San Fernando Valley Business Journal

Health Net Terminates Six Tenet Hospital Contracts

By Joel Russell Originally published December 27, 2012 at 2:19 p.m., updated December 27, 2012 at 6:03 p.m.

Health Net Inc. announced that its subsidiaries have terminated agreements with all six of Tenet Healthcare Corp.’s Southern California hospitals after the two companies failed to renegotiate reimbursement rates.

The Woodland Hills insurer said it thinks Tenet’s reimbursement should be in line with the medical consumer price index, which currently averages more than 3 percent and that reimbursement for government programs like Medi-Cal need to be consistent with that inflation rate.

“Our goal is to help preserve affordable benefits for our customers, not pass along inflated health care costs,” said Steve Sell, president of Health Net’s Western Region Health Plan, in a statement.

The contract terminations went into effect at midnight Dec. 21.

The hospitals are Desert Regional Medical Center, Fountain Valley Hospital and Medical Center, John F. Kennedy Memorial Hospital, Lakewood Regional Medical Center, Los Alamitos Medical Center and Placentia Linda Hospital.

Tenet, based in Dallas, issued a statement to the Business Journal that it is unclear why Health Net ended the contracts.

"At the time of our last meeting, we were in full agreement on the terms of our contract," the statement said. "We have full agreement with Health Net on reimbursement rates at these six hospitals. We are puzzled and disappointed by their public comments."

Shares of Health Net closed Thursday at $24.50, down 31 cents or 1 percent, in trading on the New York Stock Exchange.