N.C. Baptist Hospitals Inc. has reached a preliminary settlement of a lawsuit accusing the hospital of requiring its employees to pay more in fees for a group health plan -- which it co-owns -- than other corporate clients.
The preliminary settlement includes an agreement to increase discounts and lower co-payments in the MedCost plan. It has the potential to affect more than 8,000 current Baptist employees, along with current and former beneficiaries and employees connected to its provider network.
Employees also could be compensated for damages, particularly overpayments, as far back as March 2002.
An independent fiduciary, Norman Goldberg of U.S. Trust, has been appointed to determine whether MedCost is the "prudent choice" for the employees' health-care plan compared with other plans available in the region. He will also review MedCost's performance compared with other plans, initially just for 2007.
Goldberg will select the provider network and third-party administrator for the hospital's group health plan from 2011 through 2014.
The agreement was filed Tuesday in the Middle District of North Carolina for the U.S. District Court. The plaintiffs -- a current employee and a former employee -- are not identified in the filings, but both live in Forsyth County. A hearing on the agreement has not been set. A notice of a potential class-action lawsuit has been filed with the court system.
Also listed in the lawsuit were MedCost LLC and MedCost Benefit Services LLC. MedCost LLC is co-owned by Carolinas HealthCare System of Charlotte. A search of the Web site for the federal District Court system found no similar lawsuit filed against Carolinas.
The lawsuit said that Baptist "violated the duties, responsibilities and obligations imposed upon them as a fiduciary" under the Employee Retirement Income Security Act, or ERISA.
The lawsuit accuses Baptist of requiring employees to pay more for services rendered at the hospital through MedCost than alternative health-care plans would have, including higher co-payments and lower discounts. It also said that employees paid higher fees than those required by MedCost from other corporate clients.
Plan participants made contributions of between $9 million and $13 million a year since March 2002, the lawsuit said.
"NCBH selected its subsidiary, MedCost, as the network provider for the plan knowing that MedCost would include NCBH in its provider network at substantially inflated reimbursement rates," according to the lawsuit. "The selection was made not on the basis of quality or cost from a fiduciary standpoint, but rather was based on NCBH's own economic interests."
Baptist said in a statement yesterday, as well as in the preliminary-settlement filing, that it denies any wrongdoing.
"We cannot comment further," the hospital said.
However, in the class-action notice, Baptist said that selection of MedCost was a plan sponsor function, not a fiduciary function, and therefore its actions were not governed by ERISA.
Baptist has agreed to raise its plan discount for inpatient services to at least 36.6 percent and outpatient services to at least 35 percent for 2009 and 2010.
It has agreed to lower the co-pay for inpatient services from its provider network by 13 percent, or at least by $5, and lower the co-pay for outpatient services by 15 percent, or at least by $5, also for 2009 and 2010. The percentage that participants pay in total premiums cannot be increased through 2014.
The increased discounts and lower co-payments also apply to members of the hospital's provider network, which includes Wake Forest University Baptist Medical Center Community Physicians; Wake Forest University Physicians; hospitals affiliated with Baptist in Davie, Stokes, Wilkes and Yadkin counties; the Downtown Health Plaza in Winston-Salem; and J.R. Jones Medical Center.
■ Richard Craver can be reached at 727-7376 or at rcraver@wsjournal.com.
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