AIDED TRANBCRIPnON BY

METRO REPORCIING (601) 368-9616

Public Hearing, 8/16/2013

1 2 3
4 5

we can't wait until a baby a irena leaves Clarksdale, Mississippi on her way to

Menphis because she can't have her baby in

Clarksdale and that baby's born on the side
of the road, we can't allow what Dr. Meek

6 7

talked about that babies are going to be born

in hallways.
did.

I didn't say that, a doctor

8 9
10 U 12 13
14

We can't wait fbr a woman to die

because she couldn't get a mamnograni in her

hospital.

We can't wait fbr a man to get we can't let them close these
Thank you

colon cancer because he didn't get his

colonoscopy.
hospitals.

Mr. Chairman, I apologize.

15 16
17

for your time.

|VR. HURST:

I'm little passionate.

I understand.

CHAIRMAN CHISM:

Thank you.

18 19

CHAIRMAN CHISM:
(AUDIENCE CLAPS.)
CHAIRMAN CHISM:

Thank you.

Okay.

20
21 22

Ootrmissioner of

Insurance, Mike Chaney. Are you still in the

house?

23
24

|VR. CHANEY:

I was trying to hide.

I thought you were over

CHAIRMAN CHISM:

25

yonder.

Couldn't even find you, man.

Do you

QCMPUTER-AIDED TRANSCRIPTION BY

METRO REPORTING (601) 368-9616

Public Hearing, 8/16/2013

1 want to say a vord?

gg

2
3 4

NR. CHANEY:

Can you hear me from here?

No. Gome up here.

CHAiRNWl CHISM:

Comnissioner of Insurance, Wike Chaney.

|VR. CHANEY:

The first thing I'm going to

6 7 8 9
10

do is pass you around some information that may help you. I want everybody to knew that I truly care about what's happening in our comninity, espedally in Rankin County,
Madison and Hinds. I have been asked by all

U 12

the parties to either get involved or stay out of it, so depends on which side you're

13 14
15

on.

I will tell you that I have no authority

and I don't think any insurance comnissioner

in the united States has authority to

16

intervene in netiAork disputes unless there is

17 18
19
20

a problem with access to healthcare. And in Mississippi, that's that actual code is
being passed out new.
And we have looked at the networks. We

21

innished the surveys Friday of this week

22

and we have provided the Senate and House

23
24
25

hearing members a copy of this access report.

But I will tell you this: From what we see,
there's no violation of the law that we have
GCMPLTTER-AIDED TRANSCRIFTION BY

METRO REPORTING (601) 368-9616

Public Hearing, 8/16/2013 1 tcxiay. This is strictly an issue that I have

2 3
4

said appears to be legal, the contractual dispute, but unfbrtunately you have ten
hospitals that are on the and those ten

hospitals are affected very greatly.

tell you that up front.
vrfien I looked at the

Some of

6
7
8

them are probably going to close. I'll just

9
10

federally-facilitated marketplace, I fbund

that I had 36 counties in the state

11

constituting 900,000 people that had no

12
13
14
15 16

provider at all under the FFM,

no coverage.

I got no

calls from anyone about 900,000 people v\rith

Fortunately, we worked v\rith l-S-lS and we got providers in. The issue became one of

17

hew do you get networks.

That has been an

18 19
20

issue up until V\fednesday of this past week, but we had trouble providing neti^orks just
within the metro area fbr one of the

21

providers that thought that they would have a

22
23

netwDrk.

We were able to get three to fbur

days extension from CCEIO, that's a part of

24
25

HHS that gives us approval to do things

and we cut a deal actually with the people
CCJVlPLrTER-AIDED TKANSCRIPTTON BY

METTO REPOmNG (601) 368-9616

Public Hearing, 8/16/2013

1

gg

that provides most of the network mth HW\,

2
3

the physidans, to try to have a netiflork in

Hinds, Madison and Rankin for one of the

providers on the FFM.

5
6

Now, you are saying vhy is he talking

about that? Because babies are bom in those

7
8

36 counties. Think about it.

People live in

those 36 counties and I'm the insurance

9
10
11

regjlator.

I'm not a healthcare guy, but I

I fiDund that

find myself in the healthcare business

whether I like it or not.

12
13

Clarksdale had no provider.

Greenville,

indianola, Leiand. Greenwood, Kosdusko,

14 15

Louisville, Mississippi; Laurel, Mississippi; Golutfcia, Mississippi: Picayune, Poplarville,

16
17

Bay St. Louis, Pascagoula not pascagoula,

but Pass Christian. I could go on and on

18 19
20

with the hospitals that we looked at like Holmes Gounty that would probably close,
Grenada.

21

Thank God for Jinry Keeton. I think

22
23

y'all are going to take Grenada.

do, cxx:.

I hope you

24

And I will confess that I did get

25

involved in the dispute between university

OOMPUTER-AIDED TRANSCRIPTION BY

IVETRO REPORTING (601) 368-9616

Public Hearing, 8/16/2013

1

69

Medical Center and Blue cross Blue Shield.

2 3

That was a very private matter.

That's the

first time, I think any either one of us

4
5

has said anything public about it.

But it

was in the state's interest that I do be

involved in that because they're the only

7 8
9

trauTH care facility in the state.

The only

Level One trauma care facility in the state,

and that became one under the statute that I

10
11

could get involved writh on provider

necessity.

12
13 do.

I don't knew what the Legislature will

I'm not certain what this cormittee will

14
15

do.

I will just tell you that under the I can ask with the

statutes that we have today, I have no

16
17

authority to intervene.

small baseball bat that I have that the

18
13

parties try to agree.

I have offered, as

Mr. Hurst knows, to intervene and I've tried

20
21 22

to say that if you would consider dropping

the suit with prejudice, they would probably come to the table, if you don't drop it with

23
24 25

prejudice if you drop it with prejudice, I

don't think they would come to the table. The other issue for me, if you think
OavpUTER-AIDED TRANSCRIPTION BY

METKO REPORTING (601) 358-9616

Public Hearing, 8/16/2013

1 about the hat that I have to wear, is that my

2
3

attorneys tell me that I have no authority

and should not be involved if there's a legal

4 5 6
7
8

dispute, and that presents another host of problems for us. But we wrill do whatever we can to provide healthcare in these three
counties and the ten hospitals that are
outlined.

9 10

NOW, from what I understand, I don't think if Ootmunity buys l-m that any

11 12
13

hospitals will close in the state. personal opinion.

That's my

You may have one or two

that will close, but I don't think so and

14
15

I'll tell you why.

They only have a facility

So, I

in two other places if I'm correct.

16

don't see them competing against the

17 18
19
20

hospitals they would be buying.

So, I don't

think any of them would close, except for the

fact that they may lose the DISH payments.
That's another issue.

21 22 23
24

we've got just so you'll know, Comnittee, we got major problems in Hattiesburg that are coming our way. So,
it's an issue that I have to deal wnth and I

25

thought I was an insurance regulator.

COVPUTER-AIDED TT^ANSCRIPTION BY

METRO REPORITNG (601) 368-9616

Public Hearing, 8/16/2013

1 Between this and tornadoes and hurricanes and

2 3 4 5
6

the federally-facilitated marketplace, we stay quite busy at our department. I will tell you this, though: This is on the top of our to-do list to try to get
this issue resolved, but we cannot intervene

7
8 9

as long as there is a legal suit going on.

would ask that all the parties, the hMfii and the Blue Cross attorneys get in a room and

10
11 12
13
14
15

work it out.

I'll just tell you that again.

Unfortunately,

It's what ought to be done. This is about money.

it's about money. Somebody made a statement

to me in the back of the room that, well, the

reason the cost is different for Blue Cross

16
17

at River Oaks versus, say, Baptist or one of

the others is because one's fbr profit and

IS 19 20
21

one's not for profit.

That may be true, but

I will tell you what's coming down the pipe. The federal government is going to fine
non-profit hospitals $50,000 per occurrence

22
23
24

if they start seeing too many uninsured

folks, what v call indigent care self-pay
folks. Counterintuitive to what we would

25

norrnally hear that you're inned $50,000 each

OPUTER-AIDED TKANSCRIFTION BY

METRO REPORTTNG (601) 368-9616

Public Hearing, 8/15/2013

1

72

time you refuse to see somebody that comes

2
3
4 5
6

through an emergency room.

Sounds kind of

crazy, but that's the type things that I have

to put up with in my business of trying to regulate insurance companies.
To members of the comnittee, we'll do

7
8

whatever you want,

we passed these out.

The difference on the

i=6el free to call us.

9
10

market share, if you look at it. Blue Cross

Blue Shield under these market shares that

11
12
13

we've given you is about 58 percent.

NAIC and includes some self-funded

I will

tell you that those nunt)ers are compiled by

14
15
16 17

provisions. They do not include self-funded

plans. Like the state plan of ivrississippi
Blue has 200,000 people that are provided healthcare by the State of Mississippi.

IS
19 20
21
22

Cross Blue Shield operates the netiAork for

us, for the State, but they do not provide the healthcare. They just simply provide the
netiAork adequacy that we require, and they
are the ones that enforce that network

23
24

adequacy, and I will tell you there are

issues there sometimes. Because I serve on

25

that board, I have to get involved with them.

GCIviPLrTER-AIDE) TRANSCRIPTION BY

(^CTRD REPCKUNG (601) 368-9616

Public Hearing, 8/16/2013

1

72

But that's not included in these numbers.

2
3

Self-funded plans are not included in the

nimtiers you have here today. The 80 percent

4
5

you got from Kaiser is probably because

Kaiser has taken out anyone that sells cancer

6
7

plans, supplemental plans, anything that's

not related strictly to health insurance,

they will take them out. That may be where

9
10

they got the 80 percent.

know.

I really don't

I'd have to look at it and see.

11

So, with that, Mr. Chairman, if you have

12
13

cpjestions. I could go on and on if you want

me to.

14
15

CHAIIWN OHISM:
that.

We don't want you to do

16 17
18

|VR. CHANEY:

Any questions? Ttiank you,

OlAlRMftN CHESM:
Mr. Gottnrissioner.

19

|VR. CHANEY:

Thank you.

20

CHAlRMflW OHISM:

Let's just wind this

We hope that

21
22

thing up right now. we done been listening

to it for an hour and a half.

23 24
25

the two parties can get together, but I think that what we may need to start looking at is
we have a willing provider statute already
aavpUTER-AIDED -mANSCRIPTlON BY

IVETO REPORTING (601) 368-9616

Public Hearing, 8/16/2013

1

for pharmacists and pharmacies in this state

2 3
4 5

and we may need to look at that and we might

be studying that between now and the first of

the year. Tiwenty-fiDur states already do that, and so that might help the situation
some. But with that, Mr. chairman, I

6
7

appreciate you hosting this particular

hearir^ ibr us.
CHAIRMAN CARMECHAEL:
Mr. chairman.

8 9 10
n

Thank you,

I know vwa had some senators

who had some questions, and so if those who

12 13 14 15 16 17

have been speakir^ or those v\ho are here,

after we close the meeting, if you will hang

around and let our senators and

representatives, there may be some questions

there to that if y'all want to answer them,

then that will keep us from prolonging this

public meeting.

18
19

And I do appreciate everyone for beirg here. Thank you, Mr. Chairman. Thank you,
metrbers of the House and Senate, we are

20
21
22

adjourned.
OE HEARING CDNCLUDBD at 11:15 A.M.)

23
24

25
GCMPUTER-AIDED TRANSCRIPTTON BY

METO REPORTING (601) 368-9616

Public Hearing, 8/16/2013

1
2
STATE OF MISSISSIPPI

QOURT REPORTER'S CERTIFICflJE

3
4

OOINTY OF HIM3S

I, Barbara L. Crawford, Certified Court Reporter

and Notary Public for the State of Nrississippi, do

7 8
9 10

hereby certify that the foregoing pages contain a true and correct transcript of testimony taken by me at the
time and place heretofore stated, and later reduced to typewritten form by cotiprter-aided transcription under

11 12 13
14

ity supervision to the best of my skill and ability. I further certify that I am not in the enplpy of or related to any counsel or party in this matter, and
have no interest in the final outcome of the

15

proceedings.

16

I do flirther certify that my certificate annexed

17 18 19
20
21

hereto applies only to the original and certified transcript and electronic disks. "The undersigned assunes no responsibility for the accuracy of any
reproduced copies not made under my control or
direction.

22
23

This the

day of

, 2013.
certified Court Reporter
Barbara L. Crcawfiord,

24
25

COVPUTER-AIDED TRANSCRIPTION BY

IWETRD REPORTING (601) 368-9616

EXfflBIT 2

..,T

PHIL BRYANT
GOVERNOR

October 17,2013

Ms. Carol Pigott

Chief Executive Officer

Blue Cross & Blue Shield of Mississippi

3545 Lakeland Drive

Flowood, MS 39232

Dear Ms. Pigott: It has now been nearly four months since Blue Cross & Blue Shield of Mississippi ("BCBS") abruptly announced that it was terminating its contracts with ten Mississippi hospitals, apparently as a result of a breach of contract lawsuit filed by the hospitals. As you know, these ten hospitals provide critical medical care to tens of thousands of Mississippians, many of whom are BCBS enrollees. This fact, coupled with BCBS's dominant market position, has caused me great concern that the hospitals' exclusion from the BCBS network will do serious harm to BCBS enrollees and patients of these hospitals and reduce access to care in the State generally.

Almost two months ago, we met to discuss the matter, which I appreciated, although our meeting did not seem to result in any progress. In a follow-up letter, I reiterated that I certainly respect BCBS's "right to make informed and appropriate business decisions within the limits of applicable state and federal laws" but expressed hope that, despite the ongoing litigation, the parties could find some middle groimd to preserve patients' access to care for the time being. That has not happened, and upon further study of the issue, I have become convinced that the exclusion of the hosphals from the BCBS network may not be within the limits of the law. The current impasse and its effects on patients raise several legal issues. Most important, the Mississippi Patient Protection Act of 1995 requires BCBS to "[djemonstrate that its provider
network has providers of sufficient number throughout the service area to assure reasonable access to care with minimum inconvenience by plan enrollees." Miss. Code Ann. 83-41-409(b). State law also broadly prohibits insurers from engaging in any unfair or deceptive acts or practices. Id, 83-5-33. In addhion, I am concerned that this situation may raise serious issues under Mississippi's antitrust laws. Based on these issues, I have asked the Department of Insurance whether they intend to act immediately to retum the ten affected hospitals to the BCBS network. If not, I intend to issue an
executive order to that end. After careful and deliberate consideration and consultation with the

Attorney General, I have concluded that my constitutional duty, as chief executive of the State, to "see that the laws are faithfully executed," Miss. Const, art. 5, 123, requires me to act now to enforce the law. Any further delay risks irreparable harm and a loss of the access to care. EXHIBIT
STATE OF MISSISSIPPI OFFICE OF THE GOVERNOR POSTOFHCE BOX 139 JACKSON. MISSISSIPPI 39205 TELEPHONE: (601) 359-3150 FAX: (601) 359-3741 www.govemorbrYant.com

The threat to patients that I feel compelled to address can be avoided only if all ten of the
affected hospitals are returned to the BCBS network immediately. Let me be clear that I am not taking sides in your underlying contractual dispute with the hospitals. I have no opinion about that lawsuit. As far as I am concerned, until that dispute is settled by the parties or resolved by a court, BCBS may simply retum the hospitals to the status quo as it existed before their contracts were terminated; i.e., BCBS may continue to interpret and apply the contracts as BCBS understands them. My only concern is patient access to care.

Therefore, please advise me by 5:00 p.m. tomorrow whether you will retum the ten affected hospitals to network status and to the status quo as it existed prior to their termination. Otherwise, I intend to issue an executive order to begin addressing this threat to BCBS enrollees
and access to care generally.
Smterely,

Phil Bryant
GOVERNOR

cc:

Attorney General Jim Hood

EXHIBITS

^--...'

i"''

PHIL BRYANT
GOVERNOR

October 17,2013

Commissioner Mike Chaney Mississippi Insurance Department 1001 Woolfolk State Office Building
501 North West Street

Jackson, MS 39201

Dear Commissioner Chaney; As I know you are aware, nearly four months ago, Blue Cross & Blue Shield of Mississippi ("BCBS") abruptly announced that it was terminating its contracts with ten Mississippi hospitals: Natchez Community Hospital, Northwest Mississippi Regional Medical Center (Clarksdale), Biloxi Regional Medical Center, Madison River Oaks Medical Center, Gilmore Memorial Regional Medical Center (Amory), Tri-Lakes Medical Center (Batesville), Central Mississippi Medical Center (Jackson), Crossgates River Oaks Hospital (Brandon), River Oaks Hospital (Flowood), and Woman's Hospital (Flowood). The apparent reason for the terminations, which took effect at the end of August, was the hospitals' decision to file a lawsuit against BCBS, alleging that BCBS had underpaid them under the terms of their contracts. I am sure that you are also aware that these ten hospitals provide critical medical care to tens of thousands of Mississippians, many of whom are BCBS enrollees, and that BCBS is by far the dominant private health insurer in the State of Mississippi. This combination of factors has caused me great concern that the parties' impasse will do serious harm to BCBS enrollees and patients of these hospitals and reduce access to care in the State generally.

The current impasse and its effects on patients implicate several statutes. First, the Mississippi Patient Protection Act of 1995 provides that a managed care plan must be able to "[djemonstrate that its provider network has providers of sufficient number throughout the service area to assure reasonable access to care with minimum inconvenience by plan enrollees." Miss. Code Ann. 83-41-409(b). Second, state law specifically prohibits insurers from engaging in any unfair or deceptive acts or practices. Id.^ 83-5-33. Third, state law generally authorizes the imposition of penalties on any insurer that "violates or neglects to comply with any provision of law obligatory on it." Id., 83-5-17.
I believe that the predicament facing these ten hospitals and their patients raises substantial questions under each of these statutes. However, after talking to you this afternoon, I understand that the Department of Insurance does not believe it has authority to act on these issues immediately, based on the evidence that is currently available. Recognizing this, after careful
and deliberate consideration and consultation with the Attorney General, I have concluded that

EXHIBIT
STATE OF MISSISSIPPI OFFICE OF THE GOVERNOR POST OFFICE BOX 139 JACKSON, MISSISSIPPI 39205 TELEPHONE: (601) 359-3150 FAX: (601) 359-3741 www.governorbryant.com

my constitutional duty, as chief executive of the State, to "see that the laws are faithfully executed," Miss. Const, art. 5, 123, requires me to act now to enforce these and other applicable statutes. See State v. McPhaiU 180 So. 387 (Miss. 1938). Any further delay risks irreparable harm and a loss of access to care. In the event your office's view of the matter changes before the end of the day tomorrow, please notify me. Otherwise, I intend to issue an executive order to begin addressing this threat to BCBS enrollees and access to care generally.
As always, I appreciate your advice and assistance in this matter.
Sincerely.

Phil Bryant
GOVERNOR

cc:

Attorney General Jim Hood

EXHIBIT 4

FY 2014

MISSISSIPPI

STATE HEALTH PLAN

Mississippi State Department ofHealth

EXHIBIT
4

Chapter 5 Acute Care

Mississippi had 96 non-federal medical'siirgical hospitals in FY 2011, with a total of 10.949 licensed atute caj-c beds (phis 155 beds held in abcyance by the MSDH). Tliis total includes one OB'GW hospital but excludes one rehabilitation hospital with acme care beds and Delia Regional Medical Center-West Campus which is licensed as an acute care hospital but is used priinaiily for otlier piiiposcs. This total also cxthidcs long tcnn acutc caic (LTAC). rciiabilitalion. psychiatric, cheniitai dependency, and other special purpose beds, in addition, numerous facilities provide specific heajth care services on an outpatient basis. Some of these facilities are freestanding; others are closely affiliated with hospitals. Such facilities offer an uiaeasingly wider range of services, many of whicll were once available only m nipalient acute caie setlmgs. Examples include diagnostic iniagiug. therapeutic radiation, and ambulatory surgery. 100 General Medical/Surgical Hospitals

The 96 acute care medicaL'surgicai hospitals reported 9,793 beds set up and staffed durmg 2011. or 89.44 percent of the total licensed bed capacity. Based on beds set up and staffed, the hospitals cxpcrienccd an overall occupancy rate of '17.20pcrccnt and an average length of stay of 4.67 days. When calculating the occupancy rate iising total licensed bed capacity, the overall occupancy rate di'Ops to 42-22 percent.Using these statistics and 201.S projectedpopulation totals. Mississippi had a licensed bed capacity to population latio of 3.54 per 1.000 and iui occupicd bed to population ratio of 1.50 per 1.000. Table 5-1 shows the licensed Mississippi hospital beds by service areas. These statistics indicate an average daily ccn.sus m Mississippi hospitals of 4.622.42. leaving appro.ximately 6.326.58unusedlicensed beds on any given day. SLxiy-ciglit of die state'shospitals rqjortcd occupancy rates of less than 40 percent during FY 2010. Mississippi requires Ceilificate of Need (CON) review for all projects that increase the bed complement of a health carc facility or cxcced a capital cxpenditmc tlircshold of S2 niilliuu. The law rciiuircs CON review regardless of capital cxpcnditiux for the coiistruclioit, development, or othei' estiiblishment of a new health care facility, including a replacement facility; the relocation of a health care facility or any poilion of the facihty which does not involve a capitalexpenditure and is more than 5.280 feet from llie mahi entrance of the facility; and a change of owuciship of an existing health carc facility, unless the MSDH receives proper notification at least 30 days in advance. A health care facility that has ceased to treat patients for a period of 60 months or more must rcceive CON approval prior to reopening. A CON is required for major medicalequipment

purchase if the capital expenditure exceeds $1.5 million and is not a replacement of existing
medical equipment.

A statewide glut of licensed acute care beds complicates plamiing for conmiuniiy hospital services, Thae nrc far nioic hospital beds thmi needed. The aveiagc use of licensed beds has been less than 50 percent in recent years. With few exceptions, the surplus is statewide. Thecontinued presence of suiplushospital bedsin all planning districts, andin neaily all counties with acute care
hospitals, raises a lumiber of basic plaiuiing questions:

Docs the 'caiiymg cost" of mainiaiihiig unused beds raise operating cost lamecessaiily? Do the surpluses, and any associated economic burdens, retaid the iniroducliou of new and
more cos! enective practices and services?

Do e-ustnig services providers maintain miwananted surpluses to siiield themselves 6om coinpetitioiLas argued by some potential competitoiT.?
1 Chapter 5 - Acule Care

2014 State Health Plan

Should ilic spiKc allotaicd to siirphis beds be converted to other uses. p:micularly if doing so wouid avoid constniction of new space, or facilities, to accommodate growing outpatient
caseloads?

Do the large siirj)hises mask need for additional services and capacity in some regions and rcduce the saisiiivity aiid responsiveness of plaiuieis and regulators to these legitunatc
coirmiujiity needs?

Do ihe coiitmuing surpluses, and the view of Uieni by stakeholders aiid other iiilcrcsied parties, create an enviroimieut that invites policy intervention by legislators and other responsible parties?

Tliese questions are mnisually difficult to answer defujitively. That tliey arise not infrequently

suggest the itnponance ofreducing excess capacity where it is possible to do so and isnot likely to
result in piobkuiatic couseciucuees. The Depailniait luges each hospital to voluntarily rcducc the licensedbed capacityio equal iis averagedaily censusplus a confidence factorthat will assiue that an unused hospital bed will be available on any given day.

Chapter 5 - AcuteCare

2014 State HeeltliPlaii

EXHIBIT 5

fle(^(4rion^ct{aff
SUNDAY, UuQBERn.^uiJ l';5il-'rrMl-jl-ORMA;ON SOUfv'CE

iledger.coni

WHAT YOU NEED TO KNOW

ABOUT YOUR HOSPfTAL BILLS

Is to recoup payments easingiy larger discounts, ng the uninsured

KEV FINDINGS
*T.>Ar.ir,aK-.i* -wl iHfrti
!i.

By Emily LfCaz fceta; f suii^-rmiirkflji i4)er? jitcd liki' hiwpii.ib.

u'ould cliariio

.Siipplemvnl.il Nillrition A.v-iiilancf I'roijram fnxl ftamff

niiliJ iji'l Uie biiiEfSl Miv-

WANT TO CHECK HOW COSTS FOR DIFFERENT

inii.s iniiyltc 90i-rcenl or imire.

PROCEDURES VARY
BY HOSPITAL?
h'f i>jt G-'tat nc of t* fKiJraS tri

fHKWvjrvwilcl^arry>ttg Mil ilmijctfmotf Sir-Q/'Onto' < pao\,<yturc b'JiM jt |tAi flnalhrf fiKiHTjMtdicJIIfi iliari'than 40

No barijain. lliuy'd pay lull iv.'iKl likely(naffurcl it.

mcc, evenlhiiuiilithi-y'iHii'thc

Shop)H;rs payinB wiili t'ashf

inroracnllonofiiiilK
bu( wouldn't pnsi lliit liriceorexpccianyoni:

.jfiJ \iev> thci{ chdrgn

^i< (Iimbur^f ffi PIt\\

lo pny i!.
In.iu^ncl, il unillil
collect ulwiii liair tfml

By Ihun it n'oulil be tiifiliili-In reiiim ilie niilk. 'Hicy ivouM

/ ^^ /V c'>1

e- * II*

.1
<in

rnwT nf mh^M ^dclcHv

tiiive liin(! sinci! i'onsiinii.'il i<.

'i'llwe lio cuiiUlii'l i>;iy >i<Hild

prcfflt4lf tlif
iHtlppl hotpiMh but

*!MoS

>niucb ihroue)' a varie

IU> into dc-lit irr Tilt: l>aiii;rupti-y,

while till' supiTiiiarkcl iilil
rcpnn a S jwrcuii annual proni
and invent inn ncu deli
Weicvmc to Ihu Atiifrican

' inrsf^xtKi online fcatufo I'Ctflfd byCbrfon-t^cf^cr re&mtrr (rrsfy It Co; .ihrt on our
ViTbvkte M

ty of reimbursement diMlft WBiv

ibiedliiadcancvnithtliinl-piir-

tsnn lot cvcv aolk'd hMllh cwc pTovidd.

" Fnvpjt^t^ paylheurn* fitr
for the taifruy Vfncc al tf*

vmrw.cUr^nledgw^m.

ty payers, lo haipitals. tliat

utwld be the health insurcn'

Kor Rroccry stnrcs. let's luiy if*

the banks

htallh cartr syi^ceiii. It'v ; $17

INSIDE PERPEaiVES
COit of modr<.|) <4*V

um hMiiu)

linnoirpSiiuih

cudoniurs

Irillkin iiidun' "'i'li s"n>e I" million empliivuL.-.'' and a

drrin>ga riwi
iurribr

; IJnimutHl p^iltenli oticft raccUn* htgiunf coiti fnmc!ici) fire iJnptu itnaa- anOini- l^f) CdlinciT [Uy afnj min fMnk;ltipTi;v.

nii|:hl sou n fiOpcrcuni dLscuuiil nl the cash rcRistcr. Crciiii union nicmlwrs mii;ht set 30 purct-ni
nf/.'nir>schacl.i!j liv ihu federal

Milion payroll

Ihcbigfiest priein^ ulicli name

Se IIOSnKVLBIUS. Page 4A

all bui^eil bv

Ur^^wi'pi-irn

mio turAruptcy.
1G

EXHIBIT 5

dents

like IVacey Stafford

Hospital bills
Conlflued (ron> Pigt U

how medicare RSMBiatSES

MMtore (SB cempkr Aymukisw'ie'P'B''OA M/wit haAevtaniCtoe of taw

struggieioafroi^inediealcare.
Tbe private ari instnictor

aod an^ man of onewent in

Odeber 2011 to see a ureiegist

iDKceathisuin'-

iessoesi COtb^ csttrecooppiy-

price*to tbe poimof meaning-

Ho^tate artificuUy innite

catior jymtB (orhos^l ascs.

Mtdiear* rrtntans atesrdiiq ta nnnhins aSed t Oiignoss ReMvdGreuA

h I dairifi-

and had a cvstoacopy. Tlie test

cooftmed lite stone, and Staf

niMin (Kan inwirew deraan^

untftf codes S6-39S. Odiey <ftd latnaiy tea problem?IhOM

rewMAgtrtstmenL
Renal ftI!iire:6SS

Thinkaf a Elv a DMey DednulSyRem termeOal qrmptana. Otaua ind dnerdenot the narvguisyssm fsl) undt> ccdes 20-t(S:thoM ef tlie digcMw ^tKcn W

ford wenthometo ter it pass.

She then got three bilia total ing $3,152.Because she's unin sured,Stanord said she applied
forchariiycaretHit wasloldahe made too moch money.

beunderESS-TDO.

{Qg tnfTWiring}? larger dl*eouatt, an Ste tmie tqneeang

out tbe ndnsnred 11% a vicisw

Everypenen who wtib Intft1 beipitt! gets asSgned one or mert ORGtbMd en theb qmptona snd the

Gaa/oblMRIn^ hetnonhage: 379

Andewy 0R6codi hata NMighL* Thatwe^ reflecbtiownad> iMkaie thinia Ktftould CBR ts trtat
ippBed tcthe agenqi) bMreUnbunecnemrm.

qrde: Tbe higher the priccL tbe

bigger tbe dlscauDts. which

lead* to higbo- prices and then
bigger diecouats.
He true cost of heallb cere

fiatleim wHhbithst ORG. tad

NUMCs policy say* It offers free care to patients with househokl income levete below its sd-

eventually becomes obscured.

shell Gwd hick noiwiB 11 u

The bate late IfadJusMd amulV. OKTently S,77A. AftarMedkanappDei tilt DRG tsihe baserate. Kthin fanen Inether vsriaUeivhewr tha hsQttal b ruraler matropolilMthecondttfemof lb tool labormarfcethiM> fflMtKhartty careItprovUs, triiethertt<s
an acadenk MBty, and ts en.

juffleat nn federal poverty guidelines. Tliat adjustment is

aboul BO percent, said Joe Rep-

the pea under the provenlal

a

Thetrue cast,by(heway, is

AndflnaliK the agtncyarrives at Is magic rcimbvtsemcni nwrbcc

let^ looka reaHlfeana from hDsSa^that siitnlntestlnal hemeatvga. foi axarnpla.
period.

pert, chief flnando) officer at

North Mississippi Health Ser
vices, which owns NMMC

cmsumer 4u9i even hospital

executives dlsmias their prices

2011. FecreRCaiuralH^ltBl chargedan sveiass of18,470 ferthaameptacadure during thenmetlme

After Medicare ran the durses thrmightti fwrruria. hewevet.k reimburMd BSea! 1S3191 and FCRcfl

BUaxi Regional Medical Center ehai^ Medicare anMrageel S3S.153 totraaiDRG 379 litFizal Year

ades-old game diet hasoutlived

Its value.

as the starting point in a dec

"Charm are

The federal poverty guide line for a family of two tn 2011 was $14,710. according to the

Human Services, ^hty per>

cent of that is $11,768. Stafford

U.S. Department of H^cb and

relatively

tneaoingiess,* said Caroline

Steinberg, tne American Hospi

surpassed that threshold by OTHER RNDING5

>HaipHtU rttoip ihentalb from Maficarc throogn rarnffleitlal ItButvn,

But all third-party payers ne

$3314.
Sbe said abe asked for a dis

gotiate a reduced rate off tbe

original charge, called the chu^ master. Patients never
know the retes, though; they^ cosstdavd proprietary informstion.

tal AssoTOttoo'g vice presidnt of trends analysis. *lt% really tbe payinents dsal are tbe inw
pomnt thing a (Mus on. At the

MMdipar an avcragt ef $1^ for evey daUarofcare previdni. HotpHabwilie off mrjians ef doHarsIncharitycare and impaid bOi each
ytit; but many ttUImake a profit

count any Mad of discount

but wastoldno.

"All tbey did was stretch my

end of die day, what patients

want to laww is
carb"

psymeat ouc' she said. 'Some

months 1 was able to My more

bow much

sonieooewill be paying for their UltlRiately, though, all of us

pay for health care.

> MedKalbllban le csnfuAtg that most hoipttab ecnpl^ teams el people

iwtth(pedal dtjico to prepara the charges.

"Hieee Uddeo deals make it

but always made at least the

minimum payment, which was
stiB well over $100 a month. For

neariy Impossible to bargain hunt. Hiey also aieas custom

tlw moft ej^ensive hotpKabdorn aiMin haw the best bidependant hehh rating ReboUa lui^Hy hat grown aoes the Hate, thortenlrtg hospitalitayl but Inoeailng ooO. And Itsnot ahvajstha bea epdon. >CemnwnKir advocatescan weekWTth previdento pro4deJow<osi.pre><Uve health care.

ers rarely pay tbe same amoimt

for the same product. Imagloe a grocery store
dieckotit lin e where the cashier

me,th8fsalot." Stafford indeed did get a di-

The public got

Its

nrst

count, though she didnl realize

it.

glimpse at those raw hospital

char^ in May,when theObaxna administration authorized tlie release of reams of data tnm tbe Centers for Medicare and Medlcaid Services.

rings up a different price for

earn person buying ue same

$a.75 for Mr. Green: $9.05 for
Mrs. Buns.

Healthcara casd gobble up mete of Ubdsslpplans'moneythan r.

Smith; $2J1 for Ms. Johnson;

Customets would balk at

gallon of miUc $4!S0 for Mr.

Organized

into

nreadsoch investments from the state

patients no more than they would expect to receive in reloy bursemena from a patient widi
MedicBRi or cotnmerdal insur
ance.

hospitals must bill unbisured

Since the 2010passage of the Affordable Care Act, nonprofit

sheets, the data reveals a MWil-

derteg disparity among what

tboosands of bouliBls acrtas

sate for tfae*pei3mnel, techaol-

suchdi^arities at tiiegrocery
stive. Hovltalpatiaots, though,

Department of Health C^nifl-

cete of Need Program.

es, and other goods and servtcesreqtiired to provide ho9itat care."

Reppeit said uninsured pa

tients at NMMC get an automat ic 35 percent discount.

the counOVifnclTioIng 61in Mis* aissipf)!, charged Medicare in

Racal Year 2011 for the most

For thesetvasons,manyhos

Tlie Centers for Medicaie

pey months after the purchase atid have no one wilh whom to compare bills.
A better anab^ is the auto

Tlie ptmisionis supposed to

commoo medical procedures.

Among the examples: BUcnd
Retional Medical Center on the

level the playirtg flek), but It baa

fts flaws It aptuies only to noiv

pital edmiftlitruor* criticized the Medicare charge data for coAfustag tbe piAUc. not en

and Uedlcaid Services r^eatedly decitned to make someone

bursemot rates.

shop, said James L Wantz,chief

finandal officer at lIMC

GulfCDast charged an average tbey said, end few patients pay

of $U5J44 to treat respiratory syaem diagnosis with short-

mles-tMpples

cnmparison, aveflable to talk about its reim-

tbefull prieeanywey.

Tliere, the price reflects not a

fixed good but a service that evcdves with cach, individual
sitoatioo.

profitsmeaningMissis^i^ roughly tnodocenfoiH>roftt fadllra can continue charging the uninsured full price, thaugn
manydonoi.

At least OK executive,

term ventUatw support.

Tbe same treatment at

thoug^ sold It's a good starting

poinL
*li is Dtool for a consumer to

In tbe grocery store analogv. Medicare patients are the foMstamp sbtnpers. And they acteg patients at Mississippi oas-

couDt for 41percentof all paypitals, according to the Missis

Customers enter with a prob

Wayne General Hospital in ru

lem, get as estimate, and the es

timate chanra based on wliat the mechanic encounters. Ev

stion hospitals, for example,

Health Management Associ-

ral Waynesboro is billed at an average of just S1S.(M7.

A major bowel procedure

see which hospitals have over

age higher charges tliaii oth

sippiHospital Associatkw).

according to the corporation^

2012 annual report.

discount al 60percentor more,

Still, the law lacks the mone

ers," said JoeReppen, chief finandal officer at North Missls-

with comoriiid coinplieetiDns

that most health care facilities into Mississippi^ health care

results in an average $349,683

bill at Crassgates raver Oaks HosjHtal in Brandon. Aet^
nearly six times higher than the

stppl Health Sorvleea, which

owna the nation's targM rural hospital in Hipcla

tary caps and cost-sharing

benefHs of most insutwice pol
icies.

cant imore. Medicare pumps more than $5.2 billion a year

Ifa s giant revenue aource eryone understands tbe price is a moving target, Wentzsaid. Auto msurere might even en ter the pictiire, havugoegotialed spew discounts with pre ferred providers.
Bui customer* rarely face
teas of thousands of dollars in

Pukata,eq)eclBlly tbe onln- sectoroveralLtbeHeniyJ. Rai

An uninsured patient with a

60 percent dismint on a

average $62,587 charge for the

sameprocednre at Pormt Gv

sured,canpotentially savetens ser FafflDyFoundation r^orts.

of UKMaaoaofdeUin by ptd(diargea.

The piaam last year alone

$]00|000 bean surgery stlU

must pay $40X)00 out of packet

' eral Hoc^tal In Hatdeaborg.

Even fadlities in the same

1^ tbeboM^ withtiwm^ paid oeany $255 mQlion to

viceanearly 40 percent of it*
net patient revenue, oceording
to tfHOt the same its most recent fbiaodu
statemenL

No^ Misriaripfn Health Ser- And auto shop prices aient Tliat^venus an iasaitdpatient
charged by i>ospital& wntt Uraed hospital charge biflatfaa partly on how
the fadlitle* negotiate with in
surers.

bOlsalterlearing the auto shop.

dty report wOdly different

priw

Oemrsl Mlsaisslfipl

Yet despite dtose dlaying

Center In Jackson biOs Medicare an average of $M,S2S

Dearly a> Inflated as those whopaysa few thousand dollars after a pian reimbunes most of the discoumed price. Uninsured patieats can ne
"When we went thiongh our

to treat a pattern with hardened

thm mg pfocadBTB

It compiised more than on

fifth of tbe rtvenues at Univer

amoimt for each procednre, the ageaey^ data mwed.

gotiate for a lower price after genisg the bOI, said Sbane
Aguirre, fbraer CFO at AlU-

for which Sl Dominic Mortal

a doeen mOes away baled an av-

That $100,000 price pp in

sity of Mississlni Medical Cen

erM of $9,571.
why snch wide reargtna? Hospltd exeeutives cited a

reapiretory treatmeat charges? Medicare's reUnbursement gap Regional Medical

ter, or rou^y ^90 million, ac- latest negotialiflo widi Bloe

cordiBg to UMCs financial
sheet Tb offset the difference in

was Just $iooa It paid Bidd

Center

Ooas Blue ShieU, which was very public, we lU a cost model

and tto did a cost model,* he
stiiL "Tseir cast model assumes

ance Healthcare System InHol lySprings. But Itbmto under

stand hm boqjilals bin. Ifs a vastly conpUcated
execs said would take days to

varlMy of factors not evident

w4ien Just looking at raw

$]7M:Wayne Oenerel Hospi

tal got C1740.

process that moat heato care

fully explain, but in general,
here^ how it works: tn the bill

what the government pays, hos pital execuUves say uiey have

we're raising our rates 5 per

charges.

That's becauseMedicareIg
nores the alckel-aatf-dimlag
that hospitals doandpays only a

to boosttheir char^
There Is what Is known as

cent, so even if we're not, we

have to then raise them S per cent, otherwise we'U lose mon

Prtce willvary, for example, if one hospital uses a $7,000ce

ramic implant for a knee r^
placementsurgery 4iile anoth

flxed amount based on patient

diagnosis.

AHA^Stelob^soid."Ifsbeen ey."
doCTimwted in a number of studies that we've done. If one

the cost shut, whldi is real," the

tals are employees whose sde

Job is to maximize payments.

ing department of most hospi

er uses a $3,000 titanium alloy

model

A patient with heert disease

dtotild cost this much to treat,

surer*askforbig^ discounts,
so... you gel the picture.
Hie cycle started in the cariy

That drives up prices, so in

They do this through codes

so hospitalssgaln raise prices, numbers assigned to every

1980a wben Medicare switched from value^Msed relmburse-

They'll also differ If one hos-

Medicare flgurea, so tbst^ how

much the agency pays with few

e'al employs e^qwtsive nbotto perform o procedure that

payer doesnt pay what it costs, you have to make it up from an other payer.*
For hospitals, therenl prpnts
one ftom commerdal litiur-

productorserviceahospital ofSome services and supplies

ftXCiptlOftS.

anothCT hospital doesmanu^.

Mayte one patient eneountered a series of expendve complica
tions that a patient at another
durei

TnB system issupposed tobe

are bundled wlltaln a codc,

roeanbut you twy forthem even

on incentive (or hospitals to bet

ter manage care while stlQ coveriiu their costs. But most hos-

en, ^

are bDled the same

ment to diagno$l4>B$ed reim

bursements.

amoBot as Medicare bot relm-

bune at blgher rates depending

fter three decades of this, the

If you dMnt get them. Some are billed separatdv.

blood* of the healdi care indus

pltaTexecutives saytheagency on titelr haid-fougbt contracts consistenfly undeipeys, a post- wife the hospitals.
tioQ supperted by natioaai re

real price Is obscured by multipls layen of hiHatians end diacounta.

Medl^ coding Is the "lifeof Professional

On everage, commercial bi-

try, according to the Americao

Assodatina

Qtaifee also reflect more than the treatment ttsalf; ibey

slso take into account ht^td

overhead Tliese are hesvlly

Coders. It's so important and so complex that many colleges

now offer certificates or de grees In ii.

regulated facilities emfdoyins

24-7 sebadule some even
more so than otbera.

hi^Hpaidspecialiststisingmuv

ti-milliao-dflUar tedmelogy ona NcA only that, but many hoapitBls 6xptnd thfilr

The biggeet misconceptloo search. sarers relmlnirse 136percent of Medicare reimburses an av- tbe cost, according to the AHA. is that hospitals are diar^g ereae of 91 cents for every doiTlie more dients an insurer too mudi to rip off consntDert,* tar nealth care facilities spend reprsenta, Ae biner tbe di- Wants said. 1 cantthlok ofany treeting Its patiants, aecoralng. cotmt it can finagle, said Shane one who^ happy with the cur to an annual survey by the AgnizTe, fonner CFO at ADi- rent prtdng mechanism. We'd aiKe Healthcare System in Hot like It to be simpler and more
American HonitalAssocutlon. Tlte AHA Medicare

"What makes (the system) unfair Is the uninsured,"

ly Springs.

transparent."

Aguirre said. ~But that also

tmdsrfunded hospitals a eoUec*

tive $23.8billion m 20U alone.
It'a not tlie same as a cootra^

Heavywel^its in Mississippi
inchida insurers like Bloe Qties

But that would require every

hospital and every insurer to
agrM oo a Dew synem.

chargesomuch..they doni ex
ttpsy."
lb (cnlKl fmiy U Ck aSt)V
f(l-n*9rlBotrhrrcn IMlMr

goes back to why liospitals

pbyBtedpreseoct 6Ddmedical
cap^flitt.

pect people wilbout usurance

.ttuil.pUpTOm *whlch is tte difference tsttween'~ bi^lMl

dtargee and goversment proown paymes la,*the AHAsays, ifa titily a failure to campea-

aaa'tnaHni.lt usually rei. ficials saM tban^imUidy to

happen anytime aoeiL
S

Bine Shield, which baa 54 percett of tte (taa^

Wea^ and other b^ital of

^lits yearalooe,
hospitals have wonapproval for
a $615 tnilUoB ra

tnusei boapiiBls less than, say, Aetna, which has a smaller

share of the clieeta.

Meanwhile, Mississippi resi

eeiyjeeat