Passport Health Plan will cut pay rates for health providers and business partners to avoid a state takeover, company officials announced Friday. The Medicaid insurance company is currently suing the state over lowered Medicaid reimbursement rates set last year.
The cuts amount to “tens of millions of dollars,” including lowering payments to health care providers and business partners, restructuring its deal with administrative partner Evolent Health and leaving empty roles vacant, officials said in a news release Friday. It also said it’s withdrawing the request to return to higher reimbursements rates.
“We had hoped to avoid these drastic and potentially devastating cost-cutting measures, but the state’s rate reduction followed by a lack of cooperation from the Cabinet and the Department for Medicaid Services, have left us no choice,” Passport CEO Mark Carter said in the release.
Carter said the cuts could negatively impact Passport’s members, but said the company has a “responsibility” to stay in business. Passport serves more than 310,000 enrollees, most of whom are in the Louisville region.
In response to Passport’s announcement on Friday, Cabinet for Health and Family Services Secretary Adam Meier cast doubt on whether the company’s financial situation is as dire as officials have described.
“CHFS is concerned with the lack of veracity being exercised by Passport in its dealings with the public,” Meier said. “The withdrawal of Passport’s motion for a preliminary injunction appears to be an admission that its financial plight never was as bleak as it claimed in the lawsuit filed against the Cabinet.”
The changes come as Passport takes its fight with the Kentucky Cabinet for Health and Family Services to court, where it is asking for the reversal of pay cuts that went into effect last year.
In mid-2018, the state reduced Passport’s Medicaid reimbursement by 4.1 percent in the Louisville region, whereas rates increased an average of 0.8 percent statewide. The company said that change would create an annual budget shortfall of $140 million. In testimony at a legislative hearing this month, Cabinet officials said the cuts to Passport were part of a regular recalculation based on number of enrollees and other factors.
The company said Friday it believed the cuts to providers would allow Passport to continue operating at a level that would prevent oversight and intervention by the Department of Insurance. The DOI could take over operations if Passport doesn’t have enough money in reserves.
In a motion filed March 1, a lawyer for Passport wrote that these measures–including operating above the DOI threshold, securing “extraordinary concessions” from contractors and an April 1 rate increase from the Cabinet for Health and Family Services–will help it avoid “imminent peril.”
But Passport is not out of long-term trouble.
“These developments do not affect the seriousness of Passport’s situation,” attorney Stephen R. Price, wrote.
Passport will submit an action plan to the DOI, Price wrote. And if the April 1 reimbursement rates are lower than projected, Passport may re-file for a temporary injunction — a motion it withdrew on Friday.
A week ago, Passport announced it was pausing construction of its much-anticipated corporate headquarters in west Louisville. That would have been a $130 million project. The company cited financial pressures related to the state lowering reimbursement rates in 2018.
Company and state officials have held talks and hearings on the issue, but reached no compromise yet. Carter said Passport is “willing to compromise and be a good partner to the state.”