IN T H E C I R C U I T COURT O F HINDS COUNTY, MISSISSIPPI FIRST J U D I C I A L D I S T R I C T

JACKSON HMA, LLC, DBA CENTRAL MISSISSIPPI MEDICAL CENTER; BILOXI HMA, LLC, DBA BILOXI REGIONAL MEDICAL CENTER: BRANDON HMA, LLC. DBA CROSSGATES RIVER OAKS HOSPITAL; AMORY HMA, LLC, DBA GILMORE REGIONAL MEDICAL CENTER; MADISON HMA, LLC, DBA MADISON RIVER OAKS MEDICAL CENTER; NATCHEZ COMMUNITY HOSPITAL, LLC, DBA NATCHEZ COMMUNITY HOSPITAL; CLARKSDALE HMA, LLC, DBA NORTHWEST MISSISSIPPI REGIONAL MEDICAL CENTER; RIVER OAKS HOSPIT.AL, LLC, DBA RIVER OAKS HOSPITAL; ALLIANCE HEALTH PARTNERS, LLC, DBA TRI-LAKES MEDICAL CENTER; ROH, LLC, DBA WOMAN'S HOSPITAL AT RIVER OAKS V. BLUE CROSS & BLUE SHIELD OF MISSISSIPPI AND JOHN DOES 1 - 10 DEFENDANTS

COMPLAINT JURY T R I A L DEMANDED Plaintiffs, Central Mississippi Medical Center, Biloxi Regional Medical Center, Crossgates River Oaks Hospital, Gilmore Regional Medical Center, Madison River Oaks Medical Center, Natchez Community Hospital, NW Medical Center, River Oaks Hospital, Tri-Lakes Medical Center and Woman's Hospital at River Oaks, by and through counsel, file this civil action for, inter alia, actual and punitive damages against Blue Cross & Blue Shield of Mississippi and John Does 1-10, alleging as follows:

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This action is filed by a number of Mississippi hospitals, each of which is experiencing the same problems with Blue Cross/Blue Shield of Mississippi. Defendant

Blue Cross and Blue Shield of Mississippi have purported to reduce the contractually agreed-upon compensation amounts owed to each plaintiff hospital by unilaterally modifying BCBS" so-called policies and procedures without new consideration, and further, without agreement from the plaintiff hospitals. Since each faces common issues with the same defendant, plaintiffs have combined their claims into this one legal action to most efficiently utilize the resources of the courts and the parties to resolve these dispute. Plaintiffs estimate that the harm caused by BCBS' conduct currently exceeds many millions of dollars, will exceed over thirteen million dollars ($13,000,000) through the end of this year, and will continue to cause increasing harm unless and until it is corrected or enjoined. PARTIES 1. Plaintiff Jackson HMA, LLC, is a Mississippi limited habilily company in

good standing doing business as Central Mississippi Medical Center ("CMMC"), a licensed hospital doing business in the State of Mississippi. 2. Plaintiff Biloxi HMA, LLC, is a Mississippi limited liability company in

good standing doing business as Biloxi Regional Medical Center ("Biloxi"), a licensed hospital doing business in the State of Mississippi. 3. Plaintiff Brandon HMA, LLC, is a Mississippi limited liability company in

good standing doing business as Crossgates River Oaks Hospital ("Crossgates"), a licensed hospital doing business in the State of Mississippi.

4.

Plaintiff Amory HMA, LLC, is a limited liability company in good standing

doing business as Gilmore Regional Medical Center ("Gilmore"), a licensed hospital doing business in the State of Mississippi. 5. Plaintiff Madison HMA, LLC, is a Mississippi limited liability company in

good standing doing business as Madison River Oaks Medical Center ("Madison"), a licensed hospital doing business in the State of Mississippi. 6. Plaintiff Natchez Community Hospital, LLC, is a Mississippi limited

liability company in good standing doing business as Natchez Community Hospital ("Natchez"), a licensed hospital doing business in the State of Mississippi. 7. Plaintiff Clarksdale HMA, LLC, is a Mississippi limited liability company

in good standing doing business as Northwest Mississippi Regional Medical Center ("NW"), a licensed hospital doing business in the State of Mississippi. 8. Plaintiff River Oaks Hospital, LLC, is a Mississippi limited liability

company in good standing doing business as River Oaks Hospital ("River"), a licensed hospital doing business in the State of Mississippi. 9. Plaintiff Alliance Health Partners, LLC, is a Mississippi limited liability

company in good standing doing business as Tri-Lakes Medical Center ("Tri-Lakes"), a licensed hospital doing business in the State of Mississippi. 10. Plaintiff ROH, LLC, is a Mississippi limited liability company in good

standing as Woman's Hospital at River Oaks ("Woman's"), a licensed hospital doing business in the State of Mississippi. 11. Plaintiffs are informed and believe that Defendant, Blue Cross & Blue

Shield of Mississippi C'BCBS") is a Mississippi corporation licensed to transact business

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in the State of Mississippi by the Mississippi Department of Insurance, and does extensive business throughout the state of Mississippi, including without limitation in Hinds County, Mississippi. 12. Defendants, John Does 1 - 10, were entities believed to have engaged in

wrongful conduct against Plaintiffs whose correct identities are currently unknown. A l l allegations and claims asserted herein against the Defendants incorporated by reference against John Does 1-10. Said John Does shall be identified by name in this action as may become necessary pursuant to the Mississippi Rules of Civil Procedure upon the Plaintiffs learning their true and correct identities. S U B J E C T M A T T E R AND PERSONAL JURISDICTION 13. This Court has jurisdiction over the subject matter and over the person of

the Defendants in this cause pursuant to the applicable law and statutes of the State of Mississippi. More particularly, as to Defendant BCBS, said Defendant is licensed to conduct and has repeatedly done business in the State of Mississippi and/or has entered into contracts with citizens or entities in the State of Mississippi and/or has committed a tort in whole or in part in the State of Mississippi, such that they are subject to service of process in the jurisdiction of this court under the Mississippi Long Arm Statute, Miss. Code Ann. 13-3-57 (1972), as amended. VENUE 14. Venue of this cause is proper in this Court since substantial events which

caused the injuries and damages complained hereof occurred in Hinds County, Mississippi.

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F A C T S AND A L L E G A T I O N S 15. Hach of the Plaintiffs is engaged in the business of operating hospitals

within the State of Mississippi. At all times relevant to this Complaint, each of the Plaintiffs was contracted with BCBS for the provision of healthcare services to BCBS insureds/members. 16. Plaintiffs have each entered into contracts with Defendant BCBS, each of

which as been renewed over the course of years, and each is currently doing business with BCBS pursuant to a contract between them and BCBS. These contracts are collectively referred to as the "BCBS Contracts". Plaintiffs have not attached copies of the BCBS Contracts to this Complaint, since each contains a confidentiality clause, and each contains sensitive and proprietary rate information and since, given the number of contracts at issue, the atlacliments would be voluminous. 17. Hach of the BCBS Contracts contain 1 1 l - l ^ which states: 'This Agreement may be amended at any time during the term of the Agreement by mutual w T i t t e n consent of duly authorized representatives of the parties. Any changes to Attachment A Policies and Procedures or Attachment B Payment Program shall be made known to the Hospital in writing at least thirty {30) days before the proposed changes are to become effective. Said changes must be mutually agreed upon prior to implementation." (emphasis added) 18. Each of said contracts also contains language appearing at ^ 11 of

Attachment B to each contract which states; "In the event of conflict between the provisions of this Attachment B Payment Program and the Participating Hospital Agreement or Attachment A Policy Procedures Manual or Attachment C APC Policies and Procedures Manual, the provisions of this Attachment B shall prevail, (emphasis added)

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19.

Each of the BCBS Contracts contains Attachment A, which is identified as

"Policies and Procedures Manual", and Attachment B. which is identified as "Payment Program." Attachment B sets forth the rates which govern what BCBS owed to the Plaintiffs under the respective BCBS Contracts. 20. During the course of their dealings, in certain prior years the parties have

negotiated and signed written consent to amend the respective Attachment Bs to the BCBS Contracts. Typically these amended Attachment Bs would involve proposed increases in the amounts to be paid the Plaintiffs, which increases were needed due to both market conditions and the generally increasing expenses for hospitals providing health care each year. However, in or around late 2011, the parties reached an impasse as to the proposals from BCBS to amend the respective Attachment Bs to the BCBS Contracts. Accordingly, BCBS did not implement any payment rate increases pursuant to the proposed amendment Bs, as the parties did not reach a meeting of the minds for those amendments. 21. When BCBS proposed amendments to the Attachment Bs, it also typically

proposed amendments to the Attachment As. Although the Attachment As are styled in the BCBS Contracts as being "Policies and Procedures," BCBS actually started trying to insert into these Attachment As a number of provisions that would contradict and undercut the agreed upon compensation set forth in the Attachment Bs. I'his includes, without limitation, the tactic of itijecting both dilferent rates in the Attachment As than the rates set forth in the Attachment Bs; and the tactic of slipping rate adjustment factors into the Attachment As that would change the compensation stated in the Attachment Bs. A number ofspecific examples of these changes that have been idenlilled by Plaintiffs Hospitals are described in more detail below, and have been described in detail to BCBS

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prior lo this lawsuit being filed, in an attempt to resolve the issue without litigation. Alas, BCBS refijscd to correct any of these tactics. 22. BCBS did not provide new consideration to cmy of the Plaintiff Hospitals to

compensate for any of the unilateral compensation reductions contained in the proposed Attachment As that are at issue in this lawsuit. 23. The Plainuff Hospitals did not agree in writing to any of the unilateral

compensation reductions contained in the proposed Attachment As that are at issue in this lawsuit. Moreover, the Plaintiff Hospitals did not agree in writing to any of these compensation reductions prior to when they were implemented as required by the provision in the BCBS Contracts for amendments. 24. The course of dealings between the parties in several prior years was for

BCBS to implement the unilaterally imposed Attachment A changes only when also implementing the agreed-upon changes to the respective Attachment Bs. However, in the more recent years when the Plaintiff Hospitals failed to reach agreement on the proposed respective Attachment Bs, BCBS nonetheless unilaterally implemented the compensation reductions that had been injected into the Attachment As. 25. Defendant BCBS has wrongfully, and in breach of each of the BCBS

Contracts, purported to unilaterally modify the Attachment A to the BCBS Contracts, and to do so in such fashion that is significantly impacts the rates paid, and that lacks the required new consideration for an amendment even had the parties agreed to the changes. 26. The unauthorized unilateral changes which BCBS has imposed on Plaintiff

Hospitals include the following:

a.

Policy Manual Rule 12 (formerly Rule 9): Unilaterally Cap Charge

Outlier at 4.0 Times the FMP Rate or 3.5 ^fimes the FMP Rate. In a version of the Pohey Manual dated stamped "11.11", BCBS has inserted into Rule 12, a new term which would limit the amount owed under Attachment B for Charge Outlier to the lesser of the amount actually owed "... or four (4) times the FMP amount BCBS repeated this unilateral

change in the Policy Manual stamped "11.12." And most recently, the Plaintiff Hospitals discovered that BCBS had uploaded to its website yet another version of the Policy Manual, also bearing date stamp "11.12," which purports to further reduce the unilaterally imposed cap on Charge Outlier compensation to "3'/2 (3.5) times the FMP amount." The estimated financial harm of this change to Plainfiff Hospitals is likely to exceed $6,470,000 for 2012 and 2013 alone. b. Policy Manual Rule 12 Cformerly Rule 9): Uniiaterallv Reduced

Charge Outlier PMT %. BCBS has unilaterally changed the "charge outlier pmt %". The most recent version of the Policy Manual, date stamped "11.12", unilaterally lowers this percentage from 65% to 60%, and BCBS has begun implementing this reduced percentage, which has unilaterally been imposed. The estimated financial harm of this change on the Plainfiff Hospitals will exceed $410,000 for just the year 2013. c. Policv Manual Rule 14: Unilaterally Added Case Rate

"11.12", BCBS purports to change lour more DRGs from the Attachment B method of compensation, to also become Case Rates, (DRGs 470, 460, 473 and 491). These four new DRGs relate to spinal and orthopedic services. Plaintiffs estimate that the annual financial effect of BCBS imposing the Case Rates to these four additional spinal and orthopedic DRGs will result in financial harm that exceeding $2,400,000 in the year 2013 alone. d. Policv Manual Rule 14: Unilaterally Added Inlier Limitation on

DRGs. The version of the BCBS Policy Manual dated "11.12" discovered on BCBS website also contains different terms then the version bearing the same date identified in the preceding sub-paragraph, at Rule 14, page 26, which purports to further limit payment for the four newly added orthopedic/spinal DRGs, by stating that these specific DRGs "are reimbursed at the lesser of the Case Rate Amount or FMP Inlier Amount". The Plaintiff Hospitals estimate that this change would result in financial harm to the Plaintiff Hospitals exceeding $ 1,460,000 in the year 2013 alone. e. Rule 6: Clinical Outlier for Psychiatric and Chemical Dependency

Cases. In the Policy Manual version date stamped "11.11", at Rule 6, BCBS purported to include a per diem rate, not only for psychiatric cases, but also for chemical dependency cases, regardless of whether these types o f services are paid on a per diem rate basis in the respective Attachment Bs. In a subsequent version of the Policy Manual date stamped "11.12", the Plan also purported to add to Rule 6 a provision purporting to specify a

negotiated Attachment Bs. Ihe estimated combined fmancia! hann to the Plaintiff Hospitals for this change, for just the year 2013, exceeds $2,160,000. f Special "PER DIEM PROGRAM Policies and Procedures Manuals"

" Rule 5: Purporting to Move Per Diems to Case Rates, fwo ofthe Plaintiff Hospitals, Natchez and Tri-Lakes, have Attachment Bs that use special per diem rates instead of FMP rates. These two also have a different Attachment A, entitled "PER DIEM PROGRAM Policies and Procedures Manual". In the version of this Per Diem Policy Manual dated 9/12, BCBS unilaterally added a Rule 5 called "Case Rate". This Rule purports to change certain maternity services the parties had agreed through Exhibit B would be paid at an agreed upon per diem amount to instead be paid at the lesser of the agreed upon per diem amount or the unilaterally added Case Rates. These two hospitals estimate that the financial impact on them for just the year 2013 o f these changes will exceed $140,000.' 27. The total estimated financial harm to the Plaintiff Hospitals of the

unilaterally imposed changes to the so-called Policies and Procedures identified above

The term per diem appears to be used in at least two different circumstances by BCBS in the BCBS Contracts. For the majority of the Plaintiff Hospitals, Attachment B generally uses what BCBS calls FMP rates. But even for these hospitals compensated through FMP rates, occasionally BCBS negotiated a special per diem rate in the Attachment B for psychiatric cases or chemical dependency. All of the hospitals with FMP rates, whether or not having the special per diem rates for psychiatric cases or chemical dependency, have Attachment As called the "Policies and Procedures Manual." In contrast, a minority of Hospitals have an Attachment B that uses per diem rates instead

exceeds $13,000,000 for just the years 2012 and 2013, excluding interest, with damages continuing to accrue thereafter. 28. The Plaintiff Hospitals seek to recover damages from BCBS in the amount

by which they has been underpaid as a result of these improper and unauthorized unilateral changes to the compensation arrangement by BCBS. The total amount of the damages to the Plaintiff Hospitals, and each of them, are in an amount that will be proven at trial.

COUNT ONE B R E A C H OF C O N T R A C T 29. Plaintiffs incorporate and adopt by reference each of the preceding

paragraphs as though fully set forth here. 30. Del'endant BCBS has breached the BCBS Contracts with each of the named

Plaintiff Hospitals by unilaterally modifying the compensation under the Agreement without full disclosure to, or agreement by, the Plaintiff Hospitals. BCBS implemented these unilateral changes, resulting in financial damages to each of the Plaintiff Hospitals, in an amount as will be proven at trial, but which is esfimated to exceed $13,000,000 for the years 2012 and 2013 alone, with damages continuing to accrue thereafter. 31. As a result o (' the matters described in this Count of the Complaint,

Plaintiffs demand, and are entitled to obtain, a Judgment in their favor and against

COUNT TWO T O R T I O U S B R E A C H OF CONTRACT 32. Plaintiffs incorporate and adopt by reference each ofthe preceding

paragraphs as though fully set forth here. 33. The conduct of BCBS as described herein was and remains intentional,

wanton, willlul and/or so grossly negligent as to constitute the legal equivalent of intent to harm, all undertaken in reckless disregard of the rights of Plaintiff Hospitals, sufficient to constitute an intentional tort, and entitle the Plaintiff Hospitals, and each of them, to recovery of compensatory, extra-contractual and punitive damages. Said conduct, which represents an ongoing course of conduct designed to wrongfully deny payments to which the Plainti If Hospitals, and each of them, are entitled, pursuant to the express terms and conditions ofthe BCBS Contracts, evidences bad faith on the part of BCBS. and constitutes tortious breach of contract under the implied covenant of good faith and fair dealing owed under Mississippi law. 34. In the alternative, the Plaintiff Hospitals specifically plead their entitlement

to "Middle Tier" damages for tortious breach of contract under the authority of Universal Life Insurance Co. v. Veasley, 610 So. 2d 290 (Miss. 1992), and progeny, where the proof shows tortious breach of contract or insurance benefits which does not rise to the level to allow a punitive damages recovery.

BCBS of compensatory and piinilive damages in an amount to be determined by a jury at triaf The Plaintiff Hospitals further demand, and are entitled to obtain, an award of attorney's fees, all costs of Court, and pre and post judgment interest.

COUNT T H R E E DECLARATORY R E L I E F 37. Plaintiffs ask this Court to issue a Declaratory Judgment pursuant to MRCP

57, holding that Defendant BCBS is not permitted to amend or modify payment terms tmder the contract through a unilaterally imposed modification to its Policy and Procedure Manual, unless explicitly agreed to in writing by each of the respective Plaintiff Hospitals, each of them, absent new consideration. 38. Plaintiffs ask this Court to issue a Declaratory Judgment pursuant to MRCP

57, holding that Defendant BCBS is not permitted to amend or modify payment terms under the contract through a unilaterally imposed modification to its Policy and Procedure Manual, unless explicitly agreed to in writing by each of the respective Plaintiff Hospitals, each of them, prior to implementation. 39. Plaintiffs ask this Court to issue a Declaratory Judgment pursuant to MRCP

57, holding that Defendant BCBS is not permitted to implement any ofthe modifications to the respective Attachment As set forth above, either retrospectively, or prospectively, as none were the subject of new consideration to the respective Plaintiff Hospitals. 40. Plaintiffs ask this Court to issue a Declaratory Judgment pursuant to MRCP

57, holding that Defendant BCBS is not permitted to implement any ofthe modifications

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to the respective Attachment As set forth above, either retrospectively, or prospectively, as none were the subject of prior written consent by the respective Plaintiff Hospitals.

AD DAMNUM WHEREFORE, Plaintiffs sue and demand Judgment of and from Defendant BCBS as follows: a. Compensator}' damages, as proven at trial, including pre and post

Judgment interest, as well as attorney's fees and all costs incurred in bringing and prosecuting to conclusion this action. b. Punitive damages against BCBS in an amount sufficient to punish

it for its egregious misconduct and to deter it and others from engaging in such conduct in the future, and to make an example of BCBS for the protection of other similarly situated Mississippians, all taking into consideration the net worth of Defendant BCBS and other elements for the jury's consideration under Mississippi law on the recovery of punitive damages. c. Attorney fees and costs incurred by Plaintiffs in bringing this

action and obtaining an adjudication on the damages available for the intentional or grossly negligent misconduct of the Defendants as described herein, plus pre and post Judgment interest on amounts owing in this action. d. e. f. Declaratory relief as set forth above. Pre-judgment and post-judgment interest. Such additional general or specific relief to which Plaintiffs are

entitled at law or in equity.

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g.

A i l claims assetted against Defendant BCBS, and Plaintiffs' rights

to relief as a result thereof, arise out of the same transactions, occurrences or series of transactions or occurrences, and the instant action presents questions of law and/or fact common to all such Defendants. Respectfully submitted,

JACKSON HMA, LLC, DBA CENTRAL MISSISSIPPI MEDICAL CENTER; BILOXI HMA, LLC, DBA BILOXI REGIONAL MEDICAL CENTER; BRANDON HMA, LLC, DBA CROSSGATES RIVER OAKS HOSPITAL; AMORY HMA, LLC, DBA GILMORE REGIONAL MEDICAL CENTER; MADISON HMA, LLC, DBA MADISON RIVER OAKS MEDICAL CENTER; NATCHEZ COMMUNITY HOSPITAL, LLC, DBA NATCHEZ COMMUNITY HOSPITAL; CLARKSDALE HMA, LLC, DBA NORTHWEST MISSISSIPPI REGIONAL MEDICAL CENTER; RIVER OAKS flOSPITAL, LLC, DBA RJVER OAKS HOSPITAL; ALLIANCE HEALTH PARTNERS, LLC, DBA TRI-LAKHS MEDICAL CENTER; ROH, LLC, DBA WOMEN'S HOSPITAL AT RIVER OAKS Dated: J u n e 2 0 1 3

W ^ j ^ ^ ^ ^ ^
Thomas L. Kirkland\jr. Counsel for the Plaintiffs Hospitals

OF COUNSEL Thomas L. Kirkland, Jr. (MSB No. 4181) Copeland, Cook, Taylor & Bush. P.A, 600 Concourse Suite 100 1076 Highland C'olony Parkway Ridgeland. MS 39157 Telephone; (601) 856-7200 Facsimile: (601) 856-8242

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