Arbitration ruling forces Tenet to pay back HMO overcharges.

SCAN Health Plan may be a veritable David going up against Tenet Healthcare Corp. but it scored a big victory this month against the nation's second-largest hospital chain when it was awarded $8 million in arbitration.

One of only four "social" HMOs in the country that provides special in-home services to Medicare patients, the Long Beach-based health maintenance organization was awarded the judgment in a contract dispute that dates back to 1999.

SCAN alleged that Tenet overcharged it in a similar way it overcharged the Medicare system. (The problems with Medicare led to ongoing tumult at Tenet, including its planned divestiture of 19 California hospitals.)

"SCAN just paid them too much--$8 million more than they should have," said Peter Roan, an attorney who handled the arbitration for the small HMO.

The original dispute stems from a complicated series of events that include the bankruptcy of MedPartners Provider Network Inc. in 1999, which led SCAN to inadvertently pay Tenet's Whittier Hospital Medical Center under a contract that did not apply to it. Those payments were more than was allowable under Medicare law, according to SCAN.

Tenet disputed the HMO's allegations but arbitrator Robert Wenke sided with SCAN earlier this month and awarded the plan the full amount it sought.

Roan said that the contract mistake was at the root of the overpayment. But Tenet's inflated hospital charges kicked in a "stop loss" provision in the contract similar to the "outliers" Tenet had claimed in its direct, fee-for-service dealings with the federal government. (Outliers are outsized payments hospitals receive for handling especially difficult cases.)

Tenet spokesman David Langness characterized the disagreement as a contract dispute unrelated to its pricing policies, adding that the company planned to abide by arbitrator's ruling though it disagreed with it.

Mixed Message

Here's the good news: In what its authors are proclaiming is the most comprehensive study yet of the nation's biotech clusters, Los Angeles ranks high enough to be included.

Now the not-so-good: Among the metropolitan areas studied, the Los Angeles-Long Beach area places 10th, just above 11th ranked Orange County and the 12th, Austin, Texas.

The study, led by Milken Institute researcher Ross DeVol with assistance from Deloitte & Touche LLP, ranks San Diego as the nation's leading biotech cluster.

Los Angeles scored near the bottom in many of the categories, such as Ph.D.s awarded and patents issued. But it ranked high for having the biggest increase in VC funding and third in total life sciences employment with 23,533 jobs. (Not including Amgen Inc., which is based in Ventura County.)

Los Angeles also might take heart from industry skeptics who note that biotech is still in its infancy, employing just 200,000 people nationwide and racking up billions in losses.

Labor Peace

Nurses, lab technicians and other workers at 28 Catholic Healthcare West hospitals statewide, including three in Los Angeles County, have approved a four-year contract providing for 20 percent wage increases.

The agreement negotiated by the Service Employees International Union includes a variety of provisions sought by the union, including third-party settlements of staffing disputes, paid education leave and 100 percent employer-paid health care benefits.

The San Francisco-based hospital chain also pledged to work with the SEIU in defending SB2, landmark legislation that requires larger businesses to provide health insurance.

Staff reporter Laurence Darmiento can be reached at [phone] ext. 237 or at [e-mail].