The Richmond Register

October 18, 2012

Private Medicaid MCO to terminate state contract

Local health agencies affected by company’s decision

By Sarah Hogsed
Register News Writer

RICHMOND — Kentucky Spirit, one of the state’s Medicaid managed care organizations, announced Wednesday it was terminating its contract after claiming the current healthcare model is not a “viable path” to sustaining Medicaid in Kentucky.

Local health officials are concerned about the change, which will affect about 137,000 Kentuckians who are enrolled in Medicaid under Kentucky Spirit’s management.

Medicaid is a state-funded program that provides health coverage for lower-income people, families and children, the elderly and people with disabilities.

“We have just learned of Kentucky Spirit’s announcement and are not yet fully certain of its ramifications for our patients, our operations or our bottom line,” Madison County Health Director Nancy Crewe said via email. “We will learn more as the situation unfolds.”

Jill Williams, spokesperson for Baptist Health Richmond, said hospital officials found the news disappointing.

“This really creates another barrier to care for residents of Kentucky and Richmond,” Williams said.

The Medicaid program was managed by the state until Gov.Steve  Beshear implemented a plan to have private companies handle Medicaid reimbursements in an attempt to lower costs.

In November, Kentucky Spirit, along with the other two MCOs, Wellcare and Coventry, began managing Kentucky’s Medicaid program. Their state contracts were to continue over three years, according to the state.

In its statement to providers, Kentucky Spirit said it supported the governor’s goal to “improve the quality of healthcare for the Medicaid population while providing both cost savings and budget predictability necessary for a successful and sustainable program.”

However, the company said the state gave “erroneous and incomplete” information about the costs of the program, leading Kentucky Spirit and the other two MCOs to incur costs “well in excess” of the revenue provided by the state.

The company said it would stop providing member services in July, and it has filed a formal dispute with the Cabinet for Health and Family Services about “damages incurred under the contract.”

The Beshear administration fired back with a press release about Kentucky Spirit’s decision, stating the company has “abandoned” its obligation to the state and its Medicaid patients.

Gov. Beshear said the state would hold Kentucky Spirit accountable for its contractual obligations through “whatever means necessary.”

“Kentucky Spirit offered the lowest bid in response to the Requests for Proposal that were issued in early 2011, but now cites lost profits as the motivating factor in the company’s decision to leave,” the release stated.

The state assured Medicaid patients enrolled with Kentucky Spirit will have no interruptions in healthcare service while transitioning into either Wellcare or Coventry’s managed care program.

Local impact

The change in how Medicaid reimbursements are handled has negatively affected the budget for the Madison County Health Department and the health board’s home-health agency, MEPCO.

Unlike private home-health services, MEPCO is a public agency that can’t refuse care to patients who cannot guarantee payment. The majority of MEPCO clients are in the Medicaid program.

The switch from state employees making reimbursement decisions to having three private MCOs take over the job occurred in November, months after the health board approved the 2011-12 budget.

The Medicaid revenue for the 2011-12 MEPCO budget was $209,000 less than projected, contributing to a $611,122 shortfall for the home health agency at the end of the fiscal year, according to MCHD Finance Director David Reed.

When preparing the current fiscal year’s budget, the health board shaved off nearly $800,000 to make up for decreases in state grants and plus private insurance, Medicaid and Medicare revenue. The expected Medicaid reimbursement was adjusted down 21 percent.

Even with six MEPCO healthcare workers resigning and two retiring since June, the health board was forced to lay off seven employees earlier this month.

Crewe said she was concerned about Kentucky Spirit’s procedure with preventative care reimbursements.

“... We are concerned about the adversarial position that Kentucky Spirit has taken against local health departments by challenging all payments for preventative services,” Crewe said.

The health board currently has $227,000 in unpaid services from the clinic and school health, and an additional $63,000 in unpaid home health services.

Williams said the state’s utilization of Medicaid is already high and will increase as provisions of the federal Affordable Care Act are enacted over the next two years.

“The number of people on Medicaid will continue to grow and increase,” Williams said.

She acknowledged that healthcare reform is a difficult process, but when people already have barriers to healthcare access and services, the abrupt departure of Kentucky Spirit from the Medicaid managed care program will only make the situation worse.

Sarah Hogsed can be reached at or 624-6694.