Appeals from the Order of the Department of Insurance in case of Re: Hospital Service Plan of Lehigh Valley (Blue Cross of Lehigh Valley) Filing 6-V-74 (hospital contract.)
James H. Stewart, Jr., with him Nauman, Smith, Shissler & Hall, for appellants.
Linda S. Lichtman, Assistant Attorney General, with him Andrew F. Giffin, Assistant Attorney General, Gerald Gornish, Deputy Attorney General, and Robert P. Kane, Attorney General, for appellees.
President Judge Bowman and Judges Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. Judge Crumlish, Jr., did not participate. Opinion by Judge Mencer. Dissenting Opinion by President Judge Bowman.
These are appeals from the Insurance Department's refusal to approve a reimbursement contract between the Hospital Service Plan of Lehigh Valley (Blue Cross) and its contracting hospitals (appellants).*fn1 The Act of November 25, 1970, P.L. 707, Title 40, § 6124(a), added by the Act of November 15, 1972, P.L. 1063, § 1, 40 Pa. C.S.A. § 6124(a) (Supp. 1975-76), provides:
"(a) General rule. -- The rates charged to subscribers by hospital plan corporations, all rates of payments to hospitals made by such corporations
pursuant to the contracts provided for in this chapter, all acquisition costs in connection with the solicitation of subscribers to such hospital plans, the reserves to be maintained by such corporations, the certificates issued by such corporations representing their agreements with subscribers, and any and all contracts entered into by any such corporation with any hospital, shall, at all times, be subject to the prior approval of the department."
Each of the appellants is a hospital providing medical services to subscribers of Blue Cross, and they were member hospitals of Blue Cross until July 1, 1972, when their last contract expired. Appellants have negotiated jointly with Blue Cross as to the form of the reimbursement contract, and such negotiations have been going on since July of 1972. These hospitals have been reimbursed on an interim basis since July of 1972, but no final settlements have been held for the ensuing period. A form of contract was submitted by Blue Cross to the Insurance Department for approval on April 9, 1973 which was approved by the Department on June 18, 1973, but appellants refused to execute this form of contract.
Negotiations finally resulted in the execution of a contract between each of the appellants and Blue Cross similar to the one approved by the Insurance Department on June 18, 1973, one difference in the contract being the present refusal of the hospitals to agree to abide by the regulations and/or recommendations of the Insurance Commissioner and, in lieu thereof, their agreement "to give consideration to suggestions from all sources." The form of the last negotiated contract was submitted to the Department for approval on or about September 18, 1974.
Notice of the filing at No. 6-V-74 of this contract was given in the Pennsylvania Bulletin, Vol. 4, No. 41, at page 2094, on September 28, 1974, requesting interested parties to submit comments, suggestions, or objections within
thirty days, pursuant to the provisions of Section 6124(b), added by the Act of November 15, 1972, 40 Pa. C.S.A. § 6124(b) Supp. 1975-76). Thereafter, on November 2, 1974, in the Pennsylvania Bulletin, Vol. 4, 47, at page 2344, notice was given of "a public informational hearing concerning Blue Cross of Lehigh Valley's [filing No.] . . . 6-V-74 (hospital contract)" to be held on November 13, 1974 in Allentown. The notice went on to state that the hearing would be in addition to the written comments on the filing which had been requested. No written comments, suggestions, or objections were received by the Insurance Department from any of the appellant hospitals or from any other parties.
On November 18, 1974, the Insurance Department refused to approve the contract in question, and the Insurance Commissioner set forth the reasons for such refusal in the following letter:
Blue Cross of Lehigh Valley
Allentown, Pennsylvania 18102
Re: Hospital Service Plan of Lehigh Valley (Blue Cross of Lehigh Valley) Filing 6-V-74 (hospital contract)
"Pursuant to the authority granted this Department by 40 Pa. S. § 6124 of the Nonprofit Corporation Law of 1972, I hereby disapprove the above-referenced filing of a reimbursement contract between Blue Cross of Lehigh Valley and its contracting hospitals, submitted to the Department via your letter of September 17, 1974, received ...