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Man sues insurers for not paying hospital stay

The hospital had dropped its local Blue Cross Blue Shield plan, but a cancer patient says the plan is duty-bound to reimburse the facility.

By Tyler Chin — Posted July 18, 2005

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A Mississippi man is suing the BlueCross BlueShield Assn. and two of its licensees in federal court for not paying his $87,809 medical bill, even though the hospital where he was treated for cancer does not currently have a contract with the insurers.

James Kenneth Hedgepeth claims that the association, Blue Cross Blue Shield of Michigan and BlueCross BlueShield of Mississippi violated their fiduciary duty to him under the Employee Retirement Income Security Act of 1974. He maintains that this breach of fiduciary duty occurred because the Mississippi Blues negotiated in bad faith with North Mississippi Medical Center by unsuccessfully seeking to get it to agree to a discount that was much greater than any the hospital had with other insurers, the lawsuit claims.

"Under the federal ERISA statute, we consider Blue Cross to be a fiduciary -- somebody that's under the obligation to look out for the interest of the employees," said Jim Waide, an attorney representing Hedgepeth, who filed the lawsuit in June. "When they will not contract with the major hospital in Mississippi ... they are not acting in the best interest of the people to whom they owe a fiduciary duty."

At the time Hedgepeth received prescheduled cancer treatment at North Mississippi Medical Center in Tupelo, he was employed by a Michigan company that offered its employees health insurance through the Michigan Blues. Since Hedgepeth lived in Mississippi, the Michigan Blues had an agreement under which it covered his medical costs at the rate that the Mississippi Blues would have paid, according to the lawsuit.

However, the Michigan plan rejected Hedgepeth's claim for payment because the bill was for services rendered after North Mississippi Medical Center's contract with the Mississippi Blues expired on Nov. 30, 2003.

The 650-bed hospital, the second largest in the state in terms of bed size after 722-bed University of Mississippi Medical Center, declined to renew its contract with the insurer after the plan sought a discount of more than 30%, according to an NMMC press release. Hedgepeth was treated between Dec. 8, 2003, and March 9, 2004.

"Your contract does not provide benefits to a nonparticipating hospital unless services are needed to treat an accidental injury or medical emergency," the Michigan Blues wrote Hedgepeth on Aug. 23, 2004, reaffirming its original denial of payment. "All of your admissions and outpatient services were prescheduled and were not needed to treat an accidental injury or medical emergency."

The Michigan Blues and the Blues association said they couldn't comment because they hadn't seen the suit when AMNews contacted them.

The Mississippi Blues does not comment on pending litigation, spokesman John Sewell said.

To date, North Mississippi Medical Center has told Hedgepeth that it is not seeking to collect payment, said Nicole H. McLaughlin, an attorney who also is representing Hedgepeth in the case. The hospital, which does not have a position on the lawsuit, would not confirm or deny whether it has agreed to give Hedgepeth a pass on paying his bill at this time.

Meanwhile, the hospital and the Mississippi Blues have held discussions since their contract expired but have not been able to reach an agreement so far, said Marsha Tapscott, a hospital spokeswoman.

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