Mayo Clinic has sued the health plan division of Sanford Health, saying misrepresentations by the South Dakota-based insurer have stuck the medical center in Rochester with more than $700,000 in unpaid medical bills for a patient treated more than two years ago.

The payment dispute centers on intensive care and other services provided to an unidentified patient during a 2022 hospital stay that stretched from Feb. 5 to March 29.

Sanford preauthorized the patient's care and provided some payment but later told the clinic that a different health insurer — a Medicaid health plan operated by Blue Cross Blue Shield of North Dakota — had primary responsibility, according to a lawsuit that was moved to the U.S. District Court of Minnesota in December.

Mayo says it refunded the payments to Sanford, but Blue Cross Blue Shield subsequently denied the payment claims due to a lack of preauthorization. The clinic says it is not seeking payment from the patient, a move that comes as Mayo has expanded financial assistance programs for patients lacking insurance coverage for needed care.

"For the reasons outlined in the lawsuit, Mayo Clinic is pursuing payment from Sanford Health Plan, which presented itself to Mayo Clinic as the patient's primary insurance plan and approved all medical care at Mayo Clinic," the clinic wrote in a statement. "It was only after the episode of care that Sanford Health Plan made the claim to Mayo Clinic that a different health plan was primary. Sanford's misrepresentation prevented Mayo from obtaining reimbursement from the other health insurance plan."

Sanford Health Plan said in a statement that it does not comment on active or pending litigation.

In a court filing last month, the insurer alleged Mayo failed to follow procedures with Medicaid claims, which caused Blue Cross Blue Shield of North Dakota to deny Mayo's request for reimbursement. Sanford Health Plan, which said it represented a tribal health plan that was the patient's payer of last resort, said Mayo was "looking to shift blame for its mistakes" by bringing the lawsuit.

"Sanford is not responsible for ... medical expenses just because Mayo failed to follow standard Medicaid procedure," the insurer wrote in a memo supporting its motion to dismiss the case. "BCBS ND denied Mayo's claim because Mayo attempted to fax a Notice of Admission to BCBS ND but sent it to the wrong fax number. BCBS ND also denied reimbursement because Mayo failed to communicate with BCBS ND about its claims until Aug. 5, 2022, and otherwise failed to follow Medicaid's claims submission rules, by which Mayo has agreed to abide."

The lawsuit was first filed in November in Olmsted County District Court before being moved to federal court. A pre-trial conference in federal court has been scheduled for Feb. 4.

Mayo Clinic is an international destination for care that is also Minnesota's largest nonprofit group, including hospitals and clinics in Arizona, Florida, Iowa and Wisconsin. It reported an operating profit in 2023 of nearly $1.1 billion.

Based in Sioux Falls, Sanford Health is one of the nation's largest providers of hospital and clinic care in rural communities, and it announced Thursday it has finalized a merger deal with Wisconsin-based Marshfield Clinic that was first announced last year. The health care provider has an insurance division that's one of seven nonprofit health plans in Minnesota that saw earnings grow at the outset of the COVID-19 pandemic.

In its complaint, Mayo says the patient was transferred to its Rochester hospital from another hospital that listed Sanford Health Plan as the primary insurer, with Blue Cross Blue Shield listed as the source of secondary coverage. Mayo says it confirmed Sanford's primary coverage through an online insurance verification process.

The patient received care, Mayo says, under a provider agreement that lets patients with Sanford Health Plan insurance receive care at the clinic on an in-network basis, including a contractual discount for services.

Mayo alleges Sanford repeatedly approved and authorized services for the patient during the lengthy hospitalization but reached out to the clinic on April 15, 2022, saying its client — Three Affiliated Tribes Tribal Health Plan — was a payer "of last resort" for the patient.

"On April 27, 2022, Sanford began requesting that Mayo refund the payments made on the claims submitted, and that Mayo should bill BCBS ND as primary; Mayo refunded these payments in good faith," the lawsuit states. "Mayo then billed BCBS ND, who denied the claims ... based on a lack of preauthorization.

"Mayo would not have sought preauthorization from BCBS ND at the time of [the patient's] admission because it was led to believe that Sanford was primary, and Sanford confirmed this fact by preauthorizing all dates of service and paying several claims submitted to it by Mayo for those dates."

Due to Sanford's "negligent and material misrepresentations," the lawsuit says, Mayo has gone unpaid for more than two years for services in the amount of $739,956.20.

The clinic wants Sanford to pay damages that go beyond the value of the unpaid medical bills, including its costs and fees in the litigation.

In its motion to dismiss, Sanford Health Plan argues Mayo has not sufficiently identified the contract or material terms that the insurer allegedly breached. Further, the health plan says Mayo's reliance on inaccurate information allegedly supplied by the insurer was not the cause of its failed claim for reimbursement from Blue Cross Blue Shield.

"Mayo alleges that the denial and rejected appeal were the result of no pre-authorization for the health care [the patient] received and that Sanford led Mayo to wait too long to request a retroactive authorization," Sanford wrote in its motion. "However, in a letter explaining its denial, BCBS ND directly contradicts Mayo's allegations."

Even if there were a viable cause of action, Sanford argues, the complaint still must be dismissed because it lacks "an indispensable third party" — Blue Cross Blue Shield of North Dakota.

"There is no dispute that Medicaid was the party responsible for [the patient's] medical bills and that BCBS ND and their denial of Mayo's claim is at the core of this lawsuit," Sanford Health Plan wrote in its court filing.

Blue Cross Blue Shield of North Dakota wrote in a statement that it cannot comment on pending litigation and that any clarification on allegations "should be directed to the parties of the complaint."