St. Joseph Hospital Sued Over HMO Payments

St. Joseph Hospital of Orange Corp., strapped financially under the weight of low-paying health maintenance organizations, now faces a lawsuit alleging that it has failed to pay other hospitals completely for care provided to its HMO patients.

Tenet HealthSystem Healthcorp in Santa Barbara sued St. Joseph Hospital, claiming it has not fully reimbursed Tenet-owned hospitals for services rendered when St. Joseph HMO patients are referred or go there on emergencies.

Tenet alleges that St. Joseph “intentionally misconstrued” the terms of a contract that was designed to help the two providers cut losses when patients require extended hospital stays or incur large bills, Tenet attorney Thomas Malcolm said.

A spokesman for St. Joseph declined to comment, saying the hospital had not yet been served with the suit, which was filed Friday in Orange County Superior Court.

Under the contract, Tenet maintains that it was to be paid a flat daily rate up to a specified amount, at which point it would receive a larger amount based on a percentage of actual charges.

Tenet alleges that in the spring of 1999, St. Joseph began using different criteria to determine when it would start paying Tenet at the higher rate. The result was that Tenet was significantly underpaid, Malcolm said.

The suit does not specify the amount of damages sought, but it alleges that Tenet is owed “hundreds of thousands of dollars.”

St. Joseph Health System in Orange, the hospital’s owner and the county’s largest health-care provider, said last month that it will not accept any new patients from HMOs and may sever ties with all 17 HMOs with which it contracts.

The company, which consists of nearly 10% of the county’s doctors, said it is losing $45 million a year on its county HMO contracts and fears it could lose much more if other large medical groups in the area falter or fold, sending it more patients than it can handle.

Tenet owns and operates hundreds of medical centers and hospitals nationwide, including Irvine Medical Center, Fountain Valley Regional Hospital and Western Medical Centers in Anaheim and Santa Ana.