A Detroit cancer center has filed a lawsuit against Tenet Healthcare’s Detroit Medical Center and several of its affiliated hospitals, alleging DMC threatened to scale back or terminate services critical to Karmanos’ operations amid a long-running contract dispute — claims Tenet has rejected.
Six things to know:
1. The complaint was filed Aug. 5 in Oakland County Circuit Court in Michigan by Barbara Ann Karmanos Cancer Institute, Barbara Ann Karmanos Cancer Hospital and Grand Blanc, Mich.-based McLaren Health Care, according to court documents reviewed by Becker’s. It was filed against VHS of Michigan (doing business as the Detroit Medical Center) and several DMC-affiliated entities, including Detroit Receiving Hospital, Rehabilitation Institute of Michigan, Harper University Hospital, Children’s Hospital of Michigan, Huron Valley-Sinai Hospital, Sinai-Grace Hospital and DMC University Laboratories.
2. According to the complaint, Karmanos separated from DMC about 20 years ago to become an independent, cancer-only hospital, while continuing to operate on DMC’s campus and purchase services — including operating room access, laboratory work, IT support and other hospital infrastructure — from DMC-affiliated entities under a series of agreements. Those agreements were later updated through a 2015 settlement of a prior lawsuit between the parties.
3. Karmanos alleges DMC has failed to follow that settlement agreement and, according to the filing, began “insisting on a new interpretation” of the contract’s pricing terms that resulted in what Karmanos characterizes as inflated charges. The complaint states Karmanos has historically paid Tenet about $28.5 million annually for clinical, IT and laboratory services, and alleges Tenet sought to raise that figure to more than $82 million a year — which Karmanos calculates would cost it more than $265 million in additional payments over five years.
“Karmanos will never allow the exceptional care we provide to our patients to be jeopardized,” Brian Gamble, president and CEO of the Barbara Ann Karmanos Cancer Hospital and Cancer Network, said in an Aug. 6 news release shared with Becker’s. “Despite the difficulties created by DMC, our physicians, nurses, research associates, and care teams have continued to deliver exceptional care, as reflected in Karmanos’ consistently strong patient satisfaction scores. Karmanos took this action only after Tenet threatened to scale back or terminate services it acknowledges ‘are necessary to maintain daily operations.'”
4. The lawsuit alleges that when Karmanos has disputed Tenet’s invoices, Tenet has responded by threatening to “cease services cold turkey,” which the complaint says Tenet knew would put Karmanos out of business and jeopardize patient care.
5. In a statement shared with Becker’s, a spokesperson for Dallas-based Tenet Healthcare said DMC “honored its agreements” and disputed Karmanos’ characterization of the dispute, saying McLaren “decided on its own what to pay for the support services it uses every day and paid a fraction of the cost” for more than a year, before Tenet began seeking what it described as fair market value rates. The spokesperson also said McLaren skipped the private mediation process required under the parties’ agreements by filing the lawsuit directly.
“DMC honored its agreements. To this day, despite subsidizing the cost of these services for Karmanos, all necessary care remains available from the DMC,” the spokesperson said. “We expect McLaren to honor its own commitments. We reject the allegations and will answer them in court. We will not be taken advantage of. Not when the people of Detroit are the ones who pay for it.”
6. The lawsuit includes 11 counts, including breach of contract, unjust enrichment, and claims that certain restrictive covenants in the parties’ agreements constitute illegal restraints on trade under the Michigan Antitrust Reform Act. Karmanos is asking the court for declaratory and equitable relief, including a ruling on how the contract’s pricing terms should be interpreted, and for permission to build a new hospital facility that would reduce its reliance on DMC services.
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