Appearing to concede to many of the concerns of health care providers and patient advocates over the past few years, today the Kentucky Cabinet for Health and Family Services (CHFS) announced they would rebid all of their contracts for Medicaid Managed Care Organizations (MCOs) to improve oversight and administrative processes.

Medicaid_June-2009-thumb-320x2401Facing a $1.3 billion shortfall in 2011, Kentucky changed its Medicaid system from a fee-for-service model to managed care, in which private insurers receive a set amount of money from the state per patient to be used to directly pay health care providers. The transition to the new system was rocky from its inception, as it was inundated with complaints from patients who were denied treatment or had difficulty finding providers, as well from doctors and hospitals who found long payment delays, if not outright denials, from MCOs.

CHFS issued a new RFP today for MCOs to manage the health care services of 1.1 million Kentuckians who are on traditional or expanded Medicaid, and the new contracts will take effect on July 1. The contracts with the current MCOs — Anthem, Aetna (Coventry Cares), Humana (CareSource), Passport and Wellcare — will expire at that date.

“After four years, the Medicaid Managed Care Program is no longer in its infancy. Statistics confirm that moving to a managed care model has saved Kentucky taxpayers more than $1.3 billion in state and federal funds while simultaneously improving the delivery of health care services to our Medicaid population,” said CHFS Secretary Audrey Tayse Haynes. “However, after several years of experience, we determined it was time to retool, rebid and strengthen the contracts to appropriately address concerns expressed by advocates and healthcare providers.”

Below is a list of changes in the RFP that will be incorporated into the new MCO contracts, which reflect longstanding concerns of hospitals, providers and advocates about lax oversight and penalties on MCOs, and inefficient administrative hurdles.

  • Establishing a standardized contract for all MCOs
  • Requiring statewide coverage from all contracted MCOs
  • Mandating that 82-87 percent of member capitation payments to the MCOs must be expended for direct services to Medicaid members
  • Adding an incentive pool for the MCOs to improve health outcomes
  • Requiring the use of national standards designated by the Cabinet to determine “medical necessity”
  • Ensuring the appropriate medical specialists are making “medical necessity” determinations and reviewing cases on behalf of the MCOs
  • CHFS will be reviewing “medical necessity” denials and denials of payment for emergency room use for contract compliance
  • Expanding performance requirements for Medicaid members’ pharmacy benefits
  • Requiring the use of standardized forms for prior-authorization requests, grievances or appeals for members and providers, and claims submittal
  • Using nationally accepted uniform standards for credentialing all health professionals
  • Strengthening requirements for the provision of behavioral health services
  • Developing practical and convenient alternatives to non-emergent emergency room utilization
  • Requiring timely updates by the MCOs to their online provider network information within 10 days of changes being made to the network
  • Requiring MCOs to serve persons with Severe Mental Illness (SMI) as persons with special needs
  • Increasing penalties for non-conformance with contract requirements

Sheila Schuster, executive director of the Kentucky Mental Health Coalition, has been among the patient advocates calling for such reforms since the inception of Medicaid Managed Care in the state. She tells Insider Louisville that she is both thrilled and stunned that the administration of Gov. Steve Beshear is finally making this move, as she wondered if this day would ever come.

“They have picked up on many, many of the issues that we’ve raised over the past three and a half years, particularly with regard to people with mental illness,” says Schuster. “The inconsistency of applying medical necessity criteria, not being able to figure out what’s medically necessary, the fact that they will require standard forms for prior authorizations… we’ve asked for that from day one. The fact that they are actually going to enforce the contracts, that’s just music to my ears.”

Schuster expected the state to just “rubber stamp” the contracts of the current MCOs by this summer, adding that she did not see this coming.

“I’d like to say that they heard the voice of the people,” says Schuster, noting that hospitals attempted to pass legislation in the General Assembly this year to create an appeals process for providers. “If you look at the Medicaid Advisory Council, those meeting are every two months and it’s the same litany of complaints and concerns every darned time with no response. The only thing I can think of is it’s a gesture by this outgoing administration to get things right so that regardless of who comes in next year, there are strong contracts in place. I applaud them for it, and I’m stunned.”

Kentucky State Auditor Adam Edelen
Kentucky State Auditor Adam Edelen

The changes proposed by CHFS mirror many of the recommendations of State Auditor Adam Edelen in his report on rural hospitals released last month. Beshear critiqued Edelen’s report after it was released, saying it did not reflect new Medicaid payments made in 2014

“We are pleased to see the Cabinet taking steps to improve and strengthen managed care contracts, many of which we recommended in our recent report on the financial strength of rural hospitals,” said Edelen in a statement to Insider Louisville. “It is my hope these new contracts will bring more accountability and transparency to taxpayers and will result in even greater health outcomes for Kentuckians.”

As IL first reported in January, CHFS’s previous Medicaid Commissioner Lawrence Kissner left that month to take a job in Illinois with Aetna, which owns Coventry Cares, one of the MCOs that had been in charge of regulating for two and a half years. Kissner — and the Beshear administration — had been the target of criticism from providers, advocates, and both parties in Frankfort for failing to enact many of the reforms that CHFS announced today.

Joe Sonka
Joe Sonka is a staff writer at Insider Louisville focusing on government, politics, education and public safety. He is a former news editor and staff writer at LEO Weekly and has also freelanced for The Nation and ThinkProgress. He has won first place awards from the Louisville Metro chapter of the Society of Professional Journalists in the categories of Health Reporting, Enterprise Reporting, Government/Politics, Minority/Women’s Affairs Reporting, Continuing Coverage and Best Blog. Email him at [email protected]