Health Net 1998 Annual Report Download - page 12

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1 0 F O U N D ATIO N H EALTH SYST EMS, I N C.
Did any significant developments occur within the Government Division in 1998?
In 1998,the Department of Defense (DoD) was granted the option to extend current contracts
under its CHAMPUS managed care program,known as TRICARE, for up to two years.With
contracts in regions 6 and 11 due to expire in 2000,this could be good news for us. Moreover, if
contracts are extended, we can renegotiate rates based on current medical cost trends.
We also decided to withdraw our contract protest in Region 1.During the latter part of 1997, we
protested the DoD’s award of the Region 1 contract to another company.After careful considera-
tion, we determined we could not achieve a fair economic re t u rn given the bidding circ u m s t a n c e s .
As a result,the DoD and the current contractor agreed to cover the costs we incurred during the
bidding and protest process.
W hy is FHS in this line of business?
The company first entered the business in 1988 because we believed that by applying the pri n c i p l e s
of managed care to the government’s health care delivery system,the DoD could better manage
costs and enhance quality.We were right.We now serve as the contractor for three DoD contracts
that provide health care services to 1.5 million beneficiaries and generate approximately $1 billion
in annual revenue for FHS.
Our TRICARE business has helped us grow our behavioral health care business as well.FHS’sub-
sidiary, Managed Health Network (MHN),serves as the subcontractor on all three TRICARE
contracts, which account for more than 30 percent of MHN’s revenues.
G a ry Ve l a s q u e z
P resident and Chief Executive Of f i c e r
G o v e rnment and Specialty Services Divisions
Gary Velasquez oversees two of the company’s divisions, which combined, account for more than 15 percent of
FHS’ total revenue. Gary continually explores new opportunities and partnerships to profitably grow the busi-
nesses he oversees.
Gary joined an FHS predecessor company in 1994 as president and chief operating officer of its behavioral
health care subsidiary and later oversaw operations of its California health plan.