Woodlands Hills Insurer Regains Military Contract

Health Net Inc. last week finally received some good news about a large military contract it feared it had lost. But the Woodland Hills managed care provider still won’t be the same company it was before the ordeal began.

Aetna Inc. in June was awarded what had been Health Net’s longtime contract covering about 2.9 million U.S. military members, retirees and families in the District of Columbia, and 20 East Coast and Midwest states. Loss of the $16.7 billion TriCare contract was a blow to Health Net, which through a predecessor company had been the first contractor for a program that began in 1988. The contract was forecast to generate about 20 percent of Health Net’s projected annual revenue of more than $15 billion.

“This is a piece of business, serving the military family, that is very personal to our company,” said Chief Operating Officer Jim Woys, who oversaw the program for many years. “It’s an important piece of business to us, not just from an economic standpoint.”

Although Health Net quickly filed an appeal, the company didn’t wait to reorganize. It sold off a commercial business covering three Northeastern states to UnitedHealth Group Inc. for $510 million, among other moves.

While Woys said selling the less profitable unit was not directly related to losing the military contract, both developments prompted Wall Street analysts to speculate that a smaller, West Coast-oriented Health Net would be a vulnerable takeover target.

But in November, the U.S. Department of Defense temporarily gave the contract back to Health Net as it investigated allegations that Aetna had an unfair advantage in the bidding because it had hired a TriCare insider. On May 5, the department announced it had disqualified Aetna and the contract would be returned to Health Net.

The amount Health Net will receive per individual under the new contract will be slightly less but there are other benefits. Under the old contract it and the federal government shared the risk if costs rose higher than planned; now the government assumes all of that risk.

Shaking It Up

Herbalife Ltd. is well known for its sports world sponsorships of teams like the Los Angeles Galaxy soccer club. What’s less well known is its social responsibility efforts, such as the Casa Herbalife program that aids at-risk children in 73 countries.

Now, the weight-loss product and nutritional supplement maker, headquartered at the L.A. Live complex in downtown Los Angeles, has established a special relationship with the nearby Union Rescue Mission, Skid Row’s longest operating shelter for the homeless.

After two years of helping out at the shelter’s annual Thanksgiving dinners and other events, Herbalife last week began offering its Formula 1 high-protein shake mix to the roughly 1,000 men and women who eat the shelter’s typical breakfast of bacon and oatmeal.

“This has been such a treat for the people who come to us for meals each day. We had guys with tears in their eyes,” said Union Mission Chief Executive Andy Bales. “A lot of our people are either living on the street or in SRO (subsidized) housing, so the better we can feed people, especially in the morning, the better able they are to resist the temptations out there.”

Diahanna Brown, Herbalife’s senior director of operations, said the mission is mixing up roughly 800 shakes a day, but wasn’t able to put a dollar value on the commitment.

Hopeful Hospital

City of Hope got some bad news last week when nearly 200 of its doctors sued it over a contract dispute.

But the Duarte hospital, one of the nation’s most respected cancer research and treatment centers, last month made public the most ambitious fundraising effort in the institution’s history: a campaign to raise $1 billion by 2013.

City of Hope, which will celebrate its centennial in 2013, is known for being a savvy fundraiser and is hardly starting from scratch. Fundraising actually commenced about five years ago and more than $550 million of the goal has already been received or pledged. Donations have range from mail contributions of $25 to multimillion-dollar gifts.

Given how many non-profit institutions have struggled with fundraising since the recession hit, Chief Executive Michael Friedman said the “Power of Hope” campaign’s progress to date has been particularly gratifying.

“I think that people who know about City of Hope are very galvanized to help by the compelling research and care we provide,” said Friedman, noting both longtime backers, and past patients and their families were approached for support.

Most of the money is slated for research and development, but at least $250 million will be used for capital improvements, based on a strategic plan put together in 2007. An additional $200 million will bolster City of Hope’s endowment fund, he said.

Particular research areas to be emphasized include stem cell research, gastrointestinal cancers, blood-related cancers such as leukemia and lymphoma, and a women’s cancer program focusing on breast and gynecological cancers.

“We’re stewards of a very precious legacy and we want the second hundred years of City of Hope to be even more successful,” Friedman said.