Think the Beshear Administration’s Medicaid managed care meltdown is going to go away?

Think again.

Appalachian Regional Healthcare just hit at least a triple in the doubleheader it’s playing against the state and against the Medicaid managed care providers Kentucky signed on last November.

In a highly entertaining injunction, Federal Judge Karl S. Forester ruled that one of those MCOs, Bethesda, Md.-based Coventry Healthcare, has to resume living up to its contract with Appalachian Regional Health system through November 1.

But here’s why this is news: Forester found in his injunction that Coventry sought to essentially dump its coverage of thousands of expensive Medicaid patients by cutting ties to ARH, the largest hospital network in the extremely poor sections of Eastern Kentucky.

Worse than that, Forester’s 24-page ruling makes clear the state Cabinet for Health and Family Services officials allowed Coventry to cut its network of care providers – in violation of its contractual requirements with Kentucky – to the point many of Kentucky’s poorest, most isolated people were without any reasonable access to a physician.

Last March, Coventry notified ARH it was terminating its Medicaid contract effective May 4. Coventry added that any new contract would be at lower reimbursement rates.

In turn Lexington-based ARH, which operates eight hospitals and a number of smaller clinics in Eastern Kentucky, sued Coventry in federal court. ARH also sued the State of Kentucky and another Medicaid managed care company, St. Louis-based Centene Corp., in state court.

Here’s the conclusion from today’s federal court ruling: The court granted ARH’s injunction, stopping Coventry from cancelling the contract, instructing the insurer to pay up through August 1.

But the ruling is more important than just a legal judgement on the relationship between the non-profit hospital system and the for-profit MCO.

Forester succinctly sums up what happened after Kentucky privatized Medicaid coverage: Insurers used low-ball bidding to try to attract as many Medicaid members as they could, then preceded to identify and dump those patients they identified as high-risk and high-cost. And the insurers did it without any pushback at all from state officials.

Here are some bullet points from the ruling:

• “The Court summarized this outcome as Coventry profiting or making money from its members who are using little services, but for which Coventry receives the same monthly payment from the Cabinet. The MCO receiving the high-risk patients will be paying more for services and losing money as a result.”

• Coventry offered to transfer to one of two MCO competitors – Tampa, Fla.-based WellCare Health Plans – a group of 7,500 members who were using ARH so those Medicaid recipients could continue to use ARH as an in-network facility. “ARH objected to the offer to transfer 7,500 patients, because that would have the effect of Coventry getting rid of the sickest patients and keeping those for whom little or no services are likely to be provided. Such a process is referred to as ‘adverse selection.’ ”

• Without ARH, a total of 12 contiguous Eastern Kentucky counties in lack a hospital in Coventry’s network having obstetric services.

• “Coventry has only two Outreach Coordinators for its 64,000 members in Region 8 to explain benefits, conduct clinics and health fairs, and try to manage care through preventive education. One of these two Outreach Coordinators also has responsibility for Region 7. Another has responsibility for the entire state of Virginia and Knoxville, Tennessee. The only analysis that the Cabinet has done of the adequacy of Coventry’s network without the eight ARH hospitals was to determine whether Coventry’s members are within a 45-mile radius.”

• Coventry tried to use outdated travel software to show its Medicaid members were within range of care givers when they weren’t. And there is considerable entertaining verbiage from Forester about how straight and fast a crow can fly in the mountains of Eastern Kentucky. “This 45 mile ‘as the crow flies’ standard is not found anywhere in the Cabinet’s regulations or in the Cabinet’s contract with Coventry.”

• The impact on ARH was profound, Forester finds, with the system losing patients it will likely never get back, as well as skilled employees. “Beginning with the week of May 7, 2012, ARH anticipated beginning staffing cuts of approximately 300 to 400 full-time equivalent positions. These former employees will take with them many years of experience and skill, and the probable result is reduced services. It is clear that ARH is likely to suffer irreparable harm absent an injunction. ARH could not be made whole after it has suffered the permanent loss of a substantial number of employees, physicians, patients, and services.

Since Kentucky switched hurriedly to managed care from fees for services, hospitals and other providers have claimed since last November that the for-profit insurers were not paying, paying slowly and denying patients legitimate treatments and medications. (Medicaid care is funded 80 percent by the federal government, 20 percent by states.)
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.
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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.

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