They’re developing a 20-acre site for a new headquarters and surrounding health care campus at the corner of Broadway and Dixie Highway.
Passport Health Plan, in a lawsuit filed Friday, claims that state rate cuts have affected it so dramatically that the Louisville-based, non-profit Medicaid managed care company could be insolvent by March and subject to state takeover.
The abrupt filing of the lawsuit Friday in Franklin Circuit Court signals the collapse of extensive efforts to resolve a dispute with the state Cabinet for Health and Family Services over the cuts enacted last year to the company’s Medicaid business.
It asks that a judge bar the state from imposing the cuts that date back to July and repay millions of dollars in cuts for the past eight months — cuts that threaten its existence as well as its new headquarters under construction in west Louisville.
“Passport has done immeasurable good work in the communities it serves for two decades,” the lawsuit says. “But it appears to have been slated for immediate execution by individuals who have held their positions for less than a year.”
The two are cabinet Secretary Adam Meier and Medicaid Commissioner Carol Steckel, the lawsuit said, both appointed within the last 12 months. Meier is named as a defendant in Friday’s lawsuit.
Cabinet spokesman Doug Hogan said Friday that agency officials are reviewing the lawsuit but were surprised by it because despite extensive discussions, Passport has been “unable to identify any legitimate issues with the soundness of our rates.”
Passport dismissed that claim in its lawsuit, claiming cabinet officials including Meier and Steckel have disregarded or refused to consider information Passport has produced showing the cabinet’s Medicaid rates are deeply flawed.
Moreover, the lawsuit claims that Steckel has a “patent” conflict of interest because she served for nearly five years as a senior executive with WellCare, Passport’s largest competitor for Kentucky’s Medicaid business, before she became Kentucky’s top Medicaid official in September.
Steckel, the lawsuit said, commented at a legislative meeting that “WellCare is a great company,” and that she appears to have been involved in setting the new rates adversely affecting Passport.
By doing so, “she has participated in unfairly creating potential business opportunities and increased profits for her former employer while potentially eliminating its primary competitor, Passport,” the lawsuit said.
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If the state “forces the collapse” of Passport, it would disrupt care for the 315,000 people Passport serves and benefit its competitors, who likely would be assigned its members, the lawsuit said.
Passport is the only nonprofit health plan among five companies that provide managed care for most of Kentucky’s about 1.3 million Medicaid enrollees. The other four are all national, for-profit health insurance companies.
WellCare holds the largest share of Kentucky’s Medicaid business, with about 35 percent, followed by Passport, with 25 percent.
Passport said the rate change hit it the hardest because it cuts rates in the Jefferson County region by about 4.1 percent. That’s where Passport does most of its business. It raises rates about 2.2 percent for the rest of the state, where the other insurance companies divide up most of the rest of the state’s Medicaid business.
As a result, the lawsuit said, Passport received an overall cut in rates while the other companies received an increase.
Passport, Kentucky’s first Medicaid managed care organization, began in 1997 as a pilot project to control costs in Jefferson and 15 surrounding counties. The state later expanded managed care statewide, adding for-profit commercial insurance companies.
It is the only one of the five managed care companies that does business only in Kentucky.
The federal government provides about 80 percent of the money for Kentucky’s $11.5 billion-a-year Medicaid program.
Passport, in the lawsuit, said it is an efficient, well-managed company that has saved the state millions of dollars in Medicaid costs over its 21 years in business,
While the dispute has been ongoing, it only recently became public when Passport said the cuts could threaten its future as well as the future of its new headquarters under construction on West Broadway, a development hailed by business leaders as a chance for economic growth and development.
That prompted expressions of concern from elected officials about the future of Passport and the fate of its 700 employees.
“I am amazed that Frankfort would go down this path — it does not make any sense to me at all,” David James, Metro Council president, told the Courier Journal. “I think this sends a horrible message to west Louisville about what Frankfort thinks about west Louisville.”
Passport and cabinet officials met last week to try to resolve the dispute after appearing before a legislative committee to discuss the matter. But the talks were unsuccessful, the lawsuit said.
In a statement, a Passport spokesman said the lawsuit “is the necessary next step to ensure an adequate reimbursement to allow providers to serve our members, particularly those in the Louisville region.”
The statement added: “While we would prefer to resolve the matter in negotiation with state leaders, our fiduciary responsibility requires us to explore all options. Without an immediate rate adjustment, Passport Health Plan will face insolvency in 2019. This would be a terrible outcome for Louisville and for Kentucky as a whole.”
The case has been assigned to Judge Thomas Wingate.
Deborah Yetter: 502-582-4228; email@example.com; Twitter: @d_yetter.
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