The Richmond Register

State News

January 27, 2011

State settles case with Medicaid administrator

FRANKFORT — The third-party administrator for a Medicaid managed care program has agreed to pay more than $2 million in damages for falsely reporting patient results in order to secure a $700,000 bonus payment.

The settlement was the result of a nine-month investigation by the office of Attorney General Jack Conway acting on tips from a whistleblower inside AmeriHealth Mercy, the administrator for Passport Health Plan, the state-funded managed care program which serves clients from Louisville and 15 surrounding counties that has come under scrutiny by the state auditor and lawmakers. The over-reporting of positive health outcomes occurred in 2009, and the state Medicaid fraud statute allows the state to assess the company triple damages, Conway said.

In a written statement, the company denied any intentional wrong doing, but Conway said the investigation found it was “pretty clear there was knowledge of these erroneous claims.”

The company was eligible for a bonus payment if it achieved a goal of cervical cancer screening for a percentage of eligible patients. The AG’s investigation determined the company achieved that level by falsely excluding some eligible patients from the calculation.

“It seemed to be a case where they were a handful short of the numbers they needed for the bonus,” Conway said.

The company also agreed to implement measures to assure it doesn’t occur again, and Conway gave the company credit for “stepping up” and settling the issue when confronted with the evidence. His office pursued a civil remedy although the investigation began as a criminal investigation, but Conway said investigators didn’t think the evidence guaranteed a criminal conviction.

The company statement said AMHP “fully cooperated with the Attorney General’s investigation in this matter and assisted in bringing this to a prompt and satisfactory conclusion.” It went on to say the employees responsible for the false reporting are no longer employed at AMHP.

Passport contracts with AMHP to administer its managed care program in Louisville and 15 surrounding counties. Passport contracts with medical providers to provide services to Medicaid patients on a per patient basis rather than paying for each medical service the patient receives. Gov. Steve Beshear and lawmakers have looked at expanding managed care services in order to cut the state’s growing Medicaid costs.

But Passport came under intense scrutiny after an audit last year by state Auditor Crit Luallen. That examination found excessive spending on salaries, travel and lodging and questioned conflicts of interest by staff and disbursements of $30 million to Passport’s original investors, the University of Louisville, Jewish and St. Mary’s Healthcare, Norton Healthcare, and the Louisville/Jefferson County Primary Care Association. Those originally put up $10 million to get Passport off the ground.

Conway said the investigation “did not find any collaboration or knowledge between AmeriHealth and Passport on this matter.” But his office continues to follow up on Luallen’s audit, apparently focusing on the $30 million disbursements to investors and other transfers among medical providers. Conway said so far there is no evidence the conflicts of interest cited by Luallen’s report rise to the level of criminal violations but he has concerns about the transfers of money.

“We are looking at whether the transfer of funds between the entities was appropriate,” Conway said. “If we find the transfers were inappropriate, we’ll take the proper action. But I am concerned about how some of the money was swapped around. Was it passed to other entities for legitimate purposes and indigent care? If it was not, then we’re going to go back and seek the appropriate remedies.”

Because Medicaid is a partnership between the federal and state governments with the feds paying the largest share, the state will get only a portion of the $2 million. Conway said he thinks it will approach half of that amount.

Ronnie Ellis writes for CNHI News Service and is based in Frankfort. Reach him at Follow CNHI News Service stories on Twitter at

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