Passport Health Plan is in survival mode. The nonprofit Medicaid provider could have just months of independent operation left, which it blames on regional reimbursement cuts implemented by the state last summer.
CEO Mark Carter said the company is pursuing a contractual appeal with the state, and is about to escalate to the level of appealing to the secretary of the Finance and Administration Cabinet, William Landrum. If Landrum’s decision doesn’t go Passport’s way, the next step would be appealing to Franklin Circuit Court.
“We think that Sec. Landrum has a reputation for being independent and objective and so we’re hopeful that in that venue we’ll receive a fair hearing,” Carter said in a recent sit-down interview with WFPL.
He described himself as a political independent, and avoided answering whether he is a supporter of Republican Gov. Matt Bevin. But earlier this week, a group of Democrats held a news conference — that was crashed by state Republicans — alleging that Passport was treated unfairly, and the governor subsequently dismissed the event as political theater.
That raises the question: Does Carter think there were politics involved in the decision to cut rates?
Carter: “You know, it feels political to me right now. I mean, this really started out, you know, really is it’s a contractual dispute. These happen from time to time. Passport’s been around 22 years, you know, these kinds of rate issues have come up from time to time. But we’re almost, well, until now always resolved without, you know, having to use some sort of formal appeal process. We really — to get involved in politics there’s really no percentage for us. But it does feel like that’s what it’s devolved to.”
Why does Carter think the decision could have been political? After all, if the Department of Insurance had to takeover Passport, that would require a large administrative lift at high expense, whereas Medicaid managed care organizations save the state money.
Carter: “I don’t know. I mean, you know, my feeling is that the rates, the whole process and the result, it produced an illogical result in it. It’s clearly an error, but it’s real hard for folks to admit that something went wrong and needs to be corrected.”
Passport has already announced it would cuts rates to providers, pause construction on a new $130 million headquarters in west Louisville and implement other cost-saving measures. Carter said he has considered staff reductions, but that there is no specific plan for that at the moment.
Critics have accused Passport of not managing the business well, including by paying too much in administrative fees — a charge Carter denied.
He said that it might be difficult for the state to admit it made a mistake, but is it possible that Passport is the one that’s wrong?
Carter: “I would be the first person to tell you that we’re not perfect, you know. Sure. We’re not wrong about the rate issue. Do we have opportunities for improvement in our own organization? Do we have opportunities to restructure some of our provider network and find ways to save money? Of course we do. But we can’t solve, you know, a $120 million problem with that. We don’t have those kinds of problems.
“But that’s why I say we’ve been willing to sit at the table and find a compromise because I’m certain that we can put our share into it. But we have to have a partner in this state. I mean, this whole plan was originally a partnership between the Department for Medicaid Services, the plan and the provider community. And, you know, it’s a delicate balance, trying to balance the interest of everybody there. But if it gets out of balance, it doesn’t work. And it’s out of balance.”
So far, Passport’s conversations with the state haven’t achieved the results it wants. That’s why the company is currently suing for an injunction against the cuts.
Carter said he remains open to sitting down with the state to find a compromise. So what happens if that happens, but new rates don’t go high enough?
Carter: “This is why we need to sit and talk together. The challenge for us is there’s probably a threshold that we can get back to a break-even within a reasonable amount of time, and there’s some rate increase that could be put in effect that would make that happen. The problem is, you know, we’re not Humana. We don’t have the kinds of reserves on our balance sheet that can sustain a long period of these kinds of losses.
“And the problem is if the rates are just fixed at a percentage going forward, the balance sheet is so weakened that, you know, there will be some other issue. It might just be a flu epidemic that comes along and you don’t have sufficient reserves to ride that out. There’s got to be a dialogue around, you know, what’s occurred as well as what can be done looking forward.”
This interview has been edited for length and clarity.