“Based upon our review … the anticipated transactions will result in the protection of charitable assets,” Beshear wrote in a letter to Passport’s attorney.
Beshear’s office said in a news release that “the anticipated purchase will result in the distribution of $70 million (in) assets to the nonprofit sponsors of Passport,” which include the University of Louisville.
“Our review aims to ensure these assets were not lost or placed into the hands of a private company, which would have been detrimental to Kentuckians,” Beshear said.
Passport told Insider via email that it was “pleased” with Beshear’s decision and said it was “an important step in moving this transaction toward closing.” Evolent declined to comment.
For-profit health consulting company Evolent, based in Arlington, Va., had announced in May that it planned to take a $70 million stake in the Louisville-based nonprofit, which had been struggling financially.
Passport handles Medicaid benefits for about 305,000 Kentuckians, of whom two-thirds live in the Louisville area, including nearly 127,000 in Jefferson County, according to state data. Medicaid is a mostly federally funded health insurance program primarily for the poor, pregnant women and people with disabilities. The state funnels the federal dollars to managed care providers, including Humana and Passport.
Passport has told Insider that Medicaid beneficiaries would see no change in their coverage or service as a result of the proposed acquisition.
Passport said Monday that it “must reach additional milestones with the Finance and Administration Cabinet, the Department of Insurance and the Centers for Medicare & Medicaid Services” before the transaction can be finalized.
It expects the deal to close in November.
Passport has lost $164 million in the last three years, including $123 million last year, blaming recent struggles on the state lowering its disbursement of Medicaid dollars. Passport CEO Mark Carter had said that without additional help from the state, the nonprofit would be facing insolvency.
The state had said that it made changes to the Medicaid program because of budget constraints and because Kentucky’s managed care organizations were generating much higher profit than their peers in other states.
Beshear, who hopes to oust Gov. Matt Bevin in next year’s gubernatorial election, said in Monday’s release, “While I disagreed with the deep cuts Governor Bevin made to Passport’s rate and his hostile attempt to cripple the state’s largest Medicaid market, I believe this purchase will help ensure our most vulnerable citizens continue to receive the care they need and deserve.”
The state increased the distribution of Medicaid dollars in April, and Carter said at the time that he was “cautiously optimistic” the new rates would be enough to avert Passport’s insolvency.
However, a month later Evolent stepped in and said it would take a 70% stake in Passport.
The nonprofit’s survival is critical to the company. Passport has paid Evolent hundreds of millions in management fees in the last few years. The payments this year will account for about 12% of the company’s revenue. Evolent’s investors have not reacted well to the plans. On the day the company announced the acquisition, its shares fell 29%. They have fallen more since then. Late afternoon Monday, shares traded for $6.77, down 77% from their high in November.
A Medicaid expert had told Insider that the $70 million bailout was a matter of survival for Passport. Without Evolent’s cash and promised “interim balance sheet support,” Passport likely would have lacked the capital required to apply for the new five-year Kentucky Medicaid contract. That contract is essentially Passport’s sole revenue stream. Deadline to apply for the new five-year contract, which begins next summer, was July 5. The state has told Insider that it expects to award contracts in the fall.