A Grenade Explodes in Jefferson County’s Medicaid Managed Care.

Look for something better to rise from the rubble.

Earlier this week, my friend and colleague Terry Boyle of Insider Louisville gave us all a heads-up that the Kentucky Medicaid Cabinet would be announcing the results of its search for additional Medicaid Managed Care Organizations (MCOs) to operate in Kentucky’s Region 3 in Jefferson and surrounding 15 counties. This prediction was spot-on. Today the Commonwealth announced it had finalized contracts with four MCOs that will begin services January 1, 2013. This is big news, and must have been a terrible disappointment for Passport and the University of Louisville.

Passport has been operating under a special Federal dispensation that permitted it to have a monopoly for the past 15 years to provide clinical care to Medicaid beneficiaries in region 3. For reasons not entirely known to me (but that I can guess) that privilege has been revoked. In less than three months, Passport will be joined by Coventry Cares, Wellcare of Kentucky, and Humana. No doubt there is much scrambling going on to assemble provider networks of hospitals and healthcare workers. Coventry Cares and Wellcare already have statewide networks of Medicaid providers, and Humana has extensive local private and Medicare networks that it may be able to call into service for Medicaid beneficiaries. In fact, Passport is lucky it has not been asked to provide a statewide network as previous MCOs were required to do. This would likely have sunk Passport and seems to me to be a major concession to them.

As if having competition was not enough, the bigger disappointment for Passport and the University was a decision to split up the existing beneficiary population among the four new competing MCOs. I suspect this was felt necessary by the Commonwealth to give the new firms something to work with. Making an initial assignment of beneficiaries was the way Medicaid managed care was introduced in the rest of the state. It would have been unreasonable to have expected an MCO to invest in a new network without a reasonable expectation there would be some work to do. Inertia alone, and an obvious defensive barricade of existing Medicaid providers would otherwise have given Passport a tremendous advantage. Patients are going to be assigned to an MCO using a “high-tech matching system” designed to attempt a best fit with available providers. Medicaid recipients will be able to switch to a different MCO before and after January 1, 2013. This implies we can expect a rapid rollout. Given the difficulties observed in previous startups of Medicaid managed care in Kentucky, I expect we will see considerable confusion.

This is a tremendous body blow to Passport and the University of Louisville. While clinical direction and responsibility has always been shared with community providers, the University kept control of financial affairs. With its share of the income dropping initially to one quarter, there is now less to control. Other losses are probably even more significant to the University. It loses control of patients whom it has called “teaching material.” It loses the ability to direct the flow of patients to its favored specialists and hospital services. It loses access to subjects for clinical and commercial research. It loses control of the clinical information it was packaging for its favored commercial partners. It loses its special payments for what is loosely termed medical education. These losses, and others, will hurt.

A reasonable argument has already been made that because the Medicaid beneficiaries and providers seemed content, that Passport should have been allowed to continue as a sole-source provider. I am willing to concede that Passport was providing more than adequate clinical care to its patients. I rather doubt it was doing so efficiently. There were obviously many millions of dollars available to skim off the top for the University and its special friends. It has never been demonstrated to my satisfaction that Passport ever saved the state any money. Indeed, more than one state and federal government study agreed that the Commonwealth lacked leverage to negotiate advantageous payment rates dealing with a single MCO.

As sorry as we may initially feel for Passport and its supporters, or indeed for the Medicaid beneficiaries of our region, Passport and the University of Louisville have brought this whole matter upon their own heads. They were caught with their hands in the cookie jar. Indeed, a less kind observer might opine they were taking money from the poor. Major independent studies of the University’s use of public funds this past year have revealed a scandalous abandonment of responsibility. The University of Louisville has lost the public trust and seems not to know how to regain it. It is under criticism from many sides and for many reasons. Its Board of Trustees has been silent, and thus complicit.

Although we may see some of the same initial confusion and unhappiness in Jefferson County that occurred elsewhere in the state, ultimately this move should be beneficial for Medicaid beneficiaries and for the public pockets that support them. I do not believe the Commonwealth has made an unreasonable decision. It is my hope to see Medicaid patients integrated more fully into the mainstream of medical care where they belong. Medicaid is going to become a major medical insurer in the healthcare reform to come. Wouldn’t it be nice to see healthcare facilities and providers actually competing to provide the best and most efficient medical care for people whose choices are profoundly restricted by the present system? Isn’t such competition the mantra of our business community? Why shouldn’t Medicaid beneficiaries have the same choices as the rest of us? It will be telling to see who tries to sabotage this effort by the state.

Peter Hasselbacher, MD
President, KHPI
Emeritus Professor of Medicine, UofL
October 4, 2012

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