blue cross memo in support of tro request.pdf
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IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
JACKSON DIVISION
BLUE CROSS BLUE SHIELD OF
MISSISSIPPI, A MUTUAL INSURANCE
COMPANY PLAINTIFF
vs. CIVIL ACTION NO.: 3:13cv655 HTW-LRA
GOVERNOR PHIL BRYANT, in his
Capacity as Governor of the State of
Mississippi DEFENDANT
MEMORANDUM IN SUPPORT OF BLUE CROSS
MOTION FOR TEMPORARY RESTRAINING ORDER
Pursuant to Federal Rule of Civil Procedure 65(b), Blue Cross Blue Shield of Mississippi,
A Mutual Insurance Company (Blue Cross) respectfully submits this Memorandum in support
of its Motion for Temporary Restraining Order. Blue Cross seeks entry of a temporary
restraining order to preserve the status quo and to prevent Mississippi Governor Phil Bryant from
taking any action to enforce Executive Order 1327 to the extent that it requires Blue Cross to re-
contract with and re-admit six HMA-owned hospitals into its provider Network.
The stated basis for Governor Bryants Executive Order is the threat that Blue Cross
may be in violation of various laws, including Insurance Code (Mississippi Code) 83-41-409
and 83-5-33. Less than a week ago, Mississippi Department of Insurance Commissioner Mike
Chaney responded to the Governors concerns and advised him in writing that he is aware of the
issue and is following the process set forth by statute to examine the Blue Cross network and
determine whether it complies with the statutory requirements of 83-41-409. Commissioner
Chaney also specifically advised the Governor that he has analyzed the allegations concerning
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83-5-33 and that he believes the Governor has no authority to order Blue Cross to re-contract
with the HMA hospitals.
Rather than follow Commissioner Chaneys advice and the statutory framework for
addressing these issues, Governor Bryant has imposed an unprecedented, unconstitutional
mandatory injunction forcing Blue Cross to re-contract with the HMA hospitals--until it is
determined whether the law has been violated. Governor Bryant has no legitimate authority or
basis for his actions. Governor Bryant is merely responding to the political and public pressure
instigated by HMA, its lawyers and its lobbyists.
For the reasons discussed below, and in Blue Cross Petition [Docket No. 1],
incorporated herein by reference, Governor Bryant has absolutely no authorityconstitutional,
statutory or otherwiseto force Blue Cross, a private party, to enter into contracts with six
HMA-owned hospitals, other private parties. The effect of Executive Order 1327 is to take away
Blue Cross bargained for right to terminate its contracts with six HMA-owned hospitals without
the benefit of providing to Blue Cross the required notice and opportunity for Blue Cross to be
heard. Thus, Blue Cross constitutional rights clearly have been violated as a result of the entry
of Executive Order 1327, and Blue Cross is entitled to entry of the requested temporary
restraining order.
BACKGROUND FACTS
Blue Cross had agreements with ten HMA-owned for-profit hospitals pursuant to which
each hospital was a Blue Cross Network provider (Agreements). On June 18, 2013, the HMA
hospitals sued Blue Cross alleging, in part, breach of contract for insufficient payments. Jackson
HMA, LLC dba Central Mississippi Medical Center et al v. Blue Cross Blue Shield, et al, originally in
Hinds County and transferred to Rankin County Circuit Court, No. 2013-226. In that action, the HMA
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hospitals seek to be paid more using Payment Rules different from every other Blue Cross
Network hospital.
Pursuant to the terms of each Agreement, each party had the right to terminate each
Agreement unilaterally, with or without cause. On June 25, 2013, Blue Cross exercised those
contractual rights and sent notices of termination of the Agreements to the HMA hospitals.
Following receipt of Blue Cross notices, the HMA hospitals embarked on a massive
public relations campaign to provide misinformation to the public concerning Blue Cross
termination of the agreements, the HMA hospitals pending lawsuit, and the loss of access to
care.
The HMA hospitals became non-Network effective September 1, 2013. That same
month, based on the Blue Cross/HMA network issue, the Mississippi Insurance Department (the
Department) requested and received Blue Cross network maps for the state. On September
16, 2013, at a joint hearing before the Insurance Committees of the Mississippi House of
Representatives and Senate, Insurance Commissioner Mike Chaney stated that Mississippi law
does not allow his office to intervene in the Blue Cross/HMA situation unless there is a problem
with access to care. See Exhibit C, Transcript of Chaneys Testimony at Legislative Hearing at
pp. 66-67 and information provided to Legislators by Commissioner Chaney. Commissioner
Chaney further stated that his office reviewed the networks and finished surveys the Friday of
the previous week, that, with regard to access, [f]rom what we see, there is no violation of the
law that we have today[,] and that this is a contractual dispute between two private parties. Id.
On October 10, 2013, representatives of the Mississippi Department of Insurance met
with Blue Cross representatives to discuss the status of the Departments ongoing examination of
Blue Cross. See Exhibit D, October 17, 2013 Letter from Chaney to Carol Pigott. As part of that
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meeting, the Department informed Blue Cross that its examiners would be following up
specifically in the area concerning network adequacy and compliance within Miss. Code Ann.
83-41-409. Id.
On October 14, 2013, Blue Cross offered to reinstate four HMA hospitalsAmory
HMA, LLC (Gilmore) in Amory, Clarksdale HMA, LLC (Northwest) in Clarksdale,
Alliance Health Partners, LLC (Tri-Lakes) in Batesville, and ROH, LLC (Womans)into
its provider Network. The offer was made noting that payments would be made pursuant to the
same agreements and payment terms under which those hospitals had accepted payments for
eighteen months before filing suit. HMA rejected the offer.
On October 17, 2013, Commissioner Chaney sent a letter to Blue Cross stating that the
Departments review of network adequacy was included in the initial scope of its examination,
which began around May 1, 2013, and was concluded prior to the Blue Cross/HMA dispute, and
that, in light of the departure of the ten HMA hospitals from the Network, it is necessary for the
Department to perform an in-depth subsequent review to determine compliance with applicable
market conduct standards and statutory provisions. See Exhibit D. According to the
Commissioner, the Departments goal is to complete this review by December 1, 2013. Id.
That same day, the Governor sent a letter to Blue Cross stating that he is concerned that
the hospitals exclusion from the BCBS network will do serious harm to BCBS enrollees and
patients of these hospitals and reduce access to care in the State generally. See Exhibit E,
October 17, 2013 Letter from Governor Bryant to Carol Pigott. He stated that he has become
convinced that the exclusion of the hospitals from the BCBS network may not be within the
limits of the law. Id. (emphasis added). He then cited three alleged legal issues. Id. First, he
stated that under Miss. Code Ann. 83-41-409(b) (the Mississippi Patient Protection Act of
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1995), Blue Cross, as a managed care entity operating a managed care plan, is required to
[d]emonstrate that its provider network has providers of sufficient number throughout the
service area to assure reasonable access to care with minimum inconvenience by plan enrollees.
Id. He also vaguely stated that state law broadly prohibits insurers from engaging in unfair or
deceptive acts or practices, apparently referencing Miss. Code Ann. 83-5-33, et. seq. Id.
Finally, he stated that he is concerned that this situation may raise serious issues under
Mississippis antitrust laws. Id. (emphasis added).
Based on these issues, the Governor stated that he asked the Mississippi Department of
Insurance whether it intends to act immediately to return the ten affected hospitals to the BCBS
network[,] because, if not, he [i]ntends to issue an executive order to that end. Id. According
to the Governor, [a]ny further delay risks irreparable harm and a loss of the access to care,
which he alleged is his only concern. Id. The Governor stated that that [t]he threat to patients
that [he] feels compelled to address can be avoided only if all ten of the affected hospitals are
returned to the BCBS network immediately. Id. (emphasis added). As far as [he] is
concerned, until [the Blue Cross/HMA litigation] is settled by the parties or resolved by a court,
BCBS may simply return the hospitals to the status quo as it existed before their contracts were
terminated, i.e., BCBS may continue to interpret and apply the contracts as BCBS understands
them. Id.
By another letter dated October 17, 2013, the Governor asked Commissioner Chaney to
rethink his position that the Department does not have authority to act to immediately require
Blue Cross to enter into a contract with HMA to return HMAs ten hospitals into Blue Cross
Network. See Exhibit F, October 17, 2013 Letter from Governor Bryant to Chaney.
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On October 18, 2013, Commissioner Chaney responded to the Governors letter. See
Exhibit G, October 18, 2013 Letter from Chaney to Governor Bryant. In his response,
Commissioner Chaney states that he agrees that regulatory enforcement action is appropriate, as
long as that enforcement action is supported by applicable law with sufficient evidence. Id.
(emphasis added). He noted that the Department has been looking at the issue of reasonable
access under Miss. Code Ann. 83-41-409(b) for some time, and that the Department is
aggressively using the tools the law gives [it] to determine whether [Blue Cross] current
network provides adequate access to care. Id. He stated that [i]f the examination reveals that
there is not reasonable access to care due to inadequate network coverage in a geographic region,
the primary remedy available will be to require [Blue Cross] to pay providers at in-network
benefit levels until the inadequate access issue is correct. Id.
With regard to the Governors citation of Miss. Code Ann. 83-5-33, Commissioner
Chaney stated that
[t]hese statutes provide that where the Commissioner determines that a person hasengaged in an unfair trade practice in the business of insurance, he must serve theperson with notice of the charges and conduct an evidentiary hearing. At theconclusion of the hearing, if the Commissioner determines that an unfair tradepractice has occurred, he shall issue an order requiring the person to cease anddesist from the acts, methods, or practices complained of. In addition to, or inlieu of, the cease and desist order, the Commissioner may impose anadministrative penalty not to exceed five thousand dollars ($5,000.00) perviolation.
The Department has reviewed the eight named practices that would be consideredunfair trade practices under Section 83-5-55, and at this time, we have notuncovered any act or practice on the part of [Blue Cross] in its dealings withHMA that would constitute an unfair trade practice.
Id. Accordingly, he stated that the Department has serious concerns whether ordering [Blue
Cross] to reinstate the hospitals is a remedy supported by and available under the Unfair Trade
Practices Act[,] since, [a]gain, unfair trade practice violations are remedied through cease and
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desist orders and fines. Id. He then reiterated that he would be concerned about the legal
viability of ordering the parties to re-contract on the ground that [Blue Cross] has violated the
Unfair Trade Practices Act. Such a remedy simply does not appear to be sustainable under that
Act. Id. The Commissioner also requested that the Governor furnish to the Department copies
of any evidence he has which reveals that Blue Cross has violated either Section 83-41-409(b) or
Section 83-5-33, et seq.Id.
That same day, Blue Cross filed the instant action seeking injunctive and declaratory
relief regarding the unprecedented and unconstitutional executive action threatened in the
Governors letter. Moreover, Blue Cross again offered to reinstate the Gilmore, Northwest, Tri-
Lakes and Womans hospitals into the Network.
On October 21, 2013, after receiving no response from HMA, Blue Cross unilaterally
recognized four HMA hospital -- Gilmore in Amory, Northwest in Clarksdale, Tri-Lakes in
Batesville, and Womans in Flowood -- as Network providers, providing Network-level benefits
for Blue Cross members at those hospitals. The six remaining HMA-owned hospitals that
remain out of Blue Cross provider Network--Jackson HMA, LLC (CMMC), Biloxi HMA,
LLC (Biloxi), Brandon HMA, LLC (Crossgates), Madison HMA, LLC (Madison),
Natchez Community Hospital, LLC (Natchez), and River Oaks Hospital, LLC (River
Oaks)are all in urban areas with other acute inpatient hospitals in the Blue Cross Network.
Further, on October 21, 2013, Blue Cross finalized a managed care accessibility analysis
that concludes, even with the exclusion of the ten HMA-owned hospitals from its Network, Blue
Cross has a sufficient provider network in compliance with the requirements of Mississippi Code
83-41-409(b). See Exhibit 1 to the Affidavit of Jeffery Leber, attached hereto as Exhibit A.
Stated differently, Blue Cross current provider network has providers of sufficient number
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throughout its service area to assure reasonable access to care with minimum inconvenience to
its subscribers. Every subscriber has reasonable access to an acute care Network hospital in
every Mississippi service area. The exclusion of HMA owned hospitals from Blue Cross
provider Network will not prevent any subscriber from seeking emergency services at these
hospitals, and Blue Cross will continue to cover these emergency services at Network levels,
which is the law. If services are covered and can only be provided at a Non-Network hospital,
Network benefits will be provided to the subscriber for such covered services, as set forth in
every Blue Cross policy and plan.
On October 22, 2013, Governor Bryant entered Executive Order Number 1327. See
Exhibit H. Without affording to Blue Cross notice and an opportunity to be heard, Governor
Bryant determined based largely on self-serving HMA statements and his flawed interpretation
of press releases that the exclusion of the [ten HMA] hospitals from the BCBS network of
providers threatens patients access to care and raises other serious legal issues. Governor
Bryant determined that interim relief is necessary until the Mississippi Insurance
Commissioner can determine if, in fact, access to care is impacted by the exclusion of the ten
HMA-owned hospitals from Blue Cross provider Network. Thus, through Executive Order
1327, Governor Bryant voided Blue Cross bargained for contractual right to terminate the
Agreements with HMA and essentially entered a mandatory injunction requiring Blue Cross to
return the HMA-owned hospitals to its provider Network.
ARGUMENT AND AUTHORITIES
A temporary restraining order is warranted here, as (1) Blue Cross is substantially likely
to prevail on the merits of its claim for declaratory relief; (2) there is a substantial threat that
Blue Cross will suffer immediate and irreparable injury if Governor Bryant is permitted to take
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any action to enforce Executive Order 1327 to the extent that it requires Blue Cross to re-admit
six HMA-owned hospitals into its provider Network; (3) the threatened harm to Blue Cross
outweighs any theoretical harm the Defendant may suffer; and (4) granting the temporary
restraining order is consistent with public policy as it will preserve the status quo and will ensure
that a private party is not forced to enter into a contract with other private parties in violation of
its constitutionally protected rights guaranteed by the United States Constitution and the
Mississippi Constitution. See e.g., Canal Authority v. Calloway, 489 F.2d 567, 572 (5th Cir.
1974).
I. Blue Cross is substantially likely to prevail on the merits of its claim.
[N]o Governor, or for that matter, any governmental official, can exercise power beyond
their constitutional authority.Barbour v. State ex rel. Hood, 974 So. 2d 238, 239 (Miss. 2008)
(citing Fordice v. Bryan, 651 So. 2d 998, 1003 (Miss. 1995) (citation omitted)). Any executive
action by Governor Bryant forcing Blue Cross to re-admit six HMA-owned hospitals into its
provider Network will result in a clear violation of Blue Cross constitutionally protected rights
under the Due Process Clause, Contracts Clause and Equal Protection Clause of both the United
States Constitution and the Mississippi Constitution. Accordingly, Blue Cross is substantially
likely to succeed on the merits of its claim for declaratory relief.
A. The executive action violates the Due Process Clause of the
Fourteenth Amendment to the U.S. Constitution and 14 of the
Mississippi Constitution.
The Due Process Clause of the Fourteenth Amendment to the United States Constitution
provides that no State shall deprive any person of life, liberty or property, without due process
of law. U.S. Const. amend. XIV, 1. The Mississippi Constitution similarly declares that [n]o
person shall be deprived of life, liberty or property except by due process of law, Miss. Const.
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art. III, 14, and is construed the same as the United States Constitution, seeSec. of State v.
Wiesenberg, 633 So. 2d 983, 996 (Miss. 1994). A corporation is a person within the meaning
of the due process clause. See Grosjean v. American Press Co., 297 U.S. 233, 244 (1936); First
Nat'l Bank of Boston v. Bellotti, 435 U.S. 765, 780 n. 15 (1978) (It has been settled for almost a
century that corporations are persons within the meaning of the Fourteenth Amendment.);
Southern Ry. v. Greene, 216 U.S. 400, 412 (1910) (That a corporation is a person, within the
meaning of the 14th Amendment, is no longer open to discussion). The right to contract is
both a liberty and a property right within the protection of the Fourteenth Amendment. Pyeatte
v. Board of Regents of Univ. of Okl., 102 F. Supp. 407, 412 (W.D. Okla. 1951), judgment aff'd,
342 U.S. 936 (1952) (citingHolden v. Hardy, 169 U.S. 366 (1898);Allgeyer v. State of La., 165
U.S. 578 (1897)). Accordingly, the threatened executive action against Blue Cross is a violation
of both procedural and substantive due process.
1. The executive action is a violation of procedural due process.
Entry of Executive Order 1327 without the required notice to Blue Cross and an
opportunity to be heard deprives Blue Cross of its right to contract without procedural due
process of law. Blue Cross was not afforded the required notice, pursuant to the United States or
Mississippi Constitutions or the relevant Mississippi statutes, or an opportunity to be heard prior
to the Governor determin[ing] that BCBSs exclusion of the [HMA-owned] hospitals from the
BCBS network of providers threatens patients access to care. . . . See Exhibit H at pg. 3. An
essential principle of due process is that a deprivation of life, liberty, or property be preceded by
notice and opportunity for hearing appropriate to the nature of the case Cleveland Bd. of Ed. v.
Loudermill, 470 U.S. 532, 542 (1985). These very rights are codified by both of the statutes
cited by the Governor in his attempt to justify his threatened executive action. See Miss. Code
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Ann. 83-41-405 and 83-5-39. In this instance, the Governor has eviscerated these bedrock
rights. Therefore, his executive action violates procedural due process.
In Mathews v. Eldridge, 424 U.S. 319, 334 (1976), the Supreme Court recognized that
[d]ue process, unlike some legal rules, is not a technical conception with a fixed content
unrelated to time, place and circumstances. Id. (quoting SeeCafeteria Workers v. McElroy, 367
U.S. 886, 895 (1961). [D]ue process is flexible and calls for such procedural protections as the
particular situation demands. Morrissey v. Brewer, 408 U.S. 471, 481 (1972). Accordingly,
Mathews described a sliding-scale test for determining whether a particular set of procedures was
constitutionally adequate. Under it, a court looks at three factors: (1) the private interest at stake;
(2) the risk that existing procedures will wrongly impair this private interest, and the likelihood
that additional procedural safeguards can affect a cure; and (3) the governmental interest in
avoiding these additional procedures.Mathews, 424 U.S. at 335.
Blue Cross private interest, i.e. its right to contract, will be affected by the executive
action. This right is both a liberty and a property right within the protection of the Fourteenth
Amendment. Pyeatte, 102 F. Supp. at 412. Again, the effect of Executive Order 1327 is to take
away Blue Cross bargained for contract right to terminate the Agreements with HMA and
mandates that Blue Cross enter into new contracts with six HMA-owned hospitals.
Regarding the second factor, as noted above, the Governor initially stated that he has
become convinced that the exclusion of the hospitals from the BCBS network may not be
within the limits of the law[,] including the Mississippi Patient Protection Act of 1995, that
State law broadly prohibits insurers from engaging in unfair or deceptive acts or practices, and
that he is concerned that this situation may raise serious issues under Mississippis antitrust
laws. See Exhibit E (emphasis added). In Executive Order 1327, he states that he has now
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determined that BCBSs exclusion of the [HMA-owned] hospitals from the BCBS network of
providers threatens patients access to care. . . . See Exhibit H at pg. 3. The Executive Order
requiring Blue Cross to contract with other private parties based on what amounts to nothing
more than the Governors concern that Blue Cross may not be within the law amounts to an
erroneous deprivation of Blue Cross interest without any procedural safeguards whatsoever.
There would be great value in allowing Blue Cross to defend itself against such charges in the
proper forum.
Furthermore, contrary to the Governors claim that he is simply requiring Blue Cross to
return the hospitals to the status quo, what he is calling for is a mandatory injunction. A
mandatory injunction compels the performance of an affirmative act and, therefore, does not
maintain the status quo. The Governor initially stated that until that dispute is settled by the
parties or resolved by a court, BCBS may simply return the hospitals to the status quo as it
existed before their contracts were terminated, i.e., BCBS may continue to interpret and apply
the contracts as BCBS understands them. Exhibit E. The status quo is that the contracts of the
six HMA-owned hospitals have been terminated and those hospitals are not in Blue Cross
provider Network. Through entry of Executive Order 1327, the Governor has now ordered Blue
Cross to return the six HMA-owned hospitals to its provider Network. See Exhibit H at pgs. 5-6.
Such action, in effect, gives HMA a mandatory injunction against Blue Cross without requiring
HMA to meet the high burden of demonstrating to the Rankin County Circuit Court that it is
entitled to such relief.
The third factorthe Governments interest, including the burdens that the
additional/substitute procedural requirement would entailalso weighs in favor of Blue Cross
since, as stated above, the very statutes cited by the Governor require a hearing before any action
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is taken. See Miss. Code Ann. 83-41-405 and 83-5-39. Moreover, as Commissioner Chaney
has stated, the Department is aggressively seeking to determine whether Blue Cross current
network provides adequate access to care, and it has not uncovered any act or practice on the part
of Blue Cross in its dealings with HMA that would constitute an unfair trade practice. Exhibit G.
Accordingly, the executive action violates procedural due process.
2. The executive action is a violation of substantive due process
because it has no reasonable relation to any proper
governmental purpose and is an arbitrary exercise of
governmental power.
Entry of Executive Order 1327 also results in a violation of Blue Cross substantive due
process rights. Substantive due process is the concept that there are certain rights so fundamental
to our traditions of justice that, no matter what procedural guarantees the government affords, the
government cannot abridge those rights. See Simi Inv. Co., v. Harris Cnty., 236 F.3d 240, 249
(5th Cir. 2000), cert. denied, 534 U.S. 1022 (2001). If a regulation has no reasonable relation to
any proper governmental purpose, or is so far beyond the necessity of the case as to be an
arbitrary exercise of governmental power, it violates substantive due process. Id.
The Governors executive action in entering Executive Order 1327 is not reasonable in
relation to its purported purpose. The Governors actions have nothing to do with access to
health care. Access to quality healthcare is available to every Blue Cross member. Blue Cross
members may go to any hospital they desire. More importantly, every Blue Cross policy covers
emergency care and pays Network level benefits for emergency care even at non-Network
hospitals. 29 CFR 2590.715-2719A(b). Further, if covered services are not available to a
member at a Network hospital, such services may be obtained from a non-Network hospital at
Network rates.
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To the extent the Governor contends his concern is that Blue Cross may not have
Network providers of sufficient number throughout the service area to assure reasonable access
to care with minimum inconvenience by plan enrollees as required by Miss. Code Ann. 83-41-
409(b), it is again important to note that he does not have nor does he cite any basis for that
concern. On September 16, 2013, Commissioner Chaney stated that Mississippi law does not
allow his office to intervene in the Blue Cross/HMA situation unless there is a problem with
access to care. See Exhibit C. He further stated that his office reviewed the networks and
finished surveys the previous week, and that, [f]rom what we see, there is no violation of the
law that we have today[.] Id.
1
Further, on October 21, 2013, Blue Cross finalized a
management care accessibility analysis that concludes, even with the exclusion of all ten HMA-
owned hospitals for its Network, Blue Cross has a sufficient provider Network that meets the
requirements of Mississippi Code 83-41-409(b). See Exhibit 1 to the Affidavit of Jeffery
Leber, attached hereto as Exhibit A. Finally, it should be noted that the six HMA-owned
hospitals that remain excluded from Blue Cross provider Network are located in Jackson,
Biloxi, Brandon, Madison, Natchez and Flowood, all urban areas with other acute inpatient
hospitals in the Blue Cross Network.
Quite simply, no basis exists for the Governors arbitrary action based on an alleged
concern about access to care. Since the executive action is not reasonable in relation to its
subject and was not adopted in the interests of the community, it violates substantive due
process.
1 The Department is currently performing an in-depth review to determine whether Blue Cross currentnetwork provides adequate access to care, and that review is expected to be completed on or beforeDecember 1, 2013.
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B. The executive action violates the Contracts Clause of Article 1,
Section 10 of the United States Constitution and Article 3, Section 16
of the Mississippi Constitution.
The United States Constitution provides that [n]o State shall pass any Law
impairing the Obligation of Contracts," U.S. Const. Art. I, 10. The Contracts Clause of the
Mississippi Constitution, Miss. Const. Art. 3, 16, similarly states that laws impairing the
obligation of contracts [] shall not be passed[,] and therefore, is generally construed under the
same standards and analyses. Pub. Employees' Ret. Sys. v. Porter, 763 So. 2d 845, 84950
(Miss. 2000).
The Supreme Court has set forth a three-step procedure for analyzing federal
constitutional claims that a state law impairs contractual obligations. See United Healthcare Ins.
Co. v. Davis, 602 F.3d 618, 627 (5th Cir. 2010). First, the threshold inquiry is whether the state
law has, in fact, operated as a substantial impairment of a contractual relationship. Lipscomb v.
Columbus Mun. Separate Sch. Dist., 269 F.3d 494, 504 (5th Cir. 2001). This first step has three
elements: whether there is a contractual relationship, whether a change in law impairs that
contractual relationship, and whether the impairment is substantial. General Motors Corp. v.
Romein, 503 U.S. 181, 186 (1992).
If there is a substantial impairment, in the second step the Court must examine the state's
asserted justification for the impairment, which must be a significant and legitimate public
purpose. Davis, 602 F.3d at 627. The requirement of a legitimate public purpose guarantees
that the State is exercising its police power, rather than providing a benefit to special interests.
Energy Reserves Group, Inc. v. Kansas Power and Light Co., 459 U.S. 400, 412 (1983). See
also Davis, 602 F.3d at 631. At this stage, [t]he scrutiny to which the court subjects the state
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law is proportional to the degree of impairment. Lipscomb, 269 F.3d at 504; Energy Reserves
Grp., 459 U.S. at 411.
Third, if the public purpose is adequate, courts then must consider whether the
challenged law was reasonably necessary to achieve the purpose. Davis, 602 F.3d at 627
(quoting Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 260 (1978)); Energy Reserves
Grp., 459 U.S. at 412. Under this inquiry, a state must do more than mouth the vocabulary of
the public weal in order to reach safe harbor .... MercadoBoneta v. Administracion del Fondo
de Compensacion al Paciente, ex rel. Ins. Commissioner of Puerto Rico , 125 F.3d 9, 13 (1st
Cir.1997) (quotingMcGrath v. R.I. Ret. Bd., 88 F.3d 12, 16 (1st Cir. 1996) (ellipsis in original)).
The executive action at issue operates as a substantial impairment of the contractual
relationships between Blue Cross and the HMA hospitals. When Executive Order 1327 was
entered on October 22, 2013, the Agreements between Blue Cross and the HMA hospitals had
been appropriately terminated for a period of fifty-two days. Specifically, those contractual
relationships had been terminated by Blue Cross pursuant to the terms of the Agreements, which
stated:
Either party may terminate this Agreement, with or without cause, by giving priorwritten notice of at least sixty (60) days to the other party, provided terminationshall be made effective on the last day of the calendar month. Nothing containedin this Agreement shall be construed to limit either partys lawful remedies in theevent of a material breach of this Agreement. (emphasis added).
The executive action substantially impairs the contractual relationships between Blue
Cross and the HMA hospitals by, in effect, deleting this bargained for right to terminate the
Agreements with or without cause. In their pending state court lawsuit, the HMA hospitals do
not even seek the remedy the Governor has provided through Executive Order 1327the
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reinstatement of the Agreements. Therefore, Blue Cross satisfies the first step of the Supreme
Courts analysis.
With regard to the second step of the analysis, because the executive action completely
impairs the rights of the parties under the Agreements, the Court should apply the highest
scrutiny to such action. The Governors asserted justification for the contractual impairment is
his alleged concern about access to care. However, again, this concern is without any basis in
fact whatsoever. As noted above, Blue Cross recently completed a managed care accessibility
analysis and concluded that the exclusion of the HMA-owned hospitals from its provider
Network will not deny its subscribers reasonable access to care. See Exhibit 1 to the Affidavit of
Jeffery Leber, attached hereto as Exhibit A. Moreover, the six HMA hospitals that are not being
recognized as Network providers are in unquestionably urban areas where there can be no doubt
as to members access to care by Network providers. Furthermore, these six hospitals have made
it clear that they will not bill their patients for the difference between the non-network benefits
paid and the amount of payments that would have been made if the hospitals were still in Blue
Cross provider Network. Therefore, to require Blue Cross to contract with those hospitals
would serve no legitimate public purpose, but rather, would provide a benefit to special interests.
Finally, even if the Court were to find that the asserted public purpose was adequate, the
challenged action was not reasonable necessary to achieve the purpose in light of the location of
the six hospitals and the availability of reasonable alternatives.
Accordingly, the executive action violates the Contracts Clause of Article 1, Section 10
of the U.S. Constitution and Article 3, Section 16 of the Mississippi Constitution.
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C. The executive action violates the Equal Protection Clause of the
Fourteenth Amendment to the United States Constitution and 14 of
the Mississippi Constitution.
The Equal Protection Clause of the Fourteenth Amendment states that no State shall
deny to any person within its jurisdiction the equal protection of the laws. U.S. Const. amend.
XIV, 1. Mississippi finds an equal protection component in its Due Process Clause, Miss.
Const. art. III, 14. The equal protection clause essentially requires that all persons similarly
situated be treated alike. Travis v. Stockstill, 2013 WL 5204669, *6 (S.D. Miss. Sept. 16, 2013)
(quotingMahone v. Addicks Util. Dist. of Harris Cnty., 836 F.2d 921, 932 (5th Cir. 1988)). A
private corporation is a person within the meaning of the Equal Protection Clause. See Grosjean,
297 U.S. at 244;Bellotti, 435 U.S. at 780 n. 15; Greene, 216 U.S. at 412.
To state a claim for equal protection violation as a class of one, a plaintiff must
establish that [it] has been intentionally treated differently from others similarly situated and
that there is no rational basis for the difference in treatment. Stockstill, 2013 WL 5204669, *6
(quoting Village of Willowbrook v. Olech, 528 U.S. 562, 564 (2000)). [I]f the challenged
government action does not appear to classify or distinguish between two or more relevant
persons or groups, then the actioneven if irrationaldoes not deny them equal protection of
the laws. Stockstill, 2013 WL 5204669, *6 (quoting Johnson v. Rodriguez, 110 F.3d 299, 306
(5th Cir. 1997) (quotingBrennan v. Stewart, 834 F.2d 1248, 1257 (5th Cir. 1988))).
Blue Cross has been intentionally treated differently from others similarly situated in that
the Governor is attempting to interpret and apply two statutes, Miss. Code Ann. 83-41-409(b)
and Miss. Code Ann. 83-5-39, in ways that they are not and have never been applied to any
other managed care entity or person engaged in the business of insurance in the state,
respectively. Namely, he is seeking to use Section 83-41-409(b), which provides for
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certification, recertification or decertification of managed care plans, as a means to force Blue
Cross to contract with another private party against its will. The same is true with regard to the
Governors references to Miss. Code Ann. 83-5-39, which concerns unfair trade practices. The
classifications created by the executive action impinge upon Blue Cross exercise of its right to
contract. However, they cannot be upheld, as no rational basis exists for the difference in
treatment. Therefore, the executive action violates the Equal Protections Clause of the
Fourteenth Amendment to the United States Constitution and 14 of the Mississippi
Constitution.
II. Injunctive relief is necessary to prevent irreparable harm to Blue Cross.
Executive Oder 1327, which forces Blue Cross to re-admit six HMA-owned hospitals
into its provider Network, will irreparably harm Blue Cross as it will result in a violation of Blue
Cross constitutionally protected rights under the Due Process Clause, Equal Protection Clause
and Contracts Clause of both the United States Constitution and the Mississippi Constitution.
[S]uits for declaratory and injunctive relief against the threatened invasion of a
constitutional right do not ordinarily require proof of any injury other than the threatened
constitutional deprivation itself. Davis v. District of Columbia, 158 F.3d 1342, 1346 (D.C. Cir.
1998). [T]here is a presumed availability of federal equitable relief against threatened
invasions of constitutional interests. Id. (quoting Hubbard v. EPA, 809 F.2d 1, 11 (D.C. Cir.
1986) (quotingBivens v. Six Unknown Fed. Narcotics Agents, 403 U.S. 388, 404 (1971) (Harlan,
J., concurring))). Although a plaintiff seeking equitable relief must show a threat of substantial
and immediate irreparable injury, a prospective violation of a constitutional right constitutes
irreparable injury for these purposes. Davis, 158 F.3d at 1346 (citing O'Shea v. Littleton, 414
U.S. 488, 502 (1974); Ross v. Meese, 818 F.2d 1132, 1135 (4th Cir. 1987)). See also Opulent
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Life Church v. City of Holly Springs, Miss., 697 F.3d 279, 295 (5th Cir. 2012) (citing Elrod v.
Burns, 427 U.S. 347, 373 (1976); quoting 11A Charles Alan Wright, Arthur R. Miller & Mary
Kay Kane, Federal Practice and Procedure 2948.1 (2d ed. 1995) ([w]hen an alleged
deprivation of a constitutional right is involved, most courts hold that no further showing of
irreparable injury is necessary.).
Thus, injunctive relief is necessary to prevent irreparable harm to Blue Cross.
III. The threat of harm to Blue Cross outweighs the threat of harm that
injunctive relief may cause to the Defendant.
The threatened harm to Blue Cross business operations substantially outweighs any
theoretical harm the Defendant might suffer. The threat of a violation of its constitutional rights
is extremely harmful to Blue Cross and outweighs any threat of harm to the Governor,
particularly as the only harm asserted by the Governor are his conclusory, unfounded concerns of
a lack of access that simply does not exist. Granting an injunction on the enforcement of the
executive action until its constitutionality can be determined will, therefore, not harm the State.
IV. Granting the requested injunctive relief will not disserve public interest.
The entry of this request is consistent with public policy and in the interest of the public.
The injunction will further the public interest by ensuring that private parties and persons are not
forced to contract in violation of their constitutional rights guaranteed by the United States
Constitution and the Mississippi Constitution or their common law rights.
CONCLUSION
The harm Blue Cross will suffer as a result of the Governors unprecedented and
unconstitutional action of entering Executive Order 1327 is of an immediate and ongoing nature.
The only way to protect Blue Cross from suffering irreparable harm is to maintain the status quo
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by enjoining the enforcement of Executive Order 1327 until its constitutionality can be
determined.
ACCORDINGLY, Blue Cross respectfully submits that it has met its burden under
Federal Rule of Civil Procedure 65(b), and that it is entitled to entry of a temporary restraining
order, preserving the status quo, and precluding the Governor from taking any action to enforce
Executive Order 1327 to the extent that it requires Blue Cross re-contract with and re-admit six
HMA-owned hospitals into its provider Network. Blue Cross respectfully requests any
additional relief that the Court deems just and proper.
Dated: October 23, 2013.
Respectfully submitted,
BLUE CROSS & BLUE SHIELD OF MISSISSIPPI,A MUTUAL INSURANCE COMPANY
By: __/s/ R. David Kaufman_____________________One of Its Attorneys
OF COUNSEL:
R. David Kaufman, Esq. (MSB No. 3526)Cheri D. Green, Esq. (MSB No. 4988)Brunini, Grantham, Grower & Hewes, PLLCPost Office Drawer 119Jackson, Mississippi 39205Telephone: (601) 948-3101Facsimile: (601) 960-6902
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CERTIFICATE OF SERVICE
I, R. David Kaufman, certify that I have this day caused the above and foregoing pleading
or other document to be served via ECF and HAND DELIVERY on the following:
Attorney General Jim HoodWalter Sillers Building
550 High Street, Suite 1200Jackson, MS 39201
Governor Phil BryantWalter Sillers Building
550 High Street, 19th FloorJackson, MS 39201
Dated: October 23, 2013.
_/s/ R. David Kaufman___________R. David Kaufman
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