Tenet, Health Net Reach Agreement on Contract that Eliminates Stop-Loss Payments
Tenet Healthcare, in an effort to "repair its reputation" following several inquiries into its business practices, came to terms on a deal yesterday with Health Net that changes the way Tenet charges the insurer for hospital costs, Reuters/New York Times reports (Reuters/New York Times, 12/3). Under the agreement, Tenet's fixed-rate charges will increase, but the hospital chain will no longer receive "stop-loss" payments that are charged for unusually difficult cases. The new deal takes effect on Jan. 1 at 27 Tenet hospitals in Orange and Los Angeles counties (Knap/Heisel, Orange County Register, 12/3). Under Medicare, hospitals are paid a fixed rate but can receive special outlier payments for particularly expensive care. Tenet hospitals have come under scrutiny from federal regulators for allegedly inflating their retail charges for some procedures, prompting an "unusually large amount" of outlier payments (Reuters/New York Times, 12/3). Private insurers' stop-loss payments cover the same type of care as outlier payments; both are calculated based on hospital retail charges. Under the new agreement, Health Net will increase its fixed rates but will no longer provide stop-loss payments. Tenet officials said yesterday that the new contract will "eas[e] its reliance" on stop-loss payments. "We are confident [the new contract] will provide the revenue Tenet hospitals need to cover the rising costs of delivering quality patient care," Tenet Executive Vice President Neil Sorrentino said.
According to some analysts, the new contract between Tenet and Health Net will mark the first of "numerous changes" in the way health insurers reimburse providers nationwide. The Register reports that private and public insurers will begin to attempt to eliminate "quirks in the rules" that allow providers to boost profits by raising retail charges. CIGNA and Wellpoint Health Networks on Monday joined Health Net in announcing they will attempt to "phase out" stop-loss payments in their contracts (Orange County Register, 12/3).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.