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California hospital system, insurer locked in dispute

On Behalf of | Jan 17, 2015 | Contract Disputes

Disputes between businesses can be all but unavoidable. Every business owner is heavily invested in the success of his or her company; if another party puts that success in jeopardy, it can be crucial to take legal action.

However, it is also of utmost importance that business owners weigh the cost of any legal action with the potential cost to consumers. These costs are not just financial, either. In some cases, a company’s image, services and reputation with consumers can be seriously damaged by lawsuits and disputes, so it is essential that business owners seek legal guidance when and if such a dispute arises.

For example, readers may be aware of the dispute between Blue Shield insurance company and the Sutter Health chain of hospitals. According to reports, the two parties have been locked in a fight over the terms of a pending contract. Unless this case is resolved soon, 280,000 people with Blue Shield insurance could lose coverage.

There are two issues that are preventing the two companies from reaching an agreement. The first is the “illegally inflated prices” that Blue Shield has accused Sutter Health of imposing at their hospitals. The cost of care at these facilities is reportedly 30 percent higher than other facilities, which Sutter denies.

The second issue is that Sutter is requesting an arbitration clause in any new contract between the parties. If this goes through, the hospital would be shielded from lawsuits stemming from future disputes. Instead, parties would need to go through arbitration. Blue Shield argues that this is unfairly limiting, while Sutter argues that it is an industry norm.

This case can serve as a good reminder that business disputes can have a far-reaching impact on consumers and businesses alike. In this case, hundreds of thousands of people will be affected by the outcome, whatever it may be. It is also a situation that illustrates the importance and complexities of contract negotiations.

Business owners who may be involved in contract disputes or negotiations would be wise to take steps to protect themselves and their companies. These situations can be highly contentious, and having the support of an attorney who understands the legal options and ramifications of business agreements can be a valuable resource.

Source: LA Times, “Blue Shield in dispute with Sutter Health over costs,” Chad Terhune, Jan. 5, 2015