When Alabama Psychiatric Services closed in February, it sent shockwaves through the state’s mental health community. The company provided mental healthcare to about 28,000 people in locations throughout Alabama and employed more than 250 medical professionals. APS blamed the sudden closure on Blue Cross Blue Shield of Alabama, but a lawsuit filed in Jefferson County Circuit Court in May, and amended last month, offers more details on the specific allegations.
The Players
The case includes two plaintiffs, APS and Managed Health Care Administration. According to the lawsuit, both had a long-term relationship with BCBSAL. The health insurer did not manage its own mental healthcare coverage, instead contracting management out to MHCA. This relationship was based on what’s called a capitated model.
Under the arrangement, BCBSAL paid a set amount per person for care. This gave providers a steady stream of revenue. In APS’s case, that revenue helped the company to maintain clinics in smaller cities with fewer patients. The suit says, because APS operated as a network, it was dependent on this capitated model. APS and MHCA were also dependent on BCBSAL. The insurer provided at least 95 percent of those companies revenue.
The Change
In 2013 Blue Cross Blue Shield of Alabama decided to change who managed its mental health services and contracted with New Directions Behavioral Health. BCBSAL is a part owner of New Directions. The suit says because of Managed Health Care Administration and Alabama Psychiatric Services’ long history of providing mental healthcare in the state, New Directions wanted to continue to work with those companies for four years.
But the new agreement also changed that capitation model of funding. Executives at MHCA and APS feared they’d lose providers or have to close offices. The suit says BCBSAL agreed to make up any revenue shortfall for at least the initial part of the agreement. As financial pressures mounted on MHCA and APS in 2014, the suit says BCBSAL and New Directions refused to provide the additional funding. APS closed in February 2015.
The Allegations
One of the lawsuit’s several claims is that executives with BCBSAL committed fraud because they misrepresented facts and withheld information throughout the negotiation process. It also alleges the insurer misrepresented the need for proprietary information from MHCA and APS and that BCBSAL instead used the information to undermine those companies’ funding models.
The suit alleges BCBSAL executives said they had no stake in New Directions. It also says BCBSAL is in breech of contract when the company failed to compensate APS and MHCA for lower revenue. Essentially, APS and MHCA say the companies would never have agreed to work with BCBSAL and New Directions if all the information had been presented fairly.
Instead they say Alabama has lost a major mental healthcare provider and BCBSAL customers are receiving poorer care. The companies are seeking punitive and compensatory damages.
In a response filed by BCBSAL, the company denies the allegations. A company spokeswoman says they do not comment on pending litigation.
Note: Blue Cross Blue Shield of Alabama is an underwriter on WBHM.
Alabama Psychiatric Services Lawsuit Against Blue Cross Blue Shield of Alabama
Blue Cross Blue Shield Response