Ben Fischer

Staff Reporter- Washington Business Journal

A federal judge dealt a blow to MedStar Health's goal to provide more in-house medical care for its employees, siding with a labor union that objected to hikes to workers' out-of-pocket expenses when they seek treatment elsewhere.

U.S. District Court Judge Richard Leon on July 10 confirmed an arbitrator's earlier decision ordering MedStar to rescind changes made to its employee benefit plan in 2011 and refund higher deductibles and other fees absorbed by workers.

MedStar officials did not immediately return a message seeking comment.

The original complaint was filed by National Nurses United, which represents about 1,500 nurses at MedStar Washington Hospital Center in the District. The union argued the changes, which took effect in 2012, were subject to negotiations under its labor contract.

In late 2011, MedStar made it more costly to receive care at other hospitals or clinics under its self-funded insurance plan, which included a PPO network created by CareFirst BlueCross BlueShield. For instance, the system imposed a new $2,000 family deductible for in-network care on its enhanced PPO plan, but kept no deductible for services at MedStar facilities.

MedStar executives argued changes to the union contract, agreed to earlier that year, allowed them to alter individual components of its benefit plan design without "materially diminishing the plan as a whole," but arbitrator Herbert Fishgold found otherwise.

This dispute goes beyond mere cost-cutting and strikes at a key strategic imperative for MedStar. The system is working to develop its own insurance capabilities as a way to thrive amid health reform, and it considers its own workforce one of the frontiers in that effort. Like many systems, MedStar hopes to become a fully integrated health system that can provide all its customers both medical and insurance needs.

Stephen Frum, chief shop steward for the nurses union, said many employees do use MedStar facilities, but not all, and they value choice. At least 20 percent of all employee claims would have been subject to the higher deductibles and copays, according to the arbitrator's ruling.

"I think probably workers in general, and nurses maybe even more so, want choice in where they go for health care," Frum said. "And they don't want to be directed by their employer to use their employer's facility exclusively. This narrowness of choices is repugnant to nurses, and concerning too, because once they've got us in their system — and the cost to get out is extremely expensive — it's sort of a captive audience."

A separate case remains in arbitration, Frum said, relating to a more recent move by MedStar to put more employees into its own in-house insurance plan that he says further limits options.