Saying even the smallest disclosure of its “trade secrets” would cause irreparable damage to its business, Advocate Health Care, Illinois’ largest health system and operator of a dozen hospitals, has filed suit against a southwest suburban competitor, asking a judge to block the efforts by Palos Community Hospital to gain access to Advocate’s rate agreements with health insurers – even though Advocate recently demanded the exact same information from the Palos hospital.

Advocate brought its complaint in Cook County Circuit Court on April 11, requesting an injunction against Palos to prevent it from uncovering the information from Advocate as part of an ongoing court fight in a fraud case brought by Palos against health insurer Humana.

Launched in 2013, Palos’ complaint against Humana also involved Advocate and Motorola, two large Chicago area self-insuring employers who partnered with Humana to provide health insurance coverage to their workers and dependents. In that action, Palos alleged it did not receive the payment for services it believes it should have been owed under their rate payment agreements.

That case remains pending.

However, as part of discovery under that action, Palos in November demanded Advocate hand over all of the managed care agreements held by Advocate for “all of its 12 hospitals and other 250 provider entities for a six year period.”

Advocate responded with its lawsuit, arguing it should not be forced to turn over the documents, which it said “are among the most confidential and valuable of Advocate’s trade secrets,” in a dispute that it contends should be limited only to Palos and Humana.

According to Advocate’s court filing, Palos allegedly wrongly included Advocate in the litigation in June 2013 when it sued Advocate, in its role as the provider of health insurance to its employees, for allegedly violating a contract Palos said it held with Advocate. Advocate said it and Motorola moved to dismiss the complaints against them, arguing Illinois law doesn’t allow such actions against third-party payers. Instead, Advocate argued, Palos’ action can rightfully be brought only against Humana, the health insurance company that manages Advocate’s employees’ health insurance plans.

A judge has granted summary judgment in favor of Advocate and Motorola over Palos’ breach of contract claims, the lawsuit said, but the judge has indicated the court will not similarly rule on Palos’ remaining unjust enrichment allegations until discovery in the case is completed.

In response, Advocate brought its lawsuit, arguing, in part, that the hospital agreement it has with Palos should bar Palos from continuing with its legal action against Advocate altogether, and also block its discovery request.

“Palos’ contract claims against Advocate were dismissed, and because the Palos claims are governed by the various interrelated contractual relationships of the parties, Palos is barred from bringing an unjust enrichment claim against Advocate,” the lawsuit stated.

Advocate conceded in its complaint that it, also, had earlier demanded similar managed care agreement information from the Palos hospital. However, Advocate attempted to distinguish its request from Palos’, saying the Advocate discovery demand was brought against Palos because Palos brought in the first place the legal action over improper rate reimbursements, and “put its own rates of reimbursement at issue” in the court fight. Advocate contended Palos’ similar discovery demand against Advocate is irrelevant to Palos’ lawsuit, as Advocate was included in the lawsuit as “a sponsor and administrator of a self-insured employer medical welfare benefits plan,” and not in its capacity as a health care system.

And Advocate noted Palos admitted in arguments over its discovery request in March that “it was only seeking (Advocate’s information) because Advocate had sought information from Palos” first. At that point, the judge ordered Advocate to turn over managed care information for three hospitals: Christ Medical Center in Oak Lawn, Trinity Hospital on Chicago’s South Side, and South Suburban Hospital in Hazel Crest.

Advocate said it has offered to return the information it received from Palos, and destroy all copies it holds, should Palos agree to drop its discovery demand.

“That Advocate happens to be a health care system with 12 hospitals in Illinois is not relevant to (Palos’ lawsuit),” Advocate said in its complaint. “But Palos is taking advantage of Advocate’s status as a hospital system by seeking through discovery … information relating to Advocate’s rates of reimbursement for the services it provides as a competing health care provider.”

Advocate is represented in the action by attorneys with the firm of Drinker Biddle & Reath, of Chicago.

Palos is represented by the firm of Schiff Hardin, of Chicago.

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Organizations in this Story

Advocate Health Care Drinker Biddle & Reath LLP Schiff Hardin LLP

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