For years, a troubling pattern has emerged in the healthcare industry: health insurance companies are increasingly resorting to complex tactics to deny, delay, or drastically underpay legitimate claims from hospitals and other healthcare providers. This is not a matter of isolated incidents or administrative hiccups. Rather, it is a systemic issue that undermines the financial stability of hospitals and places patient care at risk. Several major legal cases illustrate just how far some insurers will go to avoid reimbursing healthcare institutions fairly—and the consequences these actions have for the broader healthcare ecosystem.

Case Study 1: St. Charles Surgical Hospital & Center for Restorative Breast Surgery vs. Blue Cross Blue Shield of Louisiana

In 2024, a Louisiana jury delivered a stunning $421 million verdict against Blue Cross Blue Shield of Louisiana. The lawsuit was brought by St. Charles Surgical Hospital and the Center for Restorative Breast Surgery, who alleged that the insurer had systematically underpaid for more than 9,000 procedures over a ten-year span. What made the case especially egregious was the fact that these procedures had been pre-approved. Despite verifying coverage and issuing prior authorizations, Blue Cross Blue Shield failed to reimburse the hospitals adequately, instead opting for dramatically reduced payments that ignored customary or contractual rates. The jury found these practices to be intentional and financially damaging to the providers.

Case Study 2: TeamHealth vs. UnitedHealthcare

TeamHealth, a national emergency physician staffing group, took UnitedHealthcare to court in Nevada and won a $60 million punitive damages award in 2021. At the heart of the case was a pattern of deliberate underpayment for emergency services provided by TeamHealth physicians. The jury found that UnitedHealthcare had consistently reimbursed emergency room doctors at rates far below fair market value, even when those services were essential and lifesaving. The court concluded that the insurer’s actions were part of a broader strategy to contain costs at the expense of provider fairness and patient access.

Case Study 3: Blue Cross Blue Shield Antitrust Settlement

In another monumental legal development, Blue Cross Blue Shield agreed in 2024 to pay $2.8 billion to settle a sweeping antitrust class action. This lawsuit, filed by a class of hospitals, physicians, and other healthcare providers, accused Blue Cross and its affiliates of dividing the U.S. market into exclusive service areas. This “territorial fencing” suppressed competition and allowed the insurers to keep reimbursement rates artificially low while maintaining high premiums for consumers. As part of the settlement, Blue Cross agreed to significant operational reforms aimed at increasing transparency and accountability.

Case Study 4: The Regents of the University of California v. Kaiser Foundation Hospitals

In a notable case, the Law Offices of Stephenson, Acquisto & Colman (SAC) represented The Regents of the University of California in a lawsuit against Kaiser Foundation Hospitals. The case centered on allegations of breach of contract and insurance bad faith, with Kaiser accused of failing to honor reimbursement obligations for medical services provided by the University of California’s healthcare facilities. SAC’s legal team, including attorneys David Mastan, Joy Stephenson-Laws, Barry Sullivan, and Rich Lovich, successfully litigated the case, resulting in a significant jury verdict. This outcome was recognized by Top Verdict as one of the top 50 highest jury verdicts, settlements, court, or arbitration awards in California for the year 2017.

The Fallout for Hospitals and Patients

The consequences of these practices go far beyond courtrooms and balance sheets. For hospitals, delayed or denied payments create immense cash flow issues. These financial strains may force providers to delay facility improvements, reduce staff, or even close departments. Rural and community hospitals, in particular, are vulnerable; for them, a few million dollars in unpaid claims can mean the difference between survival and closure.

For patients, the effects are even more insidious. When hospitals are not paid promptly or fairly, they often pass the burden onto patients in the form of higher out-of-pocket costs or aggressive collection efforts. Additionally, if a hospital becomes financially unstable due to insurer non-payment, patients may face reduced access to services, longer wait times, or the need to travel far distances to receive necessary care.

Moreover, the erosion of trust between providers and payers filters down to patient-provider relationships. Patients are frequently caught in the middle of disputes, receiving conflicting information from insurers and hospitals and left unsure about what services are covered and what they owe. This confusion can deter people from seeking needed care altogether, leading to worse health outcomes.

Legal Advocacy: A Necessary Shift in Hospital Strategy

Historically, many hospitals adopted a passive approach to insurance claim denials, often writing off unpaid claims as bad debt. This practice was partly due to the high costs and complexities associated with legal action. However, the current landscape of systematic underpayment and denial by insurers has necessitated a more proactive stance.

Legal advocacy has become an essential tool for healthcare providers to ensure fair reimbursement. By pursuing litigation against insurers who engage in bad faith practices, hospitals not only recover owed funds but also set legal precedents that can deter future misconduct. The success of firms like Stephenson, Acquisto & Colman in representing healthcare providers demonstrates the effectiveness of legal action in holding insurers accountable.

Furthermore, legal victories can lead to broader industry reforms, such as increased transparency in insurer practices and the establishment of more equitable reimbursement standards. These outcomes benefit not only the litigating institutions but the healthcare system as a whole.

What Needs to Change

These high-profile cases demonstrate the urgent need for systemic reform in healthcare reimbursement. While litigation can help to enforce accountability, more proactive and widespread changes are essential.

1. Strengthen Regulatory Oversight: Federal and state regulators must impose stricter standards and penalties on insurers that engage in chronic underpayment or denial of claims. Policies that enforce “prompt pay” laws should be uniformly adopted and rigorously monitored.
2. Enforce Transparent, Fair Contracts: Contracts between hospitals and insurers should clearly define payment rates, authorization procedures, and dispute resolution processes. Hospitals must be empowered to hold insurers accountable to these terms.
3. Expand Independent Arbitration: Disputes over reimbursement could be resolved through fast-track, neutral arbitration rather than costly litigation. Several states have adopted such models with success, reducing court burdens and enabling quicker resolutions.
4. Increase Public Accountability: Insurers should be routinely required to report their claims denial rates, average time to payment, and results of internal appeals processes. Public reporting would incentivize better behavior and give providers and patients insight into payer reliability.
5. Support Legal Advocacy: Law firms specializing in healthcare law play a critical role in defending hospitals from unjust payer practices. Their litigation successes have helped to set important legal precedents and have brought attention to insurers’ misconduct.

A Call to Action

The problem is clear: when insurers fail to pay for care that is authorized and provided, the entire system suffers. Patients are left in financial limbo. Hospitals are forced into impossible economic choices. And the trust that is foundational to effective healthcare is eroded.

Policymakers, provider networks, and insurance regulators must prioritize these issues now. It is time to rebalance the scales so that the burden of rising healthcare costs is not unfairly borne by those delivering or receiving care. Fair and timely reimbursement isn’t just a financial issue—it’s a matter of ethics, public health, and human dignity.