Insurance & Benefits

Pass-Through Billing or Unpaid Claims? Knox County and BCBS Headed to Arbitration

In the dispute between Blue Cross Blue Shield of Texas and the Knox County Hospital District, both parties are claiming wrongful conduct. Knox County says that Richardson-based BCBSTX hasn’t paid millions of dollars in claims, while the insurance giant says the charges are connected to the hospital’s pass-through billing scheme. The case is headed to arbitration after a judge’s ruling ordered both parties to attempt Alternative Dispute Resolution, while staying other portions of the lawsuit.

After BCBSTX had perviously filed a motion to have the entire matter sent to arbitration, the U.S. District Court for the Northern District of Texas in Wichita Falls wrote, “Where all of the issues raised before the court are subject to arbitration, dismissal is permissible… Here not all of Plaintiff’s (KCHD) claims are referred (to arbitration). But since this claim is dependent on the merits of the disputes that will be arbitrated, the Court exercises its discretion to stay this case pending the arbitrator’s determination.”

In responses filed in federal court by BCBSTX, arbitration is where the insurer wanted this case to go. “The primary purpose of the Motion to Dismiss filed by Defendant Health Care Service Corporation … is to compel Plaintiff to engage in ADR, including mandatory arbitration, as required.”

The conflict stems over $21 million worth of insurance claims that Knox County says BCBSTX never paid to the 25-bed acute care facility west of Fort Worth. The case was moved from district court to federal court, and now the central matter in the dispute will be decided out of court. The remaining issues in the lawsuit could be decided in court depending on the results of the arbitration.

But in another brief filed to support BCBSTX’s Motion to Dismiss the case, the insurer claims that Knox County’s claims are based on a fraudulent pass-through billing scheme. “Despite Plaintiff’s attempt to spin this dispute in its favor, in reality Plaintiff carried out a multi-million-dollar pass-through billing scheme that cost BCBSTX and the health plans it administers considerable sums,” the brief reads. “In breach of the parties’ Agreements, Plaintiff submitted claims for individuals who have never set foot in Knox County Hospital and for services that Plaintiff did not perform. Accordingly, Plaintiff owes BCBSTX amounts it paid as a result of Plaintiff’s scheme, and Plaintiff is not entitled to payment on the remaining disputed claims.”

If things can’t be decided in arbitration, both sides are ready to head back to court. “The Board of Directors, employees and patients of Knox County Hospital could not be more pleased with Judge O’Connor’s decision to leave critical parts of this lawsuit pending, while ordering both parties into arbitration,” said Kelly Dawson, attorney for KCHD via release. “We appreciate the Court’s willingness to have a full hearing on the factual allegations we have asserted in the lawsuit.”

BCBSTX says it is ready to recover the funds from the hospital district as well. “If the case stays in this Court, BCBSTX reserves the right to file a counterclaim against Plaintiff, asserting breach of contract and other claims, and seeking recovery of amounts Plaintiff obtained from its breaches and other wrongful conduct,” the brief reads.


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