Upon the completion of the sale of several hospitals as a part of a for-profit health system’s exit of the market, one of the nation’s largest commercial health insurance carriers retroactively decided that the selling entity should have required the purchasing entity to carry forward the insurer’s Facility Participation Agreement (FPA) with the selling entity for the hospitals in question. The insurer aimed to retroactively force the selling entity to pay the difference in price between the two Facility Participation Agreements. HMP was engaged to render expert opinions regarding what is customary in the industry for contracts when mergers and acquisitions take place.
Issues
- The for-profit selling entity wished to exit a particular market and sold its entities in the given market to a competing not-for-profit entity that operated other facilities in the market
- Both the selling and the purchasing entities made the insurer aware of the sale and acquisition of said facilities
- The total amount of differential rates from the seller’s FPA to the purchaser’s FPA was approximately $11 million for the period in question
- The underlying information utilized to support the insurer’s calculations relied upon only a few key items for the price differential
- The damages period in question was limited to the timeframe under which contract negotiations were allowed in both FPAs
Approach
- Obtained and reviewed all data and contracts utilized by the Plaintiff and determined that the data utilized in the Plaintiff’s damages calculation was scrubbed based on their proprietary grouper
- Researched and opined on industry practices regarding the assignment of provider agreements upon the merger or acquisition of healthcare entities
- Determined that the damages, if any, incurred by the insurer would almost exclusively be due to the ASO client of the insurer and not the insurer itself. The damages calculation also heavily relied upon a subset of passthrough costs as its basis, which were not negotiable
- Prepared written expert testimony which rebutted the allegations of the Plaintiff and its damages calculation favoring instead that the defendant followed contractual obligations regarding the transfer of contracts and agreements as well as notice to the insurer to that effect