Tenet-HCA tussle costs Ysleta, Socorro. The county might be next.
by David Crowder
Posted on November 28, 2008
The Tenet hospital chain, second largest in the nation, is aggressively pursuing public health contracts and a larger piece of the market share across the country, often bumping into competitor HCA, the nation’s biggest hospital chain, along the way.
In El Paso, Tenet’s new and tougher stance forced a major change in employee health-care plans that is predicted to raise costs for the Ysleta and Socorro school districts.
Hospital Corporation of America, formerly Columbia HealthCare and now generally known simply as HCA, owns the Las Palmas and Del Sol medical centers.
Tenet owns Sierra Medical Center and Providence Memorial Hospital. Both corporations also own an array of medically related facilities in El Paso.
County commissioners have tried to understand and deal with Tenet’s new approach, which for the first time keeps health-plan administrators that are competing to run the county’s self-funded health plan from offering a money-saving option from HCA.
“This is not right,” County Commissioner Luis Sarinana said in frustration over the situation at a special meeting this past Monday. “This is politics at its worst. We have to suffer a million dollars because people are playing politics with us.”
This week’s commissioners meeting to decide on the shape of the county’s $10 million health benefits plan and whether to re-hire Foresight as the third-party administrator for the plans ended with a 2-2 vote. County Judge Anthony Cobos was absent.
The deadlock was over whether to approve a redrawn health plan that scraps a five-year-old arrangement with the county that gave an advantage to HCA. The new plan would put Tenet hospitals on an equal footing with HCA as preferred provider organizations (PPO).
It’s being called an “open-access PPO,” and it would mean 80 percent of the hospital charges run up by county employees and their dependants at either chain’s hospital would be paid by the plan starting Jan.1. Currently, HCA is paid at the 80 percent, and Tenet is 60 percent for county employees.
Commissioners will take the issue up again, in Cobos’ expected absence, again on Monday.
Why an open PPO with Tenet and HCA could be more expensive
The county’s consultant, Randy McGraw of Crest Benefits, said the disadvantage of the open-access PPO is that it could cost the county as much as $800,000 more a year than the plan favoring HCA that the county now has.
That has commissioners and members of the risk pool board concerned about depleting the risk-pool fund from which claims are paid.
If that started to happen, the county would have to cut back on benefits, charge employees higher monthly premiums and/or appropriate more tax revenues to increase the public subsidy for health care.
County Commissioner Veronica Escobar said she asked the McGraw of Crest Benefits, about the advantage of the exclusive provider organization arrangement the county has now.
“He said HCA was offering really steep discounts,” Escobar said. “In fact, he credited much of our (risk pool) reserve to HCA’s willingness to work with us on those discounts.
“HCA also works very well with Thomason and has, form my perspective, been a better community partner to the county and to Thomason than Tenet.”
But in an interview with Newspaper Tree, the CEO of Tenet’s Sierra Providence Health Network, John Harris, expressed his doubts that putting Tenet on equal footing with HCA would cost the county more.
“I would doubt seriously that anyone would be more cost effective than we are if you compare apples to apples,” Harris said.
He also insists that the awards Tenet’s El Paso facilities have won show its hospitals, related health facilities and doctors are superior to HCA’s and, thus, a better value.
Here’s how it works:
-- The county’s current plan puts the Thomason General Hospital at the top and pays 95 percent of the hospital charges for employees and dependents who go there. For a variety of reasons, including the fact that many El Paso doctors do not practice at Thomason, few county employees use the county hospital.
-- HCA hospitals are exclusive provider organizations and the plan pays 80 percent of the hospital charges for county employees. HCA offers additional discounts, which the higher number of patients makes possible.
-- Tenet hospitals are preferred provider organizations, and the plan pays 60 percent of hospital charges for county employees
-- For out of network hospitals, the plan pays 50 percent.
Although the side-by side offers by Tenet and HCA have been only about 1 percent apart, McGraw said, the county and school districts considered the Tenet and HCA offers and made HCA their exclusive provider organization for reasons that were not so clear.
McGraw noted Monday that a survey of county employees indicated that they preferred Tenet’s hospitals over HCA’s.
For those reasons, Harris indicated, being in a secondary position has been a sharp and inexplicable point of frustration for Tenet.
Tenet, however, has had EPO arrangements with the El Paso and Canutillo school districts. Tenet currently is the EPO for the San Elizario school district that pays 80 percent of hospital costs compared with 60 percent at HCA hospitals.
Why the change?
The county and the Ysleta and Socorro school districts all began the year with health plans that gave employees and their dependants an incentive to go to HCA hospitals versus Tenet’s.
Early this summer, Tenet decided it would no longer accept a second-tier position in health-care plans and made that known to various third party administrators that had arrangements with Tenet, including Foresight in El Paso.
Foresight had to inform the Ysleta district mid-way through its contract that it could no longer offer an arrangement that put HCA in a more favorable position than Tenet.
Cigna, Socorro’s plan administrator, had to tell that school district the same thing when the contract was up for renewal.
Both districts then had to tear up their plans and come up with new ones, though HCA was able and interested in keeping the arrangements it had with them.
In the process, Foresight came in for much of the blame and there were calls on the Ysleta board to get rid of Foresight and find a new third-party administrator.
Foresight president critical of Tenet
Foresight President Michael Puestow is among those touting the cost savings that EPO arrangements with HCA, and he has been critical of Tenet’s actions toward Foresight as well as El Paso taxpayers.
Puestow said that his service has saved the schools, city and county millions over the years "because EPO rates are significantly cheaper.”
Harris disputes that assertion and even downplays the potential cost savings of an EPO arrangement with Tenet, though McGraw said it could save as much as $4 million over five years. However, few have appeared eager, not even Harris, to pursue that approach.
Puestow, a 56-year-old former professional football player and a retired health plan administrator, came out of retirement to take over Foresight. He said expects to lose the job around the first of the year because of plans to merge Foresight with Alliance Health Card.
“We have contracts with all the different hospitals and physicians here (El Paso), in Dallas and Las Cruces,” he said. “Earlier this year, Tenet began to reinterpret the contract in a way that said we were unable to offer anything that didn’t have Tenet at the highest level.
“We’re the ones who brought a tiered program to the El Paso area to figure ways to keep costs down. The idea is if you can steer to one system, you can get the bulk rate.”
He said Foresight has clients, including the San Elizario school district, that have Tenet as their exclusive provider organization.
“But as of Jan. 1, we can have no more contracts with HCA as the EPO,” he said.
Foresight did not agree with Tenet’s interpretation of their contract, he said, but there was a threat of litigation that went to arbitration.
“In the first quarter of 2008, Tenet spent $45 million on litigation,” Puestow said.
In effect, he said, Foresight was forced to stop offering proposals that included HCA as a possible exclusive provider organization even if HCA wanted Foresight to make that offer to school district, cities and the county.
At the same time, Puestow said, Tenet would permit Foresight to offer plans with Tenet at the top as an exclusive provider organization.
Told of Puestow’s characterization of what happened with Tenet, Ian Stuart, president and CEO of the publicly traded parent company, Access Plans USA, offered a softer conclusion.
“I would ask you to frame it differently,” he said. “In the current business environment, Tenet does have the ability to decide how to conduct business, whether in El Paso, Texas or nationally, and under the terms it chooses to do business.
“Now, it has made some decisions to conform how it chooses to do business with us … and all of its client TPAs. … They asked us and we agreed to conform to the way they asked us to do business.”
He continued, “They did not formally sue, but earlier in the year sought arbitration. We put the attorneys aside and reached an agreement. A business decision I made was to agree to conform to the way they have chosen to do business in the El Paso market with all the third-party administrators they do business.”
At stake in Foresight’s decision to “conform” to Tenet’s wishes – a term Stuart used repeatedly – was Foresight’s survival, he hinted strongly.
Foresight has a long history in El Paso
Formerly Access Plan Administrators, it was started by insurance agency owner Steve Young in the 1980s and came to dominate the El Paso market as the third party administrator for the city, county and the major school districts. At it’s peakAccess oversaw the health plans of more than 60,000 El Paosans.
In the early 1990s Young’s operation came under investigation and Young sold it to Robert E. “Bob” Jones, then the head of National Center for Employment of the Disabled. After coming under a federal investigation, NCED changed its name to ReadyOne Industries.
Jones sold Access Administrators some years ago to Precis, but his close associate, Frank Apodaca, continued to head Access and later Precis. Jones and Apodaca are major targets in the FBI’s ongoing public corruption investigation.
Because of the damage done to Access, now Foresight, by the investigation, the company has lost most of its clients.
“We’re a small public company, frankly, too small to be successful as a public company,” Stuart said. “The El Paso market used to be a very positive cash flow operation for us. But we have had challenges … Frank Apodaca was terminated over a year ago.
“When you have the very significant decrease of members we’ve suffered, we’ve gone from profitable to just the opposite. … I’m just looking to position the company so we can continue to provide the services that have been well appreciated.”
He added, “I would hate for something to get in the press that is misconstrued and have people react with the elimination of a company.
“We don’t have enough clients to support the infrastructure there today. If there is further significant loss of clients or members, it becomes increasingly difficult to support the operation.”
‘Puestow doesn’t represent Foresight’
While Stuart suggested that there is a better way of explaining Foresight’s situation with Tenet that the way Puestow put it, Tenet’s Harris said Puestow should not be quoted at all.
“I think, first, Michael Puestow doesn’t represent Foresight,” Harris said in an interview with Newspaper Tree. “Ian Stuart is the president and action CEO of that company … What I would do is I would go on the basis of what the president and CEO has to say from the standpoint of Foresight.”
Harris said the move away from EPO arrangements toward the more open PPOs has more to do with a “paradigm shift” in the health industry than any efforts Tenet has exerted.
Asked why HCA shouldn’t be allowed to offer exclusive provider organization proposals through a third party administrator`, Harris said he wouldn’t speculate.
‘Maybe it’s because that’s what the employers want,” he said.
Harris denied that his company has sought to “strong-arm” Foresight into conforming with Tenet’s wish that the TPA not offer any plan that puts a hospital corporation above Tenet.
Tenet’s action against Foresight
But Foresight’s parent company, Access Plans USA, reported its dispute and legal proceedings with Tenet to the Securities and Exchange Commission in its quarterly 10k financial report for the period ending in June.
Access Plans stated that Tenet was seeking $5 million for Foresight’s alleged breach of the exclusive provider organization agreement.
“In essence Tenet claims that Foresight TPA can only contract with Tenet facilities in benefit plans that utilize an exclusive provider organization,” the Foresight’s 10k reads. “We strongly disagree with this position for several reasons, including our belief that we do not administer any benefit plans that utilize an exclusive provider organization.”
The statement doesn’t explain that obvious conflict with Foresight’s administration of at least two EPOs in El Paso, but it goes on to say:
“In addition, Tenet has taken a position with respect to a separate agreement between Foresight and Tenet that members of certain plans administered by Foresight are not entitled to healthcare discounts from Tenet’s facilities. …
“Because of this dispute, Tenet has notified us that it intends to terminate its agreement with us and seek payment from the plans we administer of certain amounts charged to plan members and not paid by the plan.”
Reach David Crowder at (915) 351 0605 or email@example.com
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