Attorney fees awarded in TheraMatrix lawsuit against Blues

There’s been another development in Pontiac-based TheraMatrix winning a $4.5 million lawsuit against Blue Cross Blue Shield of Michigan for breach of contract and tortious interference with economic and business relationships (“Their (Blue) Cross to bear,” Aug. 23, 2010).

Oakland County Circuit Court Judge Edward Avadenka awarded case evaluation sanctions, including attorney fees, against Blue Cross on Nov. 15.

But the way he came up the $625-per-hour rate is interesting.

According to Sara K. MacWilliams and Rodger D. Young, counsel for TheraMatrix:

[Avadenka] explained that the case was “most contentious” and that trial “was like a fencing match — thrust and parry by both sides, endlessly,” and therefore, substantial attorney hours were properly included in the fee award.

But, they continued:

Judge Avadenka’s opinion is of special note, because it examined what the proper source of evidence is to determine attorney fees in a Southeastern Michigan commercial litigation. Courts determining fee awards sometimes rely on the 2007 State Bar Survey of attorney rates.

However, as Michigan Lawyers Weekly recently reported, the survey is actually poor evidence of fees, both because it is now outdated, and because the survey has a very low response rate. Judge Avadenka recognized this, writing that the 2007 State Bar Survey is not “indicative of the true hourly rate in Southeastern Michigan for the attorneys who actually tried this case. There are over 35,000 attorneys in the State of Michigan, and the 2007 State Bar Survey reflects a questionnaire return rate of only 20-30 percent.”

Judge Avadenka, through his research, determined a more reasonable alternative, writing, “A truer representation of a reasonably hourly rate for the attorneys involved in the instant case is set forth in the National Law Survey (2008), which lists various rates by firm.”

Judge Avadenka also relied on “the Michigan Benchmark” as another source of evidence for determining fee awards. Using this evidence, Judge Avadenka set a reasonable billing rate of plaintiff’s lead counsel, Rodger Young, at $625 per hour during the applicable period, and adjusted at least one attorney’s billing rate up.

Judge Avadenka’s Nov. 15, 2010, Order and Opinion, which carefully sets forth the Smith v. Khouri guidelines for setting attorney fee awards, may prove to offer useful guidance for attorneys involved in fee award disputes, including fees owed under MCR 2.403.

As we wrote last week, a USA Today story that also appears in the Detroit Free Press (both papers are owned by Gannett) also covered the TheraMatrix case. The Freep also published a story that talks about a recently filed U.S. Justice Department lawsuit against the Blues.

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Michigan Blues lawsuit gets national attention

Three months ago, we reported on Pontiac-based TheraMatrix winning a $4.5 million lawsuit against Blue Cross Blue Shield of Michigan for breach of contract and tortious interference with economic and business relationships (“Their (Blue) Cross to bear,” Aug. 23, 2010).

Now, this matter is getting national attention, thanks to a USA Today story that also appears in the Detroit Free Press (both papers are owned by Gannett). The Freep also published a story that talks about a recently filed U.S. Justice Department lawsuit against the Blues.

Here’s an excerpt:

As health care costs soared nationally, a small Michigan firm gave Ford Motor Co. a proposal to cut its physical therapy costs. The automaker signed up for an in-state pilot program, which was so successful Ford expanded it last year to cover about 390,000 employees, retirees and their families nationwide.

Yet the cost-saving program created by Pontiac-based TheraMatrix has come under attack from Blue Cross Blue Shield of Michigan.

Court records allege Blue Cross used its position as the state’s dominant insurer to try to crush TheraMatrix as it worked to also sign up Chrysler and General Motors.

A USA Todayreview of hundreds of pages of e-mails and internal documents that are part of a lawsuit TheraMatrix filed against Blue Cross indicates that TheraMatrix’s efforts to carve out a niche market in managing outpatient physical therapy costs was seen as a threat by officials at Blue Cross and by some Michigan hospitals. …

The dispute provides a window into some of the factors that make overhauling the nation’s health care system so difficult. The aggressive tactics employed against TheraMatrix raise questions about whether relationships between hospitals and insurers are inflating medical prices and stifling competition needed to control costs.

Court records depict Blue Cross — a nonprofit created under Michigan law to provide affordable health care — as working with a major hospital to stop expansion of TheraMatrix’s program. They also reveal that Blue Cross barred TheraMatrix from the insurer’s medical provider network, which covers most Michigan patients.

A Detroit-area jury awarded TheraMatrix $4.5 million in July, finding that Blue Cross breached an agreement with TheraMatrix to process claims for its Ford program, then wrongfully interfered with TheraMatrix’s efforts to launch a Chrysler program. Blue Cross has appealed.

Last month, the U.S. Justice Department sued Michigan’s Blue Cross, accusing the insurer of a different kind of anticompetitive behavior: paying hospitals higher prices for medical care in exchange for a promise they would charge competing insurers as much as 40% more than they charge Blue Cross. Blue Cross says the suit is without merit. …

Effective antitrust regulation is critical to lowering health care costs, Christine Varney, the assistant attorney general who heads the Justice Department’s antitrust division, told lawyers at a health care conference in May. “The goals of health care reform cannot be achieved,” she said, “if dominant insurers use exclusionary practices to blockade entry or expansion by alternative insurers.”

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DOJ, State files anti-trust suit against Blue Cross

WASHINGTON (AP) — The Justice Department alleged Monday in a lawsuit that Michigan Blue Cross Blue Shield is discouraging competition by engaging in practices that raise hospital prices, conduct an assistant attorney general vowed to challenge anywhere else it is found in the United States.

The suit targets "most favored nation" clauses between Michigan Blue Cross Blue Shield and health care providers which, according to the government, essentially guarantee that no competing health care plan can obtain a better rate.

Michigan Blue Cross Blue Shield has most-favored-nation clauses or similar language in contracts with at least 70 of 131 general acute care hospitals in the state, the government alleges.

The lawsuit said that Michigan Blue Cross Blue Shield intended to raise hospital costs for competing health care plans and reduce competition for the sale of health insurance.

"As a result, consumers in Michigan are paying more for their health care services and health insurance," Assistant Attorney General Christine Varney, who runs the Justice Department’s antitrust division, told reporters.

In some instances, the lawsuit states, Blue Cross has raised the prices it pays for hospital services in exchange for obtaining most-favored-nation clauses that raise the minimum prices hospitals can charge to Blue Cross competitors.

The state of Michigan joined the Justice Department in the case filed in federal court in Detroit.

In response, Michigan Blue Cross Blue Shield said the lawsuit is seeking to restrict the nonprofit company’s ability to provide the most deeply discounted rates from Michigan hospitals. The company said that negotiated hospital discounts are a tool that Blue Cross uses to protect the affordability of health insurance for millions of Michigan residents.

"Our hospital discounts are a vital part of our statutory mission to provide Michigan residents with statewide access to health care at a reasonable cost," the company said.

The lawsuit outlines two types of most-favored-nation clauses requiring a hospital to provide services to Blue Cross competitors either at higher prices than Blue Cross pays or at prices no less than Blue Cross pays.

In alleging violations of the Sherman Act and the Michigan Antitrust Reform Act, the government said that under the "MFN-plus" clause, Blue Cross negotiated agreements requiring 22 hospitals to charge some or all other commercial insurers more than the hospital charges Blue Cross. Under the other clause, Blue Cross has agreements requiring more than 40 small, community hospitals to charge other commercial health insurers at least as much as they charge Blue Cross.

Varney declined to say whether the Justice Department has open inquiries in other states of most-favored-nation clauses, which are not illegal unless they stifle competition.

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BCBSM motion denied in $4.5 million breach-of-contract suit

In our Aug. 16, 2010, edition, we reported about a $4.5 million verdict rendered against Blue Cross Blue Shield of Michigan in a breach-of-contract and tortious interference lawsuit (“Their (Blue) Cross to bear”).

That stemmed from Pontiac-based TheraMatrix Services, Inc. contending BCBSM breached its agreement with the physical-therapy business over a program at Ford Motor Co. that would have saved the auto company millions of dollars in health care costs, and also interfered with TheraMatrix’s business relationship with Chrysler Motor Co. over a similar program.

Now, in a recent development, Oakland County Circuit Court Judge Edward Avadenka on Oct. 5 rejected BCBSM’s motion for judgment notwithstanding the verdict or a new trial.

BCBSM counsel Laurine S. Parmely said in August that “we don’t see this as more than a simple, contractual business dispute between two parties.”

But Rodger D. Young, counsel for TheraMatrix, indicated the possibility of filing another suit to seek damages for money lost during TheraMatrix’s 18-month hiatus from Blue Cross’ provider network – when Blue Cross terminated TheraMatrix as a participating provider for its health plans in Michigan.

As well, he added, there could be counts of anti-trust and anti-competitiveness asserted against Blue Cross, as officials from the Michigan Attorney General’s Office and the U.S. Department of Justice monitored the July 2010 trial.

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