Embattled Passport Health Plan has asked a judge to force the state to pay the nonprofit an additional tens of millions of dollars to avert its insolvency as a lawsuit between the parties is making its way through court.
A hearing on the motion for a temporary injunction has been scheduled for 9:30 a.m. Feb. 26 in Franklin Circuit Court.
Passport, one of five organizations in Kentucky that manage Medicaid benefits, had filed a lawsuit Friday that asserted that the state, the Cabinet for Health and Family Services and its Secretary Adam Meier had breached their contract with the nonprofit, acted in bad faith and violated the state constitution by unilaterally changing the way that they distribute Medicaid dollars.
The nonprofit, which serves about 315,000 beneficiaries, including about 209,000 in the Louisville area, had said that the new disbursement rates, which the state instituted in July and which benefited its four for-profit competitors, could push Passport into insolvency as early as next month.
Given that a judgment in the lawsuit would occur after Passport’s projected insolvency, the nonprofit said that until the case is decided, the court should order the state to distribute Medicaid dollars the way it did before it “arbitrarily, retroactively and in violation of the parties’ contract began paying rates that it knows will cause the imminent demise of Passport as an insurance business.”
According to the lawsuit, Passport lost $65.5 million last year, lowering its net worth by more than 30 percent. Passport projects that it will continue to lose about $4 million per week, which will reduce its capital below statutorily required thresholds by March 31. Passport said that unless the state changes its distribution rates, the nonprofit will become insolvent and, most likely, its assets will be liquidated.
Passport also said that the disbursement changes “are likely to result in reduced access to needed health care services” for Medicaid beneficiaries in the Louisville region. Health care experts have told Insider that the loss of a managed care organization could lead to significant service disruptions for the beneficiaries and could undermine their long-term health outcomes.
Doug Hogan, executive director of public affairs for the cabinet, had told Insider Louisville in an email, “we are currently reviewing the lawsuit, but we were certainly surprised to receive it given that we had extensive meetings with their actuaries and they were unable to identify any legitimate issues with the soundness of our rates.”
While disbursement rates are contributing to Passport’s fiscal problems, an analysis by Insider, based on Internal Revenue Service records and Securities and Exchange Commission filings, showed that the nonprofit’s finances also were being undermined by hundreds of millions of dollars in management fees to health care consulting company Evolent Health.
Passport’s fiscal problems also have placed in jeopardy its new $87 million headquarters at 18th Street and West Broadway, a project that is under construction and which community leaders have said they hoped would stimulate the economy and inhibit further social degradation in an underserved part of the city.
The nonprofit has declined to answer questions about what steps it is taking — if any — to try to bring costs in line with projected lower revenue.