Louisville’s Passport loses its Medicaid Monopoly.

Why is it, whenever the bright light gets turned on, that the University of Lousiville doesn’t look so good? Last month, a friend reported some doctors lounge gossip that the University folks were all in a tizzy over some breaking event related to Passport or indigent care. With the announcement of the release of the highly critical review by State Auditor Edelen of the University’s management of the Quality Community Care Trust which provides public money for indigent care University Hospital, I thought I had an explanation.

As out of the loop as I am, I did not imagine that a double-whammy was about to occur. My colleague, Terry Boyd at Insider Louisville, gave me a heads up that something big was going to happen related to Passport, another organization led by the University of Louisville that we have entrusted to manage medical care of the disadvantaged of our community. Sure enough, on May 29, Gov. Beshear’s office released an extensive review of Passport conducted by the firm of Myers and Stauffer. It is a massive 438 pages long and is highly embarrassing for the University. The press release and subsequent immediate reporting by others (before they could have possibly have read the report) emphasized that the audit was “clean,” or that Passport has “improved” since its days of scandal in which heads rolled, money had to be returned, and the audit under discussion was mandated.

Old dinosaur of a physician and scientist that I am, I learned the hard way of the need to dig more deeply into the medical history of my patients or the scientific literature before coming to a preliminary conclusion. Even a superficial reading reveals that this audit is as critical of the University’s management of Passport as State Auditor Edelen’s report was of the University’s management of the QCCT fund, and largely for the same reasons. Perhaps this should not have been unexpected, as both programs were managed by the same University leadership. Similarities include lack of transparency and accountability, transfer of money intended for medical care of the disadvantaged to University accounts for other purposes, and the like. The way the University funneled financial support to the private practices of its faculty in their new private practice building was targeted as an open issue for further investigation.

Here are a few almost random highlights from the report:

• “Absence of a formal business plan.”

• “Few if any policies and procedures in place specific to Passport health plan that would’ve guided and provided boundaries and limitations necessary for the appropriate management of the plan.”

• “Insufficient monitoring of the third-party agent and other benefits subcontractors”

• Opaque financial arrangements.

• “Passport did not have an internal audit function”

• Self-dealing relationships.

• Ability to transfer large sums of money from patient care into University accounts under the definition of “educational,” faculty recruitment, grants, and other “supplemental” payments. The examiners could not account for how these monies were actually spent.

• “Severance agreements with select passport executives and employees… that could be considered generous.” [Amounts in the millions.]

• “No formal quality assurance processes related to financial management or reporting.”

• The accounting firm was “unable to provide analysis that would enable us to offer conclusions and responses to the objectives, including an evaluation determined that the expenditures reported by passport for its Medicaid line of business are reasonable and appropriate.” In other words, the accountants could not say whether clinical money was used appropriately.

• “Cost allocation plans were not provided that would describe and illustrate how passport ensures the accuracy of expenditures included in its financial reporting documents or in the data used to prepare capitation rate ranges. Based on the unavailability of such information, we believe that there is an elevated risk and expenses have not been properly reported.”

• “Concerns were noted with the potential accuracy of such summary of claims submitted and adjudicated by AmeriHealth Mercy.

• “It does not appear that Passport had appropriate mechanisms in place to monitor financial reporting during the period being analyzed.”

• Myers and Stauffer did not receive all the information they requested.

A summary of findings and observations begins on page 248. You can read them for yourself. (6.2 MB)

Comments.
One problem with the “non-audit” is that the period of examination stretched from the bad-old-days of 2009 until 2011 when the governor’s demands for reform and repayment had already been made and partially acted upon. Therefore, by definition, we expect that “improvement” should have occurred. However, because of the long “before” period included in the examination, it is not possible to sort out how many of the reviewer’s critical findings are still applicable. For example, does the University still have control over deciding how much money it can divert to itself from clinical dollars? I do give the new management of Passport credit for making changes for the better, but remember they had to be forced into doing it! There is some additional shame in the fact that state oversight was so inexplicably deficient in previous administrations. The Medicaid Cabinet therefore is in a position of having possible self-protective motives to diminish the harshness of the report.

The University of Louisville famously makes a fetish of secrecy about its affairs. The report is therefore interesting because of the insights it gives into how the University does business and is interesting reading for that reason alone. Several mysteries remain to be explained. Why for example was University Vice President David Dunn under subpoena and therefore unavailable to be interviewed for the report? Presumably it was for reasons related to Passport and the audit. I invite UofL to tell us below.  What is the story about the spanking-new private practice building built for the clinical faculty (most of whom do not support University Hospital) and which by its very nature worsens the segregated and disparate nature of care provided in the Medical Center?

The Real Kicker.
Shame or embarrassment seems not to motivate the University very much, but there was one additional element in the news from Frankfort that surely must have been a gut-punch for the University. Perhaps it was the effect of this body-blow that my friend had noticed. Currently, the University and Passport have a single-source monopoly to provide care to Medicaid beneficiaries in our region. This privilege was granted by a waiver given  in the 1990’s to Kentucky by the Center for Medicare and Medicaid Services in Washington. That waiver has now been pulled. As of the end of this year, Passport and the University will have to compete for the privilege of serving Medicaid patients in Kentucky. It may even be that they must offer services on a statewide basis and compete with other Medicaid Managed Care Organizations (MCOs). Will these other MCOs be able to cover services in Jefferson and surrounding counties? I do not know the answers. Given the messy state of affairs elsewhere in the state following the recent introduction of statewide Medicaid Managed Care, this change has prompted some editorial concerns. It is easy to save face and blame the Feds for this, but surely the folks in DC must have been watching what was going on here and must not have liked what they saw. Who knows what discussions went on between Frankfort and Washington? To my knowledge, it has never been shown that Passport ever saved the state any money. Certainly there was plenty of extra cash around to play with. I can see some justification to keeping the current Louisville network intact, but there are equally compelling reasons to breaking the stranglehold of the University. Either way, the University of Louisville brought this upon their own heads! To mix my metaphors for emphasis, they are reaping what they sowed.

For the University that works so hard to keep its inner workings secret from the public that finances it, this audit is a window on its internal operations. The University was in less of a position to stonewall these inquisitors. I am learning more than I ever knew before. In the days ahead, I will try to share what I find. I hope you will help me. As the University continues its campaign to frighten and threaten our community over its “need” for more public money to support its clinical mission and research ambitions, this audit provides yet another reminder that all is not well within the University of Louisville. In my opinion, the ills of the University are not curable by money alone. When the University claims that “the status quo is not viable,” I could not agree more. Allowing the University to behave as it has in past years years is indeed, a non-viable alternative for our community, and money has nothing to do with it.

Peter Hasselbacher, MD
President, KHPI
Emeritus Professor of Medicine, UofL
June 13, 2012

Complete Examination. (6.2 MB)
Press Release.