In a lawsuit filed Tuesday in state Supreme Court in Albany County, Albany Med alleges Capital District Physicians Health Plan, Inc. (CDHPP) has been withholding payments related to services provided to its members for months due to the “difficult financial situation” the insurance company finds itself in.
“Therefore, CDPHP sought to save as much cash as possible, even if it meant violating its contractual obligations,” the lawsuit says. “This strategy led CDPHP to take imprudent and desperate actions, including withholding approximately $45 million in contractually required payments to the hospital.”
Dennis McKenna, president and CEO of Albany Medical Health System, said in a statement that CDPHP's decision to withhold payments puts “the entire local health care landscape at dangerous risk” and could lead to future reductions in services provided at the hospital.
“As the largest health care system and private employer in the region, we appreciate the irreplaceable role we play in our communities,” McKenna said. “We have long been proud to provide a level of advanced care here at home comparable to academic medical centers in major cities across the country. If CDPHP does not change the way it does business, we will not be able to run our business the way we have done for years.”
Albany Med claims in its lawsuit that CDPHP has failed to pay a $5 million prepayment for covered services due at the beginning of the year and has withheld $2 million per week since August in payments owed to the hospital for services provided to CDPHP members.
“These unilateral withholdings by CDPHP are particularly egregious because they constitute CDPHP's contractually agreed upon payments for medical services already provided by the hospital to CDPHP members,” the lawsuit reads.
Albany Med projects that CDPHP will owe $50 million by the end of the year. The hospital said it has “not yet made a decision” to drop CDPHP as an accepted insurance plan, but it will not negotiate next year's contract with the company until the insurer “meets its outstanding obligations.”
KeyBank Gains Highest Deposit Market Share in the Albany Metropolitan Area – Down to Business
“Given the fact that $50 million in funds may be missing this year and an undisclosed amount in the future, we have no choice but to reduce the number of services we offer,” McKenna said.
In his own statement, CDPHP President and CEO Brian O'Grady confirmed the suspension of payments to Albany Med Health System and St. Peter's Health Partners due to financial difficulties caused by changes to the Medicare wage index approved last year, which has impacted Medicare Advantage providers.
Colonie-based CDPHP estimates the change will result in an estimated $150 million in losses over the next two years.
“In order to protect the benefits and out-of-pocket health care expenses of local seniors living on fixed incomes, CDPHP has made the difficult decision to withhold new payments to Albany Med Health System and St. Peter's Health Partners, O' Grady said. “However, we continue to pay our hospital partners at rates agreed to before this mandate was imposed without funding from CMS (Centers for Medicare and Medicaid Services).”
A team of Schenectady business owners is opening a downtown clinic
The change, approved by CMS, led to significant rate increases for upstate hospitals, ranging from 20% to 43%, and approximately $1 billion in new revenue. The adjustment was welcomed with enthusiasm by upstate lawmakers and hospitals that have long advocated for the cause amid their own financial difficulties.
However, the change did not include Medicare Advantage plans, leading to huge losses for providers like CDPHP, which paid hospitals higher rates without additional reimbursement from the federal government. Some insurers, such as Humana, have withdrawn from this area as a result of the change, which CDPHP described as an “unfunded mandate”.
A bipartisan coalition of New York's congressional delegation, which includes U.S. Reps. Paul Tonko of Amsterdam and Elise Stefanik of Saratoga, introduced the legislative fix earlier this year, though the legislation remains pending.
“While we support additional federal funding provided to our local hospitals, this policy change puts the future of our great health plan – and the 65,000 seniors who trust us with their care – in jeopardy,” O'Grady said. “Unlike our national for-profit counterparts, some of which have exited the market as a result of this new rule, CDPHP does not have the rackets needed to cover these costs, nor would we want to leave this community we call home.”
Both Albany Med and CDPHP are nonprofit organizations.
In its lawsuit, Albany Med said CDPHP's actions could force it to draw down its equity line of credit and seek other sources of financing.
Schenectady is hosting the nation's largest electric vehicle show for the third year in a row
“These options may become more difficult and expensive as CDPHP continues to violate its contractual obligations,” the lawsuit states. “Although CDPHP has similar options available to address its claimed dire financial situation, CDPHP has instead chosen to breach its contractual obligations and pass on the costs of mismanaging its own finances to the hospital.”
“As Albany Med is finally able to stabilize its finances, CDPHP's actions significantly impact our ability to fulfill our mission,” McKenna said. “Both of our organizations are based and operated locally, and we exist solely to improve the quality of care provided here. By turning its back on Albany Med, CDPHP is turning its back on 3 million people in our region.”
–
