Bevin administration leaves out Passport in awarding $8B in Medicaid contracts

• The awards follow months of conflict between the administration and Passport
• Passport and Anthem say they'll appeal, and Gov.-elect Andy Beshear's administration plans a review
• Passport serves more than 300,000 Medicaid enrollees, mostly in the Louisville region.

In a blow to Louisville's Passport Health Plan, Gov. Matt Bevin's administration has notified five other health insurance companies they have won contracts to manage around $8 billion a year in Kentucky's Medicaid business — cutting Passport out of the work it's had for more than 20 years.

Companies that won contracts are Aetna Better Health of Kentucky, Humana Health Plan and Wellcare Health Insurance of Kentucky, all of which hold existing contracts with the state, as well as two newcomers, United Healthcare and Molina Health Care. 

Unsuccessful bidders were Anthem and Passport, both of which currently hold state contracts for Medicaid managed care. Both announced Wednesday that they will challenge the outcome.

Gov.-elect Andy Beshear, a Democrat who takes office Dec. 10, also is concerned and  plans to review the contracts, awarded as Bevin, a Republican, is about to leave office, a spokesman said.

The five-year contracts take effect July 1.

Kentucky's $11-billion-a-year Medicaid program, which gets about 80% of its money from the federal government, provides health coverage for about 1.3 million low-income and disabled individuals. About 1.2 million of them fall into the managed care system. 

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Passport serves more than 300,000 of them, mostly in the Louisville region. Anthem serves 130,000 enrollees in Kentucky, mostly outside Louisville.

The state, in announcing the contracts, said they were handled through the routine state procurement process. But the awards follow months of conflict between the Bevin administration and Passport, which claimed rate cuts enacted in 2018 by the state hit it harder than its competitors and almost put it out of business.

Bevin had been critical of Passport, calling it "poorly run."

The loss of the new contract could put Passport out of business because its main revenue comes from managing health care for Kentucky Medicaid enrollees, a  population it was founded to serve in 1997 as a nonprofit. Anthem, by contrast, is one of the nation's largest health benefit companies.

Passport spokesman Ben Adkins said the company, with about 600 employees in Louisville, will protest the outcome, saying the company is "deeply disappointed."

"This decision, if upheld, would have a profound impact on our 300,000-plus members whose access to care will be disrupted as a result," Adkins said. "We strongly encourage state leaders to reconsider this decision and its devastating impact on our proud Kentucky company and the communities we serve." 

Anthem said it, too, is disappointed in the outcome and will file a challenge through the state's formal bid protest process. Meanwhile, the company "will continue to work diligently to ensure individuals have uninterrupted access to services, and deliver care that helps improve their health and well-being."

The award also was questioned Wednesday by a top official with Beshear.

“Awarding $8 billion in contracts with just 11 days left in this administration is concerning," said J. Michael Brown, Beshear's transition chairman who will serve as executive cabinet secretary in the new administration. "As we move through the transition and ultimately the change of the administration, we will be taking a close look at this action.” 

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Passport CEO Scott Bowers said Wednesday the company will protest the decision "with the goal of continuing to provide Medicaid benefits and improve the health and quality of life of our members throughout the commonwealth."  

Passport's loss of the Medicaid contract also is a blow to Evolent Health, a Virginia-based health management company that announced plans to buy Passport in May for $70 million, a transaction expected to close by the end of this year.

Evolent spokeswoman Kim Conquest said Wednesday the company supports Passport's decision to protest the loss of the contract, saying Evolent "will continue to support efforts to keep the plan on solid financial footing. Per our agreement, we intend to proceed with the pending acquisition as planned and anticipate it will close by the end of this year.”

Should the deal fall through, the University of Louisville, as a founding partner of Passport, could lose about $45 million from the sale. U of L plans to put the money toward its medical school and University of Louisville Physicians, a practice that includes more than 700 primary care and specialty doctors who also work as professors and researchers at the university's medical school.

U of L spokesman John Karman said the university is disappointed in the state's decision.

"U of L is proud of its longstanding relationship with Passport and supports its decision to challenge the outcome of the evaluation and award process for this contract," Karman said.

And loss of the contract renews questions about the future of a new headquarters and health campus Passport had planned to build in western Louisville that local leaders had hailed as a boon to growth and economic development.

Previously:Sale of Passport Health to for-profit company OK'd by attorney general

Passport suspended construction of the 337,000-square-foot complex at 18th and Broadway in February, prompting an outcry from community leaders who had welcomed the development. Evolent had said it would seek a developer to try to revive the project.

Passport's spokesman said the company hasn't given up on the project, believing it "will have a positive impact on the community."

"However, our immediate efforts are focused on mounting a successful protest to the state contract awards," Adkins said. 

Louisville Mayor Greg Fischer said he is concerned about the potential loss of Passport and the impact on its employees as well as the future of the proposed headquarters.

"We will work with the incoming administration to evaluate the impact," Fischer said. "We also will continue to explore options with Evolent on development of the property at 18th and Broadway."

Two members of the Louisville Metro Council issued statements Wednesday night condemning the decision and appealing to Beshear to reverse it. 

Council President David James said it was "a cold, callous decision done purely for political reasons" and was one of "many slaps in the face to the people of Jefferson County."

Councilwoman Keisha Dorsey ​​​​​​​said the decision meant "our most vulnerable population is going into this holiday season facing massive change and influx.​​​​​​​" 

The award of the five-year agreements, the largest outside contracts in state government, comes despite major changes to the Medicaid health program planned by Beshear — most significantly, abolishing Bevin's plan to overhaul it and add work requirements and other new rules for most "able-bodied" adults.

The managed care companies would have been responsible for carrying out some of Bevin's changes under the contract terms.

The award of new contracts also comes as Kentuckians are being asked to enroll with one of the five current managed care companies for their Medicaid coverage for 2020. Open enrollment is from Nov. 4 to Dec. 13, according to the state's website.

The changes don't affect current enrollment, said Christina Dettman, a spokeswoman for the Cabinet for Health and Family Services, which oversees Medicaid. A new open enrollment period will be held July 1 when the new contracts take effect, with members getting information in advance about how to enroll.

Earlier:Lawsuit claims Evolent misled investors in acquiring Passport Health Plan

The cabinet announced the contract awards on Wednesday, and said they include a number of improvements including a new, single system under one company, Wellcare, to manage health needs of foster children and those under supervision of the state Department of Juvenile Justice.

The new system will affect about 24,000 youths and enhance their health services as well as "improve health outcomes for our youth in out-of-home care," cabinet Secretary Adam Meier said.

The contracts also include provisions for tighter management of the prescription drug program, including abolishing "spread pricing," a system in which middlemen known as pharmacy benefit managers can profit by paying pharmacists less than they make from state Medicaid programs.

Passport was the state's first Medicaid managed care company. It has operated continuously under contract to the state since it was founded in 1997 as a pilot project to help the state control Medicaid costs in the Louisville region.

But it ran into financial trouble during the Bevin administration under rate changes in 2018 that Passport claimed adversely affected it while not harming the state's other four Medicaid managed care companies.

Passport said the state cut rates in the Jefferson County region, where Passport does most of its business, by about 4.1% while rates for the rest of the state were raised about 2.2%.

Former Passport CEO Mark Carter at the time questioned whether the state was trying to put Passport out of business.

"If there is an ulterior motive to push Passport out of the Medicaid market, there has been little effort to conceal it," Carter said in a Jan. 10 letter to Scott Brinkman, secretary of Bevin's executive cabinet.

The Bevin administration maintained the rate changes were fair. But in the midst of the dispute, Bevin blasted Passport as "a very poorly run operation" without providing specifics.

See also:Kentucky benefits task force makes only minor recommendations

Carter, at the time, called Bevin's claims "outrageous and unsupportable."

Evolent in May agreed to buy a majority ownership stake in Passport, to shore up its finances and put Passport in a stronger position to bid on the new Medicaid contract.

Passport now is the second largest of the five managed care companies with current contracts.

The award marks the third time the state has handed out new contracts for the Medicaid work since 2012, when it awarded three-year contracts to the five companies it currently employs. The current contracts were reawarded in 2015, and the Bevin administration has extended them several times. 

Most company officials had expected the new contracts to be awarded by late summer or early fall.

For many years, Passport operated as the only Medicaid managed care organization in Kentucky, focused on the Louisville region, until the state decided in 2011 to seek other outside, for-profit companies to provide managed care statewide for most of its Medicaid patients.

Reach Deborah Yetter at dyetter@courier-journal.com or 502-582-4228. Find her on Twitter at @d_yetter. Support strong local journalism by subscribing today: www.courier-journal.com/subscribe.