Two physician entrepreneurs are getting a real taste of what its like to run a hospital in California. Blue Shield of California has filed a lawsuit against Alvarado Hospital Medical Center alleging the San Diego facility is refusing to honor a contract signed by its previous owner, Tenet Healthcare Corp.
Alvarados new owners, led by two physician-executives, say the contract is invalid and that Blue Shield is the only insurer that wont negotiate new and better rates. They call Blue Shields current reimbursement unaffordable for a hospital that is struggling to rebound under the difficult circumstances it inherited from Tenet.
The unusual lawsuit suggests a new tactic in high-pressure rate negotiations, with insurers unwilling to give any wiggle room once a contract is in place. Blue Shield is becoming increasingly aggressive and using Alvarado as a test case to that aggressiveness, says Dietmar Grellmann, vice president of managed care for the California Hospital Association.
A group of investors under the name Plymouth Health bought Alvarado in January for $22.5 million. Two brothers, Pejman and Pedram Salimpour, both pediatricians in Los Angeles, spearheaded the deal and are now running the 306-bed facility. Modern Physician profiled the brothers Salimpour earlier this year.
In May 2006, Tenet had agreed to sell or close Alvarado and pay a $21 million fine to the federal government over allegations of giving kickbacks to physicians in exchange for patient referrals.
Under the terms of the three-year amended contract Tenet signed in March 2006, Blue Shield agreed to reimburse the hospital at a 10% rate increase, using a blended calculation, each year through 2008. Blue Shield says Plymouth is now reneging on the contract and demanding exorbitant rates on an immediate blended basis of nearly 40% higher in 2007 alone, according to the lawsuit, filed in late July in San Diego Superior Court. The defendants invested in the hospital for a profit, Blue Shield wrote in the complaint. They baselessly seek this excessive price hike in order to maximize their profit and return on investment.
But Pejman Salimpour, M.D., says Blue Shield is reimbursing Alvarado at a rate that is half of what it pays other San Diego hospitals. He contends it is the not-for-profit insurer that is seeking revenue at the expense of patients. The doctors and nurses ... wont be intimidated by a multibillion-dollar insurance company that has figured out a way to not pay taxes, he says.
The California Medical Association, California Nurses Association, San Diego State University and the American College of Emergency Physicians all wrote letters on behalf of Alvarado in May, alleging that Blue Shield representatives told patients to leave the hospital because their care wont be covered by the insurer.
David Seldin, spokesman for Blue Shield, says that it is Alvarado that is duping patients.What do you think? Write us with your comments at [email protected]. Please include your name, title and hometown.