When the OMNIA line of health plans were introduced in 2015 with the promise of revolutionizing health care options in the state, Horizon Blue Cross Blue Shield of New Jersey said it was offering consumers high quality care at the lowest price.

But confidential reports and related documents obtained by NJ Advance Media suggest Horizon invited two of the biggest and most expensive hospitals to join the exclusive OMNIA network -- even before Horizon hired a consultant to evaluate hospital quality and cost.

The reports, prepared by the national consultant McKinsey & Company, are at the heart of a bitter court battle a handful of independent hospitals are waging against Horizon to gain entry into OMNIA's top tier, which offer patients discounts on co-pays.

Horizon's business practices and decisions matter deeply in New Jersey. As the state's largest health care provider, by far, Horizon's actions directly and indirectly affect every hospital and influence the entire health care market.

In the battle over OMNIA, Horizon says the goal was to give consumers a better choice at a lower cost, and gradually transform health care by financially rewarding their OMNIA partners hospitals which keep people healthy. But the hospitals left out of preferred status say it could force them to downsize, consolidate or close their doors.

Valley Hospital in Ridgewood and CentraState Medical Center in Freehold are headed to court to prove Horizon "breached its duty to act in good faith" by relegating them to OMNIA's second tier, costing them millions of dollars. Holy Name Medical Center in Teaneck was a plaintiff in the case until Tuesday, when it and Horizon announced they had reached a confidential settlement.

Taken together, the documents appear to show how McKinsey's recommendations evolved over 10 weeks in 2014. The consultant started by identifying hospitals with strong "partnership potential" and that could lower Horizon's total cost of care. But cost was not among the final criteria used to OMNIA Alliance and Tier 1 hospitals. The largest hospital systems came out ahead, even if smaller competitors scored better on quality measures.

Represented by the law firm of Robinson Miller of Newark, NJ Advance Media, which provides content to NJ.com, The Star-Ledger and other affiliated newspapers, sued to obtain a copy of McKinsey's work. On Tuesday, State Superior Court Judge Robert P. Contillo, sitting in Bergen County and presiding over both cases, released the report and related documents after the state Supreme Court cleared the way.

According to the documents:

* Months prior to hiring McKinsey in 2014 to help select which of New Jersey's hospitals ought to be tier 1 members, Horizon executives had discussed forming a "value-based care" partnership with two of the largest hospitals systems, Barnabas Health Network and Hackensack University Network.

Michael Furey, the attorney representing Valley, CentraState and Holy Name, said this finding contradicts how Horizon sold the OMNIA plans to the public.

"They had already decided they wanted Barnabas and Hackensack to be the partner hospitals. They told the Legislature and the public they selected the best hospitals in the state who provided the lowest cost care, and they said they did it on the basis of what McKinsey told them," Furey said. "But we uncovered they were already having these discussions in 2013 and early 2014 before they began the selection process."

In court records, Horizon officials say they had met with numerous hospitals -- including some that later sued Horizon -- to discuss "value-based care" strategies that could control costs by structuring payments based on patient outcomes.

* The first iteration of McKinsey's report, dated March 2014, gave Holy Name, CentraState, Valley Hospital high marks based on price and "partnership potential."

A month later, McKinsey introduced a new "core belief" for selecting Tier 1 hospitals: geographic exclusivity. That effectively ruled out Holy Name and Valley, Hackensack University Hospital's competitors in Bergen County.

"Having too many partners in the same geography makes it difficult to foster the right mindset with partners and provide them sufficient incremental volume to make partnerships attractive," according to the report.

St. Peter's University Medical Center in New Brunswick is also suing Horizon after being edged out by RWJBarnabas, the state's second-largest hospital chain, which has a strong Middlesex County presence.

Horizon spokesman Tom Wilson said McKinsey understood "geography was always a consideration in the selection of potential OMNIA Alliance partners." He pointed to language in the McKinsey scope of work that made geography one of the items McKinsey was tasked with considering as it developed the model.

The Department of Banking and Insurance requires all insurance plans to meet geographic access requirements, he added.

* OMNIA counted on Tier 2 hospitals losing a lot of money. McKinsey projected Tier 1 hospitals would absorb 60 percent of patient volume from elective procedures and 40 percent from emergency care from Tier 2 facilities.

* Horizon and McKinsey finally arrived at six characteristics, weighted differently, to choose its preferred partners: leadership mindset, clinical quality, consumer attractiveness, financial resources committed to population health, service offering across the care continuum, and scale.

Leadership and quality each account for 25 percent of the score -- a fact, Horizon officials have argued in legal documents, that demonstrates their commitment to choosing the best partners. Quality measures earned more weight in later versions of McKinsey's report.

But Furey argued the remaining categories benefit larger hospitals and hospital chains.

Services "across the care continuum" reward hospital chains, because what one hospital may lack in specialty or outpatient care can be complemented by another in the same system, Furey said. "Consumer attractiveness" favors the big-name institutions that can afford to wage aggressive marketing campaigns, he said.

* Cost ultimately was not a determining factor in selecting Tier 1 hospitals.

Horizon officials, according to court records, said they did not judge hospitals based on what they charge now because OMNIA intends to create a "value-based" payment model, which rewards hospitals for keeping people well.

"The purpose of this engagement was to transform the health care delivery model to focus on quality and total cost of care, not just reduce the price of a given trip to the hospital," Wilson said.

But Horizon is still paying hospitals the old-fashioned way, so cost should matter, Furey said.

Wilson said Furey is wrong on that count.

"We made payments in 2017 that take into account both quality and reductions in the total cost of care. This change won't happen overnight, it's a marathon not a sprint," Wilson said.

Hackensack University Medical Center was listed as the most expensive hospital in the state -- 30 percent higher than average -- according to a chart in the March 2014 draft of the McKinsey report. Robert Wood Johnson University Health, Saint Barnabas and Atlantic Health System were not far behind. All of them are Tier 1 OMNIA Alliance partners.

There are 36 hospitals in OMNIA's top tier, according to an October memo on Horizon's website. There are 72 acute-care hospitals in the state.

The public's response to OMNIA has been enthusiastic. In its debut year in 2016 premiums were 15 percent lowered compared to Horizon's other product lines.

This year, there are 400,000 members, up from 238,000 the prior year, Wilson said.

"Moreover, more than 70,000 previously uninsured New Jerseyans now have healthcare thanks to OMNIA," Wilson said.

"OMNIA members now have the power to not only choose their provider, but also the cost of their healthcare. The power of OMNIA is that its members have the option of selecting a Tier 1 provider with lower associated out of pocket costs or a Tier 2 provider whose out of pocket costs are similar to the broad based plans that members were used to and that are still offered by Horizon," Wilson said. "This radical shift in the healthcare paradigm is exactly what Horizon members needed to combat the ever rising cost of healthcare."

OMNIA policy holders paid double-digit increases this year, which Horizon largely attributed to the uncertain future of the Affordable Care Act under the Trump administration.

Contillo released the documents following the state Supreme Court's motion, made public Tuesday, which declined Horizon request for an emergency stay of the order.

"We are very pleased that the Supreme Court lifted the stay and allowed the Judicial records at issue to be released to the public," said Keith J. Miller, NJ Advance Media's attorney. "Records regarding the functioning of our health care and legal systems should not be hidden from the public whose very lives are impacted by the records at issue."

In April, Contillo sided with the news organization's request for the documents, calling the case "no mere private dispute -- it is infused with broad public impact and it is of legitimate public interest."

Susan K. Livio may be reached at slivio@njadvancemedia.com. Follow her on Twitter @SusanKLivio. Find NJ.com Politics on Facebook.