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Hospital Sues Blue Cross for ‘Excess and Greed’

PROVIDENCE, R.I. (CN) - A nonprofit hospital and its court-appointed special master sued Blue Cross Blue Shield of Rhode Island, asking that it "limit its accumulation of wealth" and its "excessive compensation and benefits" to executives, "in accordance with its statutory and charitable mission."

On behalf of Landmark Medical Center in Woonsocket, Special Master Jonathan Savage claims that roughly 80 percent of Rhode Islanders receive health coverage from Blue Cross, but that the health-care giant refuses to negotiate or pay adequate reimbursement rates for Landmark's services.

Landmark is in one of the state's poorest areas and serves mostly poor people who cannot afford their medical bills. The hospital relies heavily on insurance reimbursement from Blue Cross to continue its operations.

But it says Blue Cross has a history of paying excessive compensation and pensions to its executives, by raising subscriber rates, and refusing to reimburse medical providers for services.

"Blue Cross executives, past and present, have effectively converted a nonprofit, charitable organization into a powerful monopoly designed primarily to accumulate wealth in order to fund hundreds of millions of dollars to executives and employees in the form of excessive compensation and benefits," the complaint states.

"As a nonprofit, charitable 'hospital service corporation' which exists pursuant to the special legislature enacted in 1939, Blue Cross is not an insurance company. Furthermore, as a hospital service corporation, Blue Cross is afforded substantial protections not granted to competing commercial health insurance companies. For instance, nonprofit corporations receive special treatment under state tax laws," according to the complaint in Superior Court.

It adds: "While Blue Cross has continued to build assets on its balance sheet and through mismanagement, excess and greed, has increased its administrative expenses, Blue Cross' inadequate reimbursements to Landmark have led to an overall cumulative loss for Landmark of over $5 million and the eventual Landmark Mastership Proceedings."

Savage seeks an order compelling Blue Cross to execute a contract with Landmark for reasonable reimbursement rates for Blue Cross subscribers, damages to compensate Landmark for past underpayments and a permanent injunction restraining Blue Cross from continuing its excessive spending for administrative expenses and limiting its accumulation of wealth.

Landmark Medical Center and Savage are represented by Preston Halperin with Schectman Halperin Savage of Pawtucket.

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