A stock chart showing Evolent's one-month decline
Evolent expects to get more money out of Passport Health Plan, either through payments for services, selling its stake or liquidating the nonprofit’s assets. Investors have not reacted favorably to the plan. See if you can spot when Evolent announced its plans to take a majority stake in Passport. | Screenshot courtesy of Yahoo! Finance.

Evolent Health expects to get more money from Louisville’s nonprofit Passport Health Plan — one way or another.

Evolent CEO Frank Williams said he expects that taking a $70 million majority stake in Passport Health Plan will increase the nonprofit’s annual payments to Evolent by up 75%, to about $158 million.

Until now, Passport, which was facing insolvency because of heavy losses in the last year, had been paying the Arlington, Va.-based consulting company about $90 million per year.

“With the new deal we’re expanding that pretty substantially so would expand our revenue base by 50 to 75%, very profitable in terms of what we can do for that client,” Williams said last week at William Blair’s 39th Annual Growth Stock Conference in Chicago.

Evolent had announced May 29 that it planned to acquire a 70% stake in Passport, a nonprofit managed care organization that is partially owned by the University of Louisville. Passport handles Medicaid benefits for about 307,000 Kentuckians, including nearly 129,000 in Jefferson County. The acquisition still has to be approved by state and federal regulators.

A Medicaid expert had told Insider last week that without Evolent’s bailout, Passport likely would lack the capital required to even qualify to apply for the new five-year Kentucky Medicaid contract. The deadline to respond to the state’s request for proposal is July 5. Without that contract, which is essentially Passport’s sole revenue source, the nonprofit would go under.

Williams told investors that even if Passport fails to win another contract and becomes insolvent, the nonprofit has enough assets to allow Evolent to recover its $70 million investment.

“If you look at the wind-down value of that plan, it’s, we believe, over the amount of money that we invested in the plan,” Williams said. “So at its worst, we would recoup our investment … and then at its best, we’d get substantial ownership stake in a very valuable asset and one that we could monetize in different ways in an expanded service relationship.”

Williams also said that he does not believe Evolent will hold on to a majority stake in Passport for long.

“This was a pretty unique situation with a large and growing client where we felt there was an opportunity to preserve our base service business and also expand the relationship,” he said. “We ultimately are not in the health plan ownership business but see an opportunity to move into a minority position over time either with strategic or financial investors.”

Evolent investors have not reacted well to the company’s plans. Shares fell about 29% on the day of the announcement. They’ve fallen another 11% since then, including a 5.4% drop on Friday, hitting a 52-week low of $8.88, before closing 2 cents higher. Since last fall, Evolent’s shares have lost more than two-thirds of their value.

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Boris Ladwig
Boris Ladwig is a reporter with more than 20 years of experience and has won awards from multiple journalism organizations in Indiana and Kentucky for feature series, news, First Amendment/community affairs, nondeadline news, criminal justice, business and investigative reporting. As part of The (Columbus, Indiana) Republic’s staff, he also won the Kent Cooper award, the top honor given by the Associated Press Managing Editors for the best overall news writing in the state. A graduate of Indiana State University, he is a soccer aficionado (Borussia Dortmund and 1. FC Köln), singer and travel enthusiast who has visited countries on five continents. He speaks fluent German, rudimentary French and bits of Spanish, Italian, Khmer and Mandarin.