Passport Health Plan will appeal the decision from Gov. Matt Bevin’s administration to drop the company as a state Medicaid provider, just days before incoming Gov. Andy Beshear takes office.
Last week, the Kentucky Cabinet for Health and Family Services announced several new contracts for insurance companies to run Kentucky’s Medicaid benefits. The contract for Passport Health, which is based in Louisville, was not renewed. Neither was Anthem Kentucky’s contract; that company said it will also appeal, but unlike Passport, Anthem operates in several other states, including Indiana, Ohio and California.
Passport’s main business is with Medicaid in Kentucky, so the loss of the state’s contract raises questions about the financial future of the company.
The majority — 91 percent — of Medicaid enrollees get their benefits through one of these Managed Care Organizations, or MCOs. They’re paid by the state and federal governments to run these benefits on a monthly basis per member. The idea is that these companies will better keep down health care costs because they’re only paid a pre-arranged amount, so they might drive people to be healthier or cut out unnecessary spending. This system has been in place since 2013.
Bevin’s administration announced the new Medicaid contracts about two weeks before Bevin’s last day in office: on Dec. 10, which is also Beshear’s inauguration day. And there are several unknowns as to how the changing administration will affect Passport’s chances going forward.
Appeals, Lawsuits Or New Proposals
The Beshear administration could grant an appeal to either Passport or Anthem, but then the number of Medicaid administrators in the state would rise to six, an increase from the current five. This might not sit well with lawmakers who have previously said Kentucky needs to narrow down the field to reduce administrative costs.
Or, Beshear could completely re-issue a request for proposals that would nullify the previous contracts and give Anthem and Passport a new chance to apply, according to health care consultant Jeff Myers. He said this has happened in other states. This scenario may be even more likely if Beshear follows through on a promise to immediately revoke Bevin’s controversial changes to Medicaid.
The new Medicaid contracts set out how the state’s chosen insurers will meet those upcoming requirements laid out in Bevin’s proposal. Those changes, including work requirements, have been tied up in court. Myers said he suspects the Beshear administration will issue new RFPs and rescind the current contracts as to not include Bevin’s signature policies in the contracts.
If either Anthem or Passport loses their appeals, Myers said it’s likely they will sue the state; he said such lawsuits are common by insurers that are turned down for new contracts. Because of the way Medicaid proposals are scored, insurers have a lot of leeway to argue their case in court. This, too, could result in the new Beshear administration issuing a new request for proposals for the Medicaid contracts, much as other states like Pennsylvania did in 2018 when faced with lawsuits by losing insurers that didn’t get contracts, according to Myers.
“Pennsylvania, put out a procurement and then abruptly yanked the procurement and then put out another one, because they got sued and they felt they were going to lose,” Myers said, the founder of health care consulting firm OpDis.
It’s also notable that ex-Passport CEO Mark Carter is on Beshear’s transition team for the state’s Cabinet of Health and Family Services. He’ll be part of a small group helping to pick a new secretary and other political appointees that will be influential in the process of either deciding appeals or issuing new RFPs.
But Beshear spokeswoman Crystal Staley downplayed Carter’s involvement in the future of Passport Health.
“Mr. Carter is serving as a volunteer member of the transition team; he is no longer employed or affiliated with Passport and has no role in reviewing any of the contracts,” Staley said.
What’s Next For Passport’s West Louisville Headquarters?
Another potential casualty if Passport is unable to renew its contract with the state could be the $130 million corporate headquarters already underway in Louisville’s California neighborhood. Stalled since February, the building was once expected to be one of the major investments to take place in west Louisville during a current and unprecedented wave of development.
This summer, Passport announced plans to sell most of the company to its business partner Evolent Health — a deal that Evolent and Passport representatives say they still expect to close this month. At the time, the sale was seen by some as an opportunity to resurrect the headquarters project.
Given the recent news about Passport’s uncertain future, the headquarters plan is somewhat unknown. Passport spokesman Ben Adkins said there may still be a way forward for the project.
“Passport believes strongly that the development of the site at 18th and Broadway will have a positive impact on the community, and a search is under way to identify a developer that can bring the vision for the site to fruition,” he said in an emailed statement. “However, our immediate efforts are focused on mounting a successful protest to the state contract awards so that we can continue to serve our members across the Commonwealth.”
In a recent conference call with analysts, Evolent CEO Frank Williams said he believed the decision to not award Passport a contract is not in the best interest of Kentucky residents and Medicaid beneficiaries. He said he supported Passport’s plan for an appeal, but that it was difficult to say whether the new administration would help the situation.
“What we really want is a fair hearing in the appeal process,” Williams said. “We believe this is a high performance plan. We believe they provide incredible service to members, incredible clinical care for an integrated model.”
He indicated that Passport would file an appeal soon after Beshear takes office. He said appeals take time because the company has to get information on scoring and other details from the state; he pointed to similar situations in Louisiana and Florida. The process could take weeks or months, Williams said.
In the cases of some other successful appeals, Williams said, “there were certain things in the decision process which really didn’t make sense.”
He also said there are some aspects of the scoring process in Kentucky that are “highly subjective.”
When he made the comments, Williams said he did not know the details of Passport’s scoring, but that the companies planned to examine them carefully once received.