(Editor’s note: Due to reporter error, the original version of this post included an incorrect figure for Kentucky’s total population.)

Welcome to the final top secret, always confidential Monday Business Briefing of 2012.

These are biz tips Insider Louisville staff and contributors have collected during the past few days, a few of which are NOT double-verified as with our daily reporting.

But as always, we’ve made multiple calls on these tips, which come from sources who are not merely insiders, but who have direct knowledge of the deals.

We swore we weren’t going to do a full-blown Monday Business Briefing for New Year’s Eve, but what can we do when we keep having news, even at the holidays?

As much as we wish this weren’t the case, 2013 is shaping up to be a rocky year financially for Kentucky, so consider this the “ticking time bomb” edition of MBB as we enter the New Year.

The unvarnished truth – on several different fronts, Kentucky is functionally bankrupt thanks to decades of poor governance and arguably the worst legislature of all 50 states.

• When we started using the “Medicaid Meltdown” verbiage, it was hyperbole. We admit it. We never dreamed the system would actually melt down. Now, it’s reality. Sources assured us last Friday that Tampa, Fla.-based WellCare Health Plans has terminated Medicaid managed care contracts with King’s Daughters Medical Center in Ashland, Lexington-based Appalachian Regional Health System and six Western Kentucky hospital systems effective March 1. If WellCare follows through, this could ultimately leave ARH and King’s Daughters with NO contracts. That would mean by our calculations about 200,000 of the poorest, unhealthiest people in the state would be without health care unless they wanted to leave Eastern Kentucky and travel to in-network systems in other Medicaid region. We’ve called all the parties, and no one is talking. So we’re guessing there are behind-the-scenes negotiations. St. Louis-based Centene already notified Kentucky Cabinet of Health and Family Services officials back in July they would leave Kentucky in mid-2013. Centene execs anticipate losing between $60 million to $70 million in their Kentucky MCO contract through the expiration date of September, 2013. Bethesda, Md.-based Coventry Health Care is suing ARH and several other hospital systems, and they’re all counter-suing Coventry. This ultimately will hit your pocketbook, Kentucky Taxpayer, because if the Medicaid system breaks down – if there are no Medicaid Managed Care insurers willing to do business here – all those sick and destitute people end up in the local emergency room. Taxpayers will have to pick up at least part of the bill. Further, we’re guessing the Obama Administration is going to be less than amused by Kentucky’s crisis, and 70 percent of Medicaid funds come from the feds. Kentucky could be looking at federal penalties for falling out of compliance, and we’re guessing those fines won’t be coming out of Gov. Steve Beshear’s pocket. To put a cherry on top of all this, Louisville legal firm Wyatt, Tarrant & Combs is using the Freedom of Information Act to get information from the Federal Centers for Medicaid and Medicare Services, trying to find out what the feds know about the huge holes in Kentucky’s Medicaid coverage in hopes the Obama Administration will intervene. And just so you understand, we’re talking about $6 billion annually flowing through Medicaid to Kentucky members. Kentucky has a total of about 800,000 people on the Medicaid rolls out of a total population of 4.3 million, or about 18 percent of total residents. The Medicaid Meltdown all started in 2011 when Beshear – in a heated campaign against former State Senator David Williams – announced the state would save $380 million by switching overnight to a managed care system from fees for services, a process that has taken other states years to implement.

• The Courier-Journal yesterday finally – after years of mostly ignoring the issue – found time between covering sports events to report how the state pension crisis ultimately will impact Kentucky cities. (That said, it was a localized version of a NYTimes story from last summer.) The Governmental Accounting Standards Board will institute a new reporting rule next summer requiring cities to report their share by percentage of the state’s $30 billion in public pension underfunding. For a city such as Louisville, which has almost 20,000 employees just in the Jefferson County Public Schools system, this acknowledgement of at least a theoretical demand on the city to cover any state public pension gaps in the event of insolvency could lower the city’s credit rating drastically.

Check out this scary public pension chart from the Kentucky Association of Counties:

Click to see full size.

Add this to the city obligation regarding KFC Yum! Center and to the Metropolitan Sewer District crisis, and you get the feeling 2013 has to be a very, very good year revenue-wise for the city just to keep its financial head above water. MSD has a $120 million problem related to an “investment” in derivatives, which was a $32 million obligation just six months ago. (Exactly why a utility took a risky position in what are known as fixed to floating interest rate swaps has never been explained.) The good people of Louisville are in for a rude awakening because only the boutique media such as IL have bothered to cover this. The question no one has delved into effectively, though, is, “Where did all that money go? Or did the public employee pension obligations simply outgrow Kentucky’s ability to service them? And who got the fees for persuading our less than sophisticated local officials to do the things they did? Such as the millions lost by the Kentucky Retirement Systems in currency speculation?”

• This is weird: One of our most reliable downtown real estate sources tells us to look for Ward Plauche to try to reopen the O’Malley’s Corner/Coyotes complex at Second and Liberty streets after walking away from it back in 2008. A lot must have changed because there was a rancorous 2010 law suit filed by the property owners – the Fischer Family – against Plauche and Second Street Corp., the president of which was Don Blackburn. The Fischers were claiming the defunct nightclub owed $53,978.89 in back rent. The Fischers owned the property that housed the larger O’Malley’s Corner/City Block complex, listed as 112, 114, 115 and 117 W. Liberty St., according to court documents and records at the Jefferson County Property Valuation Administrator’s office. The rest of the City Block complex is owned by auto dealer Bob Montgomery, who is not a party to the suit. That was then. Now, the complex is two blocks south of the biggest draw in downtown, KFC Yum! Center. Which changes everything. Said our source, “Ward still owns that lease, and it’s a (relatively) cheap lease.” And we have to say anything would be better than thousands of square feet sitting there empty and rotting.

We told you about this back during the summer, but it’s taken awhile to happen. A strategic 2-acre parcel next to the University of Louisville Belknap Campus is scheduled to be auctioned on Thur., Jan. 31 at the Jefferson Circuit Court foreclosure auction. (What are the odds we’ll remember to put “2013” on everything?) The property at 1900 S. Floyd Street belonged to Bill Hysinger and one of his investor groups, and Ikon-Cards Development. It was going to be a dorm and retail, but the deal went bad almost as soon as it was announced in 2007 as the commercial real estate markets began to seize up. The amount to be recovered by Luckett & Farley Architects is listed as $2.3 million, according to Jefferson Circuit Court foreclosure records. Larry Owsley, vice president of Business Affairs, told us back in April several groups have approached the university about the lot. Say what you will about U of L President James Ramsey, he’s transformed the area around campus to the point that investors will find a good use for the property.

The Jimmie Conti & Sons building at 1737 Frankfort Ave. on the west side of the Silver Dollar Saloon is in play. We hear there’s an offer on the building, though our sources say the deal isn’t close to closing. The sources we know who looked at the building say it’s a former movie theater, and that presents certain issues for reuse. Architect Mose Putney has been trying to get investors lined up for some time, but our sources won’t say whether he’s part of the current group making its move. Putney, a partner in Shine Contracting in NuLu, has been an urban revitalization and redevelopment advocate for years. If anyone can make this work, it’s him. And may we remind you, the Silver Dollar next door is one of the biggest hits in years.

• Look for the Vint cofffee/wine shop that closed last summer on Brownsboro Road to reopen as a Heine Brothers’ Coffee sooner rather than later. All part of the new direction and new energy for the 20-year-old Heine Brothers’ Coffee chain, which has a plan for 20 total stores, up from 12 now. As we told you two weeks ago, as of January 7, there will be 12 Heine Brothers’ stores with the change-over of all but one Vint Coffee location including two downtown Vint stores. The Vints on Fourth Street Live and on Main Street will become Heine Brothers’, the Louisville chain’s first foray downtown under that brand. The only Vint that will remain will be the store at 2309 Frankfort Ave. in Crescent Hill.

• Multiple people in and around the automotive business see 2013 as the year when the retail side of the industry explodes. Dick Swope and others see this coming just in replacement demand. In the United States, the majority of cars on the road are now 10.8 years old. As unemployment falls and wages rise, goes the theory, sales will finally return to pre-Recession levels. Assuming we don’t plunge over the fiscal cliff today and land in the middle of another recession.

Monday Business Briefing briefs:

• The Hertz Starks Building is on the market. We wouldn’t have believed it either, but we’re assured it’s listed. More as we get the details.

• We’ve heard a bit more on the Hunt Tractor property at the end of East Market. All the leases expire in 2014, opening the site to redevelopment. We hear Steve Paradis is interested in redeveloping the property.

• This is intriguing: What does Meat in Butchetown creator Payton Ray have planned for NuLu? Some say a hotel, though we can’t think of a building large enough. Digging ….

• Speaking of NuLu, this just in: Stacie Henehan posted on the IL Facebook page that Earth Friends Cafe & Coffee Bar is coming in February to former Bodega space at 829 E. Market St. from New Albany. From Stacie Henehan Bale: “We are a espresso and smoothie bar, as well as breakfast and lunch spot, with a focus plant based diet. We also promote local foods, including meats.” Very cool!

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4 thoughts on “Monday Biz Briefing: 'Ticking time bomb' edition includes Kentucky Medicaid Meltdown, pension crisis hits home

  1. Hello! I haven’t lost sleep over it, but I’ve noticed on more than one occasion that IL has referred to the Frankfort Avenue Vint location as being in Crescent Hill. It’s actually in Clifton. Ewing Avenue is the dividing line between the two neighborhoods. Thanks, and I love the blog! I check it several times a day.

    http://www.neighborhoodlink.com/Clifton/map

  2. Hello! I haven’t lost sleep over it, but I’ve noticed on more than one occasion that IL has referred to the Frankfort Avenue Vint location as being in Crescent Hill. It’s actually in Clifton. Ewing Avenue is the dividing line between the two neighborhoods. Thanks, and I love the blog! I check it several times a day.

    http://www.neighborhoodlink.com/Clifton/map

  3. Kentucky’s total population is almost 4.4 million. So 18% of the state is enrolled in Medicaid. Not that it makes a material difference to your report. But careless factual mistakes are not flattering.

  4. Kentucky’s total population is almost 4.4 million. So 18% of the state is enrolled in Medicaid. Not that it makes a material difference to your report. But careless factual mistakes are not flattering.

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