Health Net Inc. Settles Dispute with Tenet Healthcare Corp. for $28.5 Million

Strategic Insights -

A significant settlement has been reached between Health Net Inc. and Tenet Healthcare Corp. over outstanding claims involving Tenet's California hospitals. The dispute, which spans over two years, has been resolved with Health Net agreeing to pay $28.5 million. The settlement marks a conclusion to a contentious period between the two companies, which began in November 2003 when certain Tenet hospitals filed an arbitration demand for approximately $45 million in claim underpayments. The demand was later amended to increase the alleged claim to $77 million plus interest, fees, and damages, prompting Health Net to file counterclaims seeking around $100 million.

Key Takeaways:

  • Health Net Inc. and Tenet Healthcare Corp. have settled their dispute over outstanding claims involving Tenet's California hospitals, with Health Net agreeing to pay $28.5 million.
  • The dispute centered around a "stop-loss" provision in health-care contracts, which requires health plans to pay a percentage of a hospital's billed charges once a certain dollar threshold is reached.
  • The companies' November contract allows Health Net of California's 2.4 million members to access health-care services at Tenet California's 17 acute-care hospitals and other facilities in the state.
  • Tenet hospitals initially filed an arbitration demand for approximately $45 million in claim underpayments, which was later amended to increase the alleged claim to $77 million plus interest, fees, and damages.
  • Health Net filed counterclaims seeking around $100 million in response to Tenet's amended arbitration demand.
  • The settlement marks a conclusion to a contentious period between the two companies, which began in November 2003.

Statistics:

  • Health Net Inc. agreed to pay $28.5 million to resolve disputes with Tenet Healthcare Corp.
  • Tenet hospitals filed an arbitration demand for approximately:

+ $45 million in claim underpayments in July 2003

+ $77 million plus interest, fees, and damages in October 2004

  • Health Net filed counterclaims seeking around $100 million in response to Tenet's amended arbitration demand
  • Health Net of California has 2.4 million members with access to health-care services at Tenet California's 17 acute-care hospitals and other facilities in the state

Sources:

  • Health Net Inc.'s most recent quarterly report, cited in the article.
  • Tenet Healthcare Corp.'s statement, as provided in the joint press release with Health Net on February 14, 2005.
  • Health & Medicine Week editors' summary, citing information from staff and other reports.