The Fountain Hills Medical Center (FHMC) filed a federal complaint against Blue Cross Blue Shield of Arizona (BCBSAZ) alleging that the carrier owes FHMC more than $14 million in unpaid claims and is in violation of federal and state patient protection laws.

The complaint, filed on May 18 in the United States District Court for the District of Arizona, lists 18 total counts against the carrier, claiming that the BCBSAZ knowingly made direct claim payments to patients rather than the emergency center, creating an “antagonistic relationship” between the facility and its patients.

Each patient registered to receive medical services from FHMC signs an assignment of benefits that allows BCBSAZ to send all payments to FHMC and not directly to patients.

The complaint states that BCBSAZ “knowingly and willfully ignored the assignment of benefits” by continuing to send payments directly to patients rather than to FHMC.

Fifty-seven FHMC patients who have received direct payments from BCBSAZ have failed to transfer payments to FHMC, leaving the emergency center uncompensated for “substantial sums of money,” the complaint said.

“When contacted, the BCBSAZ patient members had cashed the checks and did not understand, were confused and frustrated that FHMC was now trying to collect the money and were unable or unwilling to pay for the emergency services FHMC provided,” FHMC’s in-house counsel, Grover C. Peters III, wrote. “Forcing FHMC to collect directly from patients is a way for BCBSAZ to punish the emergency room for remaining an out-of-network provider, pressuring it to join the network and accept lower payments.”

Forcing FHMC to collect from its own patients also damages FHMC’s reputation as an emergency room, places recipients in a moral and ethical bind and opens the way for a “money-making scheme” for BCBAZ members, the complaint said.

Intentional delay

The complaint also states that BCBSAZ intentionally delayed claims processing for six to seven months in 2022. It was not until Peters wrote a letter to Deanna Salazar, general counsel for BCBSAZ, that the carrier began processing claims and sent them to FHMC in large batches.

Given the processing backlog, several denied claims were eligible for Federal Independent Dispute Resolution (IDR) but missed the deadline for IDR due to “misinformation” provided by BCBSAZ and its agents, resulting in nearly $577,000 in losses which FHMC requests full compensation plus interest.

“Most claims did not provide the required basis or reasoning for underpayment or denial,” Peters wrote. “Hundreds of cases became eligible for open negotiation all at once.”

Delayed processing of claims beyond 30 days is in violation of the Arizona Insurance Code and Arizona’s Prompt Payment Act.

Outstanding debt

The complaint also states that BCBSAZ made payments to the emergency room well below benchmark and violated the 2010 Affordable Care Act and the 2022 No Surprises Act by not properly reimbursing the out-of-network provider for in-scope services like emergency care, post-stabilization care and other types of non-emergency care.

“The doctors at Fountain Hills Medical Center are emergency room physicians and they’re out-of-network and Blue Cross Blue Shield has not been paying them properly,” Peters said. “With all the efforts that doctors made to get [BCBSAZ] to comply with the law, they have continued to not do so. It forced us to a position where we ended up having to file the federal complaint.”

Given BCBSAZ’s reported failure to comply with the assignment of benefits and pay usual and customary claim amounts, FHMC asked the federal court to declare that BCBSAZ violated Arizona law and common law and breached the parties’ contract and implied covenant of good faith and fair dealing. FHMC also requests a 10% annual interest on all unpaid and underpaid claims.

As of the printing of this story, FHMC states it has not received a response from BCBSAZ.