The last three hospitals in a legal battle against the state's largest insurer have see half their claims survive a crucial test.
A string of court victories for Horizon Blue Cross Blue Shield of New Jersey recently came to an end when a Bergen judge refused to dismiss all counts of a lawsuit by three hospitals.
Those hospitals were left out in the cold when Horizon announced its "OMNIA" health insurance policies in late 2015. The policies save consumers money by giving them more coverage if they are treated at one of the plan's "Tier 1" hospitals. If they go instead to "Tier 2," they pay more. Their monthly premiums are also 15-20 percent lower.
The move touched off a titanic battle in both the legislature and the courts, as the excluded hospitals realized their financial stability would be threatened if Horizon customers went elsewhere. As the state's largest health insurer, Horizon covers 3.8 million residents.
The excluded hospitals also worry that being dubbed Tier 2 implies their care isn't as good as Tier 1.
In the latest ruling, delivered late last week, Superior Court Judge Robert P. Contillo allowed crucial parts of the hospitals' lawsuit against Horizon to continue.
That means Horizon could face a trial in which it would have to explain how it chose the hospitals it selected for OMNIA, and would have to prove it didn't commit a breach of contract by excluding other hospitals from the new arrangement. And it would have to defend the charge that its Tier 2 label wasn't damaging to the hospitals' reputations.
Three of the six counts against Horizon were dismissed, meaning the group of hospitals cannot pursue its claim the insurance giant pressured physicians to steer patients to OMNIA hospitals. Nor will it be able to continue to argue in court that Horizon's role as a non-profit means it has a financial obligation to the hospitals.
Because of that split ruling, however, both sides are claiming victory.
"The ruling is a win for the hundreds of thousands of people who have chosen OMNIA and a clear rebuke to the remaining three plaintiffs," said Horizon spokesman Tom Wilson. "The hospital's case was effectively gutted and what remains amounts to no more than a garden variety contract dispute."
The hospitals that remain in the suit - Holy Name Medical Center in Teaneck, The Valley Hospital in Ridgewood, and CentraState Medical Center in Freehold - insist their core complaints remain legally alive.
"The Court's decision means that a trial is likely and as a result, the secrecy Horizon has maintained surrounding the selection proves will finally be removed," said Michael K. Furey, attorney for the hospitals. Already, court documents have shown the insurer selected its participating hospitals using a scoring system that "was biased in favor of the large hospital systems," he said.
Four other hospitals that joined the lawsuit when it was filed in late 2015 have since dropped out and made their own arrangements with Horizon. They are St. Luke's Warren Hospital, Trinitas Regional Medical Center in Elizabeth, JFK Medical Center in Edison, and Capital Health Systems in Trenton.
Another group of 17 hospitals tried a different legal tack, arguing the N.J. Department of Banking and Industry failed to take into account the effect OMINA would have on struggling urban hospitals, as well as on the state's Catholic hospitals. They were largely designated Tier 2 facilities.
That approach failed, however, as a judge ruled the Department acted properly in allowing Horizon to set up the ground-breaking arrangement with hospitals. Also failing was a court battle to force Horizon to release internal documents about its formation of the new OMNIA policies.
Given that track record, Wilson remained confident about this latest ruling.
"Having lost more than half of its plaintiffs, the... case has now lost half its allegations," said Wilson, of Horizon. "The ruling is a win for the hundreds of thousands of people who have chosen OMNIA and a clear rebuke to the remaining three plaintiffs."
Kathleen O'Brien may be reached at kobrien@njadvancemedia.com. Follow her on Twitter @OBrienLedger. Find NJ.com on Facebook.