A Kentucky cabinet has ousted Louisville-based Passport Health Plan and another company as managed-care organizations, or Medicaid benefit administrators, for the state.
That means that Passport will not get another more-than $1 billion contract to provide Medicaid benefits to the roughly 300,000 Kentuckians that currently count on the nonprofit benefits provider for health insurance.
On Tuesday, the Cabinet for Health and Family Services announced that the five big-dollar contracts to provide Medicaid benefits to roughly 1.3 million Kentuckians will go to the following for-profit organizations beginning July 1, 2020, many of which are among the nation’s largest insurers:
- Aetna Better Health of Kentucky, a subsidiary of Woonsocket, R.I-based CVS Health Corp. (NYSE: CVS)
- Humana Health Plan, Inc., a subsidiary of Louisville-based Humana Inc. (NYSE: HUM)
- Molina Healthcare of Kentucky, a subsidiary of Long Beach, Calif.-based Molina Healthcare Inc. (NYSE: MOH)
- UnitedHealthcare Community Plan of Kentucky, a subsidiary of Minnetonka, Minn.-based United Health Group Inc. (NYSE: UNH)
- WellCare Health Insurance of Kentucky, a subsidiary of Tampa, Fla.-based WellCare Health Plans Inc. (NYSE: WCG)
All told, the five MCOs manage over $8 billion in Medicaid benefits.
“We are deeply disappointed in this decision, having been a committed partner to the state and an organization that has been dedicated to improving Kentuckians’ health and wellbeing for more than 20 years, with demonstrable results,” Passport CEO Scott Bowers said in a news release.
Anthem Blue Cross and Blue Shield Medicaid, a subsidiary of Indianapolis-based Anthem Inc., also did not get its contract renewed. Anthem provided Medicaid benefits to about 128,000 people.
Amanda Stamper, public relations director for Anthem in Kentucky, said that the company has provided Medicaid benefits since 2014 and is one of the state’s highest rated quality plans.
“We remain committed to working collaboratively with the state to review the process and determine the best approach for moving forward. In the meantime, we remain focused on our top priority – the Kentuckians we serve,” Stamper said.
The request for proposals document put out by the state dictates that the term for the new contracts will expire Dec. 31, 2025, and will include up to five two-year extensions after that.
The incoming administration of Governor-elect Andy Beshear intends to take action in the waning days of the Matt Bevin administration. But what that will look like specifically is unclear.
“Awarding $8 billion in contracts with just 11 days left in this administration is concerning,” Michael Brown, incoming Executive Cabinet secretary and chair of the Beshear transition team said in a statement. “As we move through the transition and ultimately the change of the administration, we will be taking a close look at this action.”
Impact of decision
The future of Passport is now in deep uncertainty without a managed-care organization, or MCO, contract. Ben Adkins, a spokesman for Passport, said in an emailed statement that the organization will protest the award process, something that Stamper said Anthem will do as well.
Financial documents from the Kentucky Department of Insurance show that $1.93 billion of Passport’s $1.95 billion in revenue came from its Medicaid business in 2018. So, without the contract, Passport effectively has no revenue.
“This decision, if upheld, would have a profound impact on our 300,000-plus members whose access to care will be disrupted as a result, as well as our more than 600 team members and their families,” Adkins said. “We strongly encourage state leaders to reconsider this decision and its devastating impact on our proud Kentucky company and the communities we serve.”
Regardless of the outcome of the protest, Passport will continue to provide Medicaid services to its members under its current contract through June 30, 2020, Adkins said.
Passport was founded in 1997 with the express purpose of being a nonprofit managed-care organization that focuses on helping address unique health issues of the urban community of Louisville. It’s the only nonprofit MCO in the state and has enrollees throughout Kentucky. But the bulk of enrollees are in Jefferson County and surrounding counties.
Passport is in the process of being acquired by Arlington, VA.-based health plan management and technology services provider Evolent Health Inc. (NYSE: EVH) Announced in May, Evolent intended to pay $70 million for a 70% stake in Passport and make the organization a for-profit operation. Evolent’s stock was down more than 30 percent at the midpoint of Friday’s trading session.
Sponsors speak out
The current sponsor group of Passport includes University of Louisville, University of Louisville Physicians, University Medical Center, Jewish Heritage Fund for Excellence, Norton Healthcare, Inc. and the Louisville/Jefferson County Primary Care Association.
“Obviously, we are disappointed in the decision not to award Passport a new Medicaid managed care contract,” U of L’s Director of Media Relations John Karman said in a statement. “U of L is proud of its longstanding relationship with Passport and supports its decision to challenge the outcome of the evaluation and award process for this contract.”
The deal is slated to close by the end of the year, according to a news release from Evolent. Evolent also supports Passport’s protest of the award process.
In publicly available documents, Evolent stated that if Passport is unable to obtain an MCO contract that Evolent is required to buy out the sponsor group’s stake at $20 million within a year of June 30, 2020, when Passport’s current contract expires.
It’s also unclear if the deal will go through now that Passport has not been selected for a contract renewal.
Evolent CEO Frank Williams said on a conference call with investors and analysts that he expects that Passport will get a fair protest process from the Beshear administration.
He also said that the focus of Evolent’s involvement with Passport is improving the organization’s financial performance in the wake of the rate change. Williams expects the revenue growth of Evolent to halve to 10%, down from the company’s previous estimate of 20% revenue growth.
Evolent’s stock price plummeted more than 27% Wednesday, closing at $7.76.
At the beginning of the year, Passport sued and engaged in a public feud with two state agencies over changes based on the location of to the per-member, per-month rate that the MCOs receive for its members. Passport maintained that the changes resulted in an unfair rate cut that disproportionately impacted the organization, claimed that the cuts would push the organization into insolvency.
Passport’s former CEO called the dispute a “political food fight.” But, Passport eventually dropped the suit in July. It’s also not clear what is going to happen to the stalled $100 million headquarters project Passport announced in 2017.
Adkins said Passport is searching for a developer for the project, but also said that its efforts will focus on fighting for a successful protest.
Coverage of welfare program
In addition to a managed-care contract, WellCare has also been awarded the contract to provide health insurance to all 24,000 children in the Kentucky foster care system and those dually committed to the juvenile justice system as well, according to a news release.
The release states that the new MCO contracts include new accountability standards for quality of care, transparency and addressing social determinants of health.
The contract also requires a centralized credentialing process for providers, addressing a common complaint among health care professionals over having to credential with five different organizations that are covered by the same state welfare program.
“The contracts awarded in the most recent bid process fortify the department’s ability to oversee the activities of the MCOs and their subcontractors, significantly improve our pharmacy program, and provide a better focus on critical health issues facing the people of the commonwealth,” Carol Steckel, commissioner for the Kentucky Department of Medicaid Services said in the release.
Source: Business Journal