Archive for December 17th, 2010

Cost Plus Hospital Reimbursement Sees Continued Growth in Texas

Friday, December 17th, 2010

The Cost Plus health care revolution in Texas continues to grow. Employers, searching for cost effective plans under the protections afforded through ERISA,  are experiencing plan savings of 40% and more without reducing benefits.

Five (5) Texas hospitals have elected the Cost Plus approach for their own group medical plans – a profound and unintended endorsement of the scheme. And, several large physician groups have initiated Cost Plus Plans for their employees as well.

Carrier representatives are worried. “Cost Plus will fail” is their message to their brokers. “Hospitals will shut Cost Plus Plans down!” they insist. Or, “We cant compete against it” some sob in abject mental anguish. Yet we find that more employee benefit brokers are embracing the concept, either as a defensive mechanism or as “true believers.”

We predict continued growth of the Cost Plus approach, along with significant changes to be endorsed by willing providers.

Cost Plus plans are managed by Group & Pension Administrators Inc. ( in partnership with ELAP (

Editor’s Note: Cost Plus is all about transparency. Will other TPA’s follow suit? Will other audit firms join the fray?

Dallas’s Tenet Health Care Rejects $7.3 Billion Buy Out

Friday, December 17th, 2010
By: Texas Business     Posted: Tuesday, December 14, 2010 10:16 am
Dallas’ Tenet Healthcare Rejects $7.3 Billion Buyout | dal_ftw_txbz, Tenet Healthcare, Community Health, buoyout,

Texas Business reports:  Dallas-based Tenet Healthcare Corporation  rejected a $7.3 billion buyout offer from Tennessee-based Community Health Systems Inc.

In a prepared statement, Tenet Healthcare confirmed it rejected the proposal to acquire all of the outstanding shares of Tenet for $6 per share in cash and stock, stating that it was identical to a proposal it rejected in November.

The Tenet board of directors, after consultation with its financial and legal advisors, “unanimously determined that the prior Community Health proposal was not in the best interests of Tenet or its shareholders.”

In making its determination, the Tenet board “considered that  Community Health’s opportunistic proposal would transfer the growth potential inherent in Tenet to Community Health without adequately compensating Tenet shareholders.  The Tenet board believes that the interests of Tenet shareholders would be better served by benefiting from 100 percent of the upside inherent in Tenet rather than  accepting Community Health’s inadequate proposal.  In addition, the Board has serious concerns about Community Health’s ability to integrate and operate a business like Tenet.   

 In a letter to Community, the board stated that the proposal is “opportunistic, grossly undervalues Tenet and fails to reflect Tenet’s prospects for continued growth and shareholder value creation.”

 In addition, the letter stated that “Community Health’s stock appears to be over-valued and is not a desirable currency for Tenet shareholders.”

“Given that Community Health is offering a portion of consideration in Community Health stock, it is imperative that Tenet shareholders understand fully the risks inherent in the value of your stock.  We are concerned that your growth has slowed dramatically and future “guidance” will be difficult to achieve.  You indicated to Tenet’s CEO on November 12 that “we all know 2011 will be a very tough year.” 

Barclays Capital is acting as financial advisor to Tenet.  Gibson,Dunn & Crutcher LLP and Debevoise & Plimpton LLP are acting as Tenet’s legal counsel.

Community Health responded with a letter of its, stating it would publicly disclose the offer:
“We were surprised and disappointed by your flat rejection of a transaction that would provide a premium of approximately 40 percent to Tenet Healthcare Corporation shareholders,” the letter stated.  “As you know, Community Health Systems  Inc. (“CHS”) has offered to acquire all of the outstanding shares of Tenet at a price of $6.00 per share ($5.00 in cash and $1.00 in CHS stock). We are convinced this transaction would be very attractive to Tenet shareholders — and we do not understand how you could state in your letter of December 6 that our proposal does not offer “even remotely fair value” to Tenet shareholders.”