LEXINGTON, Ky. (Oct. 17, 2012) – Kentucky Spirit Health Plan, a subsidiary of Centene Corporation, has notified the Cabinet for Health and Family Services that it is exercising a contractual right that it believes allows Kentucky Spirit to terminate its Medicaid managed care contract with the Commonwealth of Kentucky effective July 5, 2013. In addition, Kentucky Spirit has filed a formal dispute with the Cabinet for damages incurred under the contract.
Kentucky Spirit, which serves 125,000 Medicaid recipients in 104 counties, is one of three managed care organizations (MCOs) that signed three-year contracts with the state in 2011 to provide Medicaid managed care. The contracts expire July 5, 2014.
Since the inception of the contract, the company said it has had concerns about the sustainability of the state’s Medicaid managed care program.
“The decision to terminate the contract comes after months of effort by Kentucky Spirit and the Cabinet to resolve these concerns and only after it has become clear that there is not a viable path to a sustainable Medicaid managed care program in Kentucky,” Centene’s press release said.
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, said CHFS Secretary Audrey Tayse Haynes.
The Cabinet secretary is “deeply frustrated” that Centene, a Fortune 500 company, “has chosen to put profits above people and will not honor the terms of its contract. The managed care model is working in many states and is working here in Kentucky. The recent RFP process in Region 3 demonstrated that the managed care market in Kentucky is healthy and viable,” she said.
Kentucky Spirit’s parent company, Centene, is a St. Louis-based, publicly traded company with an estimated $6.6 billion in gross revenues and more than 5,300 employees. It offers Medicaid managed care services in 19 states including Wisconsin, where it has offered core Medicaid and specialty services since 1984, Haynes said. Centene has operated similar programs in several other states dating back to the 1990s.
With this level of experience, she said, Kentucky expected that Centene and its subsidiary Kentucky Spirit “had a sound and tested business strategy.”
No disruption in service
Kentucky Spirit serves approximately 25 percent of the more than 550,000 Kentucky citizens who are enrolled in Medicaid managed care outside of Jefferson and 15 surrounding counties that comprise Region 3. The remaining Medicaid managed care membership is now almost equally divided between Wellcare and Coventry.
Kentuckians enrolled in Kentucky Spirit coverage will continue to receive health care with no interruptions, according to the Cabinet for Health and Family Services. The state will ensure a smooth transition for those patients to another managed care organization in the coming months.
“Our top priority remains the continued health care of Medicaid patients, and we will make sure those patients experience no disruption in health services,” said Gov. Steve Beshear. “However, we are disappointed in Kentucky Spirit’s decision to break its contract. We have worked with the company to address its questions since Kentucky Spirit agreed on the contract terms last year. We will continue to work within the contract process to make sure members are provided healthcare services and providers get the payments they are due. We will hold this company accountable to its contractual commitments through whatever means necessary on behalf of both the members and taxpayers.”
Kentucky Spirit serves approximately 25 percent of the more than 550,000 Kentucky citizens who are enrolled in Medicaid managed care outside of Jefferson and 15 surrounding counties that comprise Region 3. The remaining Medicaid managed care membership is now almost equally divided between Wellcare and Coventry.
The Department for Medicaid Services will work with Kentucky Spirit members to ensure they experience a smooth transition with no interruption in services, Haynes said. Members may call Kentucky Spirit’s Member Services at 1-866-643-3153 for more information about their coverage.
“We will continue to hold Kentucky Spirit accountable and in compliance so that providers are paid and members continue to be covered,” she said.
More than 200 jobs affected
Kentucky Spirit created more than 200 high-paying technical and specialized jobs in Lexington in order to meet the health needs of Medicaid recipients across Kentucky, the company said.
“We regret the loss of these high quality jobs, which represent over $12 million in annual wages and benefits eliminated from the local economy and state tax base,” said Carol E. Goldman, executive vice ptesident and chief administrative officer of Centene. “The company is working closely with its employees to provide them with the appropriate levels of support and resources during this transition.”
Company touts its successes in Kentucky
“We are proud of the outcomes we have achieved in the short time under the contract,” said Jean Rush, Kentucky Spirit president and CEO. The managed care plan has achieved many successes, she said, including:
— a 30-percent increase in well child visits;
— a 53-percent increase in diabetes testing;
— a 94-percent decrease in ‘doctor shopping’ for narcotics;
— a 30-percent reduction in pharmacy costs;
— a 30-percent decrease in one-day hospital admissions;
— a 23-percent reduction in hospital readmissions; and
— a 17-percent decrease in medical and surgery costs.
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