(Editor’s note: This post was updated at 5:30 p.m. on May 18 with comment from state officials.)

(Editor’s note: Thist post was updated at 11:45 a.m. on May 20 with additional information from the Williamson Daily News.)

First, it was Coventry Health Care versus hospital groups such as Appalachian Regional Healthcare and Baptist Healthcare as Kentucky’s switch to Medicaid managed care collapses.

Then, it was Coventry halting reimbursements for a drug used in treating drug addiction.

Now, Coventry officials are igniting another round of controversy as they start notifying physicians at small medical clinics in some of the poorest Appalachian counties that they’re cancelling contracts.

Multiple employees at clinics in Wolfe County confirmed to Insider Louisville that earlier this week, Coventry executives started sending letters notifying area doctors that Coventry would no long honor Medicaid contracts. Coventry also sent letters to its Medicaid members telling them erroneously their doctors had left the clinics, sources said.

Wolfe County is in Eastern Kentucky. It is one of the least populated counties, with only about 7,400 residents as of the 2010 census.

The median income for a household in the county in 2010 was $19,310, and about 36 percent of the people live below the poverty line.

The Coventry cancellation letters have not escaped the attention of Kentucky officials.

Kentucky Cabinet for Health and Family Services contracts with the managed care providers require the companies to establish and maintain an adequate network of providers to ensure quality access for Medicaid members, said Jill Midkiff, CHFS director of communications. “The Cabinet is aware of this latest development with Coventry and will closely examine and continue to monitor the adequacy of Coventry’s provider network.

“The Cabinet holds all MCOs to the requirements of the contracts they signed.”

Matt Eyles, vice president of Public Affairs and Policy at Coventry’s headquarters in Bethesda, Md. did not return calls for comment.

Sources gave Insider Louisville a letter circulating through health care circles confirming the Coventry contract cancellations.

We’ve redacted all names:

From: XXXXXXXXXXXXXXXX

Sent: Thursday, May 17, 2012 7:39 PM

To: 

Subject: Coventry Provider Cancellation Notices

 

Dear XXXXXXXXXXXXX,

I received a call yesterday morning from one of our Jordan Drug

pharmacists that was very alarming to me. It appears that two of the

three medical clinics that service Medicaid patients in Wolfe County

were having their contracts cancelled by Coventry. I had been following

the media accounts of the issues Coventry has been having with the

different hospital groups but until that call had not heard of any

physician groups being sent cancellation notifications. You can imagine

the panic that has started to set in with all the Medicaid patients in

Wolfe County who have been going to the same physicians for years. If

the main two clinics that service the entire county are forced from

Coventry participation, these patients will be left without access to

care.

I have two questions for you that come from me personally but will

also resonate throughout Kentucky from all of our KIPA (Kentucky

Independent Pharmacist Alliance) members. Is there Open Enrollment

right now for these patients who are being directly affected by the

reckless Coventry contract cancellations? If so, can you share the Open

Enrollment dates with me so that I can share this with my KIPA members?

I have had one e-mail already tonight from a KIPA member who shared an

e-mail with me from members of another health care group voicing the

same concerns that I am voicing for our Medicaid patients.

Neville and Carrie, if our Medicaid patients are not in a period of

Open Enrollment in which they can switch immediately from Coventry to

either KY Spirit or WellCare, is there a Hardship Form that we can

provide for them to make their case? We are going to be facing a

medical crisis of access to care in at least Wolfe County in the

immediate future. I’m sure Wolfe County will not be the only county

that will be affected. It is just the first county that I have heard

from and one that is near and dear because we have been servicing

patients there for many years. These patients have looked to us since

the November 1st implementation of managed care to help them navigate

through each new roadblock that has come their way. Now, over six

months into managed care, Coventry has thrown a major roadblock to their

continuing care from their trusted physician groups. Coventry used the

catch of no-copays to get patients to switch from the other two managed

care companies and now are starting to cancel the contracts of their

physicians and hospitals. There must be a way out for our Medicaid

patients. Please let me know the status of Open Enrollment and the

procedure we can tell our patients they can use to switch MCOs.

 

Sincerely,

 

XXXXXXXXXXXX

Beattyville, KY 41311

Earlier this week, sources began telling Insider Louisville that Coventry officials notified physicians at small clinics in various parts of Kentucky that Coventry was terminating their managed-care contracts.

“This is going to be a death by a thousand cuts,” said a source with direct knowledge of events. “I think (Coventry executives) are trying to get kicked out” of their MCO contracts with the state.

Before this ongoing round of contract cancellations, Coventry executives notified Louisville-based Baptist Health Care that if Coventry can’t renegotiate more favorable terms.

There would be no affect in Louisville, where the MCO is Passport Health Plan. But the Baptist system also operates hospitals in Lexington, Paducah and Corbin.

Executives at Coventry, a publicly traded insurer, have made no secret that they’re bleeding money in Kentucky even as the MCO is accused of late pays or no pays to doctors and hospitals.

ARH, based in Lexington, sued Coventry last month, and the two parties currently in negotiations to try to work out a new contract by July.

In April, Insider Louisville posted a letter from a top Conventry executive in Kentucky to ARH’s CEO blaming the whole Medicaid managed care fiasco on the Beshear Administration, which rushed to swtch to a managed care system from fee for services in an attempt to save money.

For a number of reasons, Coventry ended up with a larger number of high-risk patients than the other MCOs, Centene and WellCare.

If their losses grow too painful, it could cause Coventry officials to decide to walk away from its Kentucky MCO contracts, say our sources. The insurer posted $25 million performance bonds as part of the contract process back in July, 2011. But if Coventry starts bleeding money, surrendering the $25 million may turn into the least painful way out of the deal.

The Williamson Daily News on Saturday reported State Sen. Ray S. Jones II of Pikeville  sent a letter to Beshear, aasking him to step in and “ensure the vulnerable citizens of Kentucky on Medicaid receive adequate healthcare.”

The newspaper/website in Williamson, W.V. quoted Jones, a Democrat, confirming Coventry’s termination letters, saying if no agreement was reached between Coventry and state officials, more than 40,000 people who currently receive Medicaid services through Coventry would have to move to another health plan or switch health care providers.

The back story on Medicaid changes in Kentucky: In April, 2011, state officials asked health insurers to submit managed-care proposals for the $6 billion worth of care 800,000 poor and elderly Kentuckians receive annually under the federal/state Medicaid program. At the time, Gov. Steve Beshear touted the switch to managed care from fee-for-services as saving the state $375 million over the life of the initial three-year contracts. Insiders said officials in other states such as Georgia took as long as 18 months to make the change while Kentucky tried to do it in less than six months.

The three companies receiving MCO contracts were Centene, WellCare and Coventry Cares, all publicly traded companies. (Passport Health Plan, a Louisville-based non-profit controlled by providers, is the managed care insurer for Jefferson County and 17 surrounding counties.)

Each bid for the Kentucky MCO business was based on per-member, per-month health care costs projections. Low-bidder Centene bid $330 per member, per month, according to documents submitted to Insider Louisville. WellCare bid was based on $400 per member per month, and Coventry bid $436 per member per month.

The algorithm state officials used to choose the winners favored the low-cost plans, obviously, because therein lies the savings.

The state methodology initially assigned members to a plan, with the two lowest cost plans getting more members than the highest.

If Centene’s manged care system, for example, could actually get each member to spend less than $330 per month, they’d make a profit. But crucial to getting costs that low would mean lowering reimbursements to health care providers such as doctors and pharmacies, which meant losing some.

Terry Boyd
Terry Boyd has seven years experience as a business/finance journalist, and eight years a military reporter with European Stars and Stripes. As a banking and finance reporter at Business First, Boyd dealt directly with the most influential executives and financiers in Louisville.