Humana has filed a lawsuit against ChenMed, alleging breach of contract and other harms related to JenCare Senior Medical Center, which the two companies jointly operate. JenCare is a service provider for Medicare-eligible patients operating in multiple locations across at least five states.
Dr. Jen-Ling James Chen founded ChenMed because of his frustration with a cancer misdiagnosis and fee-based health care, according to the company’s website. The lawsuit, filed in the Court of Chancery of the State of Delaware, claims that ChenMed imposed license fees on JenCare in 2024 because of financial struggles.
“About a year ago, ChenMed unilaterally decided to impose improper technology license fees on JenCare to make money at Humana’s expense,” the partially redacted court filling said. “What is more, ChenMed is using the fees to siphon off substantially all the profits from JenCare in order to keep 100% of those monies for itself.”
Humana said it was not consulted before the fees were imposed.
“Humana’s repeated efforts to get explanations and market benchmarks from ChenMed to justify the fees ChenMed said it wanted to charge were consistently met with delay and a lack of transparency,” the lawsuit said. “The license fees and other terms were imposed by ChenMed without any review or approval by the JenCare board -- again, contrary to express requirements in multiple governing documents.”
The fees depleted the company’s cash, which otherwise would be distributed periodically to both owners, effectively using Humana’s money to shore up ChenMed’s own finances, “And aside from the cash implications, by reducing JenCare’s profitability, this maneuver also artificially depresses the results of operations that Humana, a public company, incorporates into its own financial reports to its stockholders for its venture,” the complaint said.
This action violates the working agreement between the two companies, according to Humana.
“Everything about this arrangement -- including its timing, the imbalanced terms and ChenMed’s repeated lack of transparency -- demonstrate that it was not adopted in good faith,” the filing said. “Additionally, the arrangement conflicts with several negotiated contractual protections that Humana secured over the years in its agreements with ChenMed relating to JenCare’s operations.”
Humana is asking the court for damages for both itself and JenCare, and a declaration that the 2024 license agreement was not validly entered into and is void and unenforceable.
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