Northwell Health Seeks $15 Million in Health Republic Suit

Crain’s Health Pulse
March 23, 2016

Providers in the state are waiting to learn what reimbursement, if any, they will receive from Health Republic Insurance of New York. But one health system has taken a proactive approach to recovering assets. Northwell Health filed a lawsuit in November that seeks damages "in excess of $15 million," plus interest and legal fees. The network accused the insurer of breach of contract for failure to pay for services provided to Health Republic members, among other allegations.

Attorneys for Health Republic filed a motion to dismiss the case last month, arguing any reimbursements would have violated a Nov. 9 order from the state Department of Financial Services to stop paying claims. Richard Slack and Michael Bell of Weil Gotshal & Manges also argued that the lawsuit should be dismissed because it "did not provide the most basic information about the purported contract."
DFS based its decision to order Health Republic to stop paying claims based on financial projections that suggested by Dec. 31, 2015, the company would have $650 million in assets and $581.5 million in liabilities, plus a required surplus of $147.6 million. That would seem to suggest that the insurer had enough assets to pay claims.

But a DFS spokesman said the figures cited in the Nov. 9 order are Health Republic's own numbers. Health Republic's actual assets are still being determined as part of the liquidation process, he said.
Northwell said it is owed about $22 million in outstanding claims from Health Republic, mostly stemming from out-of-network emergency-room visits, according to a spokesman for the system. Only Northwell's Phelps Memorial and Northern Westchester hospitals, which joined the system Jan. 1, 2015, were in-network for the insurer. They are collectively owed $4.5 million.

"As a not-for-profit health care system, [Northwell] has razor-thin margins and is therefore substantially prejudiced by long delays in payments, being paid less than contracted rate for the services it provides, and/or not being paid for the services it provides," wrote Thomas Noonan, an attorney in the Manhattan office of Tibbetts Keating & Butler, in a complaint filed Dec. 29 in Nassau County Supreme Court.
In the first nine months of 2015, Northwell had operating income of $51.7 million and an operating margin of 0.9%, according to its unaudited financial statements.

Health Republic's attorneys also called into question why Northwell would be entitled to any sort of special treatment that would violate DFS' administrative order.

"It is telling that although every one of the thousands of holders of unpaid claims is in the exact same position as North Shore-LIJ, it is the only one to seek to 'jump the line' by filing a separate litigation against Health Republic," they wrote. (NS-LIJ changed its name to Northwell Health in January.)
Northwell's spokesman defended the lawsuit. "Even though there's a stop-payment order in place, there's nothing to prevent the company from processing our claims, but they have not done so. We're simply pursuing all actions allowed under the law to have our claims adjudicated on a timely basis."

HANYS has estimated that hospitals statewide are owed about $200 million by Health Republic. About two-thirds of that money is owed to hospitals located in the Hudson Valley and on Long Island, said Kevin Dahill, president of the Suburban Alliance, which advocates for those facilities.

Still, Dahill hasn't been able to get any answers from the U.S. Department of Health and Human Services or Paul Francis, New York's deputy secretary for health and human services. He wrote a letter to Francis in December seeking information about whether Health Republic has assets available to repay creditors, and about how restructuring firm Alvarez & Marsal was handling the wind down.

"That's a lingering question," Dahill said. "When the state steps in and shuts down a company and puts beneficiaries without coverage, to me, that suggests insolvency. You would expect at this point there would have been a bankruptcy filing, so we don't even know what kind of assets might be there. We just know what the hospitals are owed."

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