Appalachian Regional Healthcare asks federal judge to make managed-care firm keep it under contract

Appalachian Regional Healthcare, a hospital chain in Eastern Kentucky and southern West Virginia, is seeking an emergency injunction by a federal judge ordering Coventry Cares to let its Kentucky members continue receiving services from the hospitals, and to avoid widespread layoffs the chain says will happen if the judge doesn't intervene, reports Bill Estep of the Lexington Herald-Leader. Coventry Cares is one of three state-approved companies to provide managed care services through Medicaid. It said it would cancel its ARH contract after Friday, which would affect about 25,000 Medicaid recipients.

With a few exceptions, Coventry members would lose access to treatment or have to travel long distances to get to other facilities approved by the company, which ARH and officials in affected counties say would be difficult for most because they don't have money or reliable transportation to make the trip. Coventry spokesman Matthew Eyles said the company would continue paying for some services at ARH hospitals, including ob-gyn services to women who are more than 12 weeks pregnant and have a relationship with an ARH doctor.

The state switched to managed-care last year as a way to save money, but as Estep reports, the move has been "rocky." Providers have complained about delayed payments from the companies and their cumbersome pre-approval processes for treatments. ARH sued Coventry and Kentucky Spirit, another provider, claiming the companies owed more than $18 million for services ARH had provided.  Estep notes, "The state allowed another managed care provider not to include ARH in its network, which meant a lot of higher-risk, higher-cost patients ended up covered by Coventry, the company said." The company also said the state failed to implement a method to assess risks that would adequately compensate managed-care providers who have more high-risk patients."

ARH and its Coventry patients think the company is trying to get more money out of the state. Many of ARH's patients are covered by Coventry, and ARH spokeswoman said about 300 to 400 jobs would be cut if Coventry cancels its contract. State officials are encouraging continues negotiation between ARH and Coventry. (Read more)

Meanwhile, Bardstown pediatrician and Passport Health Plan board member James Hendrick wrote a letter to the editor of The Courier-Journal offering Passport's services to "help the state get Medicaid back on track." He said he's been very impressed with the nonprofit's "strong and engaged provider network, and an intense focus on delivering services at a cost that doesn’t diminish quality," adding that because Passport is a nonprofit, it's not concerned with appeasing shareholders. Passport has been managing Medicaid in the Louisville region for several years.

Beshear vetoes parts of budget, but health spending is intact

Though Gov. Steve Beshear vetoed 45 parts of the state budget yesterday evening, health-related spending was safe from the cut.

The budget will help reduce caseloads for social workers who investigate child abuse and neglect, funds colon cancer screenings for 4,000 uninsured Kentuckians, substance-abuse treatment for Medicaid recipients and includes funding for an elder abuse registry to protect senior citizens from unscrupulous caretakers.

"This is the most difficult budget I have ever drafted, and it will also be a challenge to implement and manage over the next two years," the governor said in a statement.

In the two-year, $19 billion budget, Beshear voted more than three dozen line-item appropriations, including "portions of the General Fund budget that limited his ability to manage the state's budget or spent money that doesn't exist," reports Beth Musgrave of the Lexington Herald-Leader.

He also cut some earmarks, including $100,000 for Actors Theatre of Louisville and $150,000 for the International Mystery Writers' Festival in Owensboro. "I am vetoing these parts because they identify new spending earmarks yet the General Assembly failed to appropriate additional funds to finance them," Beshear said. (Read more)

Health departments face more cuts as demand for services grows

More cuts to Kentucky's public-health system have been proposed at a time when the demand for services is growing, officials say. In his state budget proposal, Gov. Steve Beshear suggested public health cuts of 8.4 percent in each of the next two budget years, the same cut he recommended for most other state agencies.

"It's going to have an impact on us being able to provide services (for poor patients)," Dr. Steve Davis, the acting public health commissioner, told the House human services budget subcommittee.

The cuts will mean "the 58 health departments that serve Kentucky's 120 counties will have fewer resources to provide services such as immunizations, cancer screening, diabetes care and maternal and child care," reports Deborah Yetter for The Courier-Journal. Public health will also likely be cut at the federal level. This budget year, public health received $239 million in federal funds. It received $59 million for its General Fund from the state, which would drop to about $56 million if the cuts pass.

Davis said there are no plans yet for how to absorb the cuts. "Every single program we have is going to be on the table," he said. (Read more)

Independent pharmacists say managed care costs them money

Because two of the three new Medicaid managed-care companies have slashed the dispensing fee they will pay them, independent pharmacists are in danger of going out of business all over the state, pharmacists told the interim joint Health and Welfare Committee yesterday.

But one managed-care firm said that's the cost of saving money for the taxpayers, the reason the state implemented managed care statewide. "We recognize ... there's a big change here for everyone," said Barb Witte, CEO of CoventryCares. "All health care providers are going to have to tighten their belts."

Under the traditional Medicaid system, "pharmacists were paid a 'dispensing fee' per prescription of $4.50 to $5 plus reimbursement for their actual cost of the drug based on an industry formula called the 'maximum allowable cost,'" reports Deborah Yetter of The Courier-Journal.

But the dispensing fee of CoventryCares is only $1 to $1.50. WellCare increased its fee to $3 from $1.50, but cut reimbursement for cost, making the increase only worth about 80 cents. Kentucky Spirit is still paying $4.50 to $5.

Because the maximum allowable cost fluctuates on a monthly basis, pharmacists don't know their return until they file a claim. Often, "pharmacists find they are being paid less than it cost them to buy the drug from a wholesaler," Yetter reports.

"How long will I be able to stay in business losing money?" asked Mayfield pharmacist Sam Willett. "Not very long."

Rep. Tom Burch, D-Louisville, told the MCOs and pharmacists to come to an agreement. "There must be a way to work this out," he said. (Read more)

Medicaid's move to managed care delayed until Nov. 1; hospitals need more time to sign contracts

The move to managed care, which the state has touted as the answer to improve the quality of its Medicaid system and solve a budget deficit, has been delayed by a month in response to the Kentucky Hospital Association saying hospitals need more time to sign contracts and prepare for implementation.

"We have made great progress in Medicaid managed care since we first announced the contract awards in July," said Janie Miller, secretary for the Cabinet for Health and Family Services. "Thousands of providers have signed up with the managed care organizations ... but we still need the hospitals to sign contracts before we can implement managed care across the commonwealth."

Mike Rust, president of the KHA, said of about 100 hospitals that will be affected by the changes, only about 20 have signed contracts so far, reports Deborah Yetter of The Courier-Journal.

Four managed-care organizations, including the previously established Passport Health Plan in Jefferson and surrounding counties, will take over health-care management of the state's 730,000 Medicaid recipients. The companies will be paid a per-patient, per-month amount set by contract negotiations. Because they won't be paid using a fee-for-service model — believed to be more costly — and will try to streamline care, the move is expected to save $1.3 billion in the next three years, Miller has said.

Earlier this month, Kentucky got the green light from the federal Centers for Medicaid and Medicare Services to proceed with the transition to managed care. (Read more)

Health secretary tells legislators Medicaid budget has been balanced by moving all beneficiaries to managed care

The switch to managed care organizations has fixed Kentucky's Medicaid shortfall, with Janie Miller, secretary of health and family services, calling the budget "balanced." She said the projected savings from moving to managed care will take care of the $97 million funding gap caused by a lack of anticipated federal funding.

The Courier-Journal's Deborah Yetter notes that the shortfall was the most contentious issue for the legislature this year, with Gov. Steve Beshear wanting to plug the hole by moving to managed care and Senate Republicans wanting to make across-the-board budget cuts. After a special session, Beshear got his way and 560,000 Medicaid members are slated to move into managed-care organizations starting Oct. 1. Those in the Louisville region have been in one, Passport, for several years. Passport has a one-year contract with the state; Coventry Health Care Inc., Centene Corp. and WellCare Health Plans Inc. have three-year contracts. "They have every incentive to be successful," Miller said. "They are making a huge investment in this state."

Asked by skeptical legislators how the savings can be assured, Miller said they are guaranteed by the contracts. "To achieve savings, Medicaid will pay each company a fixed rate of about $345 per month per person. In turn, the company will be responsible for all costs of the person's health care," Yetter reports. "It's got a lot of potential," said state Rep. Jimmie Lee, D-Elizabethtown. "I have faith that if it's managed right, it could work." (Read more)

Program serving young, blind children hit hard by state budget cuts

A program that helps educate blind preschoolers throughout Kentucky has had its state funding drastically cut. Louisville-based Visually Impaired Preschool Services, also known as VIPS, will only receive $10,000 from the state this year, compared to $80,000 three years ago, The Courier-Journal's Deborah Yetter reports. (C-J photo by Michael Hayman)

The program provides free, at-home education for children who are considered legally blind until they turn 4. "The impact is that we won't be able to serve them as often," said Diane Nelson, the program's executive director. "It's so sad."

While the cut will not affect VIPS' preschool in Louisville, it will affect parents and children in more rural parts of the state because fewer specially trained teachers will be sent from Louisville and Lexington to help them. The program serves about 300 children in Kentucky and southern Indiana. Last year, about 50 of those children were outside Louisville and Lexington. This year, only 22 rural children are being helped. "We don't have the money to go out and find these kids," Nelson said.

The funding reduction is the latest in a series of cutbacks that have affected Kentucky public health in the past several years. All told, public health funding has been cut $12 million in recent years. (Read more)

Louisville's University Hospital limits care for non-local patients

University Hospital in Louisville has been forced to stop providing some free or deeply discounted care to patients who live outside Jefferson County. The number of low-income patients coming to the hospital from surrounding counties created a $20 million shortfall last year, "jeopardizing University's primary obligation to treat Louisville's poor," The Courier-Journal's Patrick Howington reports.

Out-of-town patients who want elective procedures such as colonoscopies now have to pay up to 70 percent of the charge. They also must show that they tried to get care in their home county first and may have a longer wait than Jefferson County patients. The changes do not affect patients who come seeking care for trauma, high-risk pregnancies, strokes or cancer care.

University Hospital is generally the facility of last resort for low-income patients in the region. The training hospital for the University of Louisville, it receives extra state funding to help pay for patients who can't pay for themselves. Last year, the university got nearly $69 million to cover indigent care, but that care cost it $89 million. The $20 million shortfall is five times higher than 2005's shortfall of $3.7 million.

Last year, University gave treatment to 767 Hardin County patients, compared to 441 five years ago; 221 Warren County patients compared to 134 in 2005; and 200 Hart County patients, almost twice the number from 2005. (Photo of patient DeEdra King and physical therapist Cathy Gerrish by Aaron Borton) The economy is likely to blame, Howington reports. "The economic downtown cost many people their jobs, and thus their health insurance, and contributed to a surge in uncompensated care at many Kentucky hospitals." (Read more)

State awards Medicaid managed-care contracts to 4 firms, including Passport; networks to be established by Oct. 1

In an effort to save $1 billion in the next three years, and fill a hole in the current state budget, Gov. Steve Beshear announced Thursday that Kentucky's Medicaid program will be run by four companies, including the beleaguered Passport Health Plan. (Associated Press photo by Ed Reinke)

The move will affect 815,000 Kentuckians who qualify for Medicaid, a program for the poor and disabled. Despite the changes, they will not see a cut in services, and the moves are expected to create nearly 550 jobs, Beshear said. For his press release, click here. For audio of his press conference, go here. He plans to fly around the state Friday to get the word out about the changes, the Lexington Herald-Leader reports.

The companies are Coventry Health Care, based in Bethesda, Md.; WellCare Health Plans of Illinois; and Centene Corp. of St. Louis. As it has been doing already, Passport will serve Jefferson and 15 neighboring counties, but its contract was renewed for only one year. The other companies were awarded three-year contracts. Passport was the subject of a scathing audit earlier this year by state auditor Crit Luallen, who uncovered unnecessary spending. The other organizations operate in at least seven states each.

Now that the contracts have been awarded, the companies will start establishing provider networks, which they have until Oct. 1 to do, Jill Midkiff, spokeswoman for the Kentucky Cabinet for Health and Family Services, told Kentucky Health News. Initially, Medicaid recipients will be matched with a company based on what network their doctor is part of. "But if they don't want to stay with that company, they can change immediately or change after they've been with them for a little while," Midkiff said.

Unlike with Passport, Midkiff said, Coventry, WellCare and Centene will not be responsible for a specific number of counties; they will simply serve their in-network doctors, wherever they happen to be. "Which doctors are in which networks in which counties is not a question I can answer," Midkiff said. "It will be something the companies will be working to establish."

Moving to managed care is the Beshear's administration's answer to fill a $166 million hole in the Medicaid budget, created by a lack of expected federal funding. The federal government pays more than 70 percent of Medicaid costs, bringing the expected savings to $1.3 billion over three years.

Lawmakers vigorously butted heads over how to resolve the issue, making it the most contentious of this year's legislative sessions. The Democratic House sided with Beshear's plan, but the Republican-led Senate fought it, saying managed care would not save the money Beshear promised. They instead proposed making across-the-board cuts, even to the basic school-funding formula. The issue went to a special session, with Beshear warning that, without a compromise, Medicaid reimbursement to hospitals and providers would have to be cut 35 percent. When he promised House Democrats that he would line-item-veto the Senate's spending cuts, the House passed the bill and he made the vetoes.

The bill gave state officials had until July 1 to get contracts in place, a deadline they missed by almost a week. The plan must now be approved by the federal Centers for Medicare and Medicaid Services. The waiver was submitted to CMS June 11. CMS officials have 90 days to review and approve or disapprove the submission.

WHAT IS MANAGED CARE?

A managed care organization "in the broadest context is an organization that is responsible for managing patient care as opposed to just paying the bills that come in," explained Robert Slaton, who was executive vice president of University Healthcare, now known as Passport, from 1998 to 2006. In the traditional Medicaid setup, the doctor or hospital bills the state and the state pays the bills. "With an MCO, the doctor or hospital bills the managed care company and they have a lump sum from Medicaid and they pay the bills," Slaton explains.

Before the contracts were signed, Slaton said the MCOs likely studied Kentucky demographics carefully and came up with a lump sum they would like to be paid per patient based on the Medicaid members in the state. "Our experience was they had a very sophisticated information system and over time they were able to drill down to understand exactly where expenses were being incurred, more so than a total statewide system," Slaton said.

Because the lump sum it receives for each patient stays static, unlike in the fee-for-service model in which the state pays for whatever bills are incurred, there is incentive for the MCO to keep costs down. That can mean requiring more preventive care, like screenings or dental checkups, in order to save money in the long run; and analyzing care to prevent duplication of services. And it can involve sending case managers to visit repeatedly ill patients to help them get their health issues in check. "It's the kind of thing where it's doing the right thing and also, in the long run, saves money," Slaton said. "If someone who is a diabetic gets sick, you don't want to just pay for them to go to the doctor. You want somebody to help them figure out how to live a healthier lifestyle."

Because there is incentive for MCOs to keep costs down, does that also create incentive to deny care? Slaton said no. "It used to be probably true that there was too much emphasis on denying care," he said. "Now what they try to do is provide appropriate and necessary care, but eliminate duplication ... The old ways of cutting fees and denying care just won't fly. You'll have such a political backlash that you end up losing your contract."