The U.S. Court of Appeals for the Sixth Circuit on Wednesday, April 24, rendered an opinion rejecting Coventry Health and Life Insurance Co.’s appeal of an adverse lower court’s decision granting a temporary injunction to Appalachian Regional Healthcare, while refusing Coventry’s request to require ARH to post a security bond.
At stake at the time of the injunction was the continued availability of healthcare for thousands of low-income people in Bell, Breathitt, Clay, Floyd, Harlan, Johnson, Knott, Knox, Laurel, Lee, Leslie, Letcher, Magoffin, Martin, Owsley, Perry, Pike, Whitley and Wolfe counties.
Though the injunction, granted on June 1, 2012, was temporary, and had expired on November 1, 2012, Coventry continued to press its appeal claiming it was concerned other providers with terminated contracts would want injunctions too. (King’s Daughters Medical Center in Ashland was recently allowed to intervene in the case after Coventry terminated its contract.) The Court of Appeals disagreed. It found those other parties’ interest in intervening in this case “a far cry from an unlawful injunction.”
Coventry also appealed the lower court’s decision to not require ARH to post a surety bond. Coventry argued a bond was needed to protect it from any damages incurred should it later be determined that Coventry only had to pay 90 percent of the Medicaid rates to ARH as an out-of-network provider. The Court of Appeals again ruled in ARH’s favor in affirming the lower court’s decision to not require a bond. The court agreed with ARH’s counsel, Steve Price of Wyatt, Tarrant & Combs, in ruling that ARH could actually be entitled to more money under the equitable doctrine of quantum meruit.
Under quantum meruit, where no contract exists, a party is entitled to reasonable value for its services which could be more than the Medicaid rates. In addition, Coventry failed to specify any dollar amount as to their potential damages, so the Sixth Circuit concluded that ‘little, if any’ harm was shown.”
Perhaps most significantly was the length of the opinion. The three judge panel of the Court of Appeals wrote 13 pages describing the facts in great detail when they could have dismissed the appeal as moot with a couple of sentences. The Sixth Circuit may have been saying with its opinion that while the case has to proceed through the lower court before it gets to them, there are obvious problems with Kentucky’s Medicaid managed care program in Eastern Kentucky.
The court noted that Coventry had written Gov. Steven Beshear complaining about unequal treatment that had allowed another managed care organization to “game the system” and that “the continued viability of the Medicaid managed care program was at stake.” The Sixth Circuit observed that “Coventry’s stratagem was to put Appalachian in the middle of its fight with the Cabinet to pressure policymakers to solve Coventry’s financial problems.”
The federal district court recently permitted ARH to file an amended complaint bringing the federal agency responsible for overseeing state Medicaid programs, the Centers for Medicare and Medicaid Services (CMS), into the action. ARH has alleged that CMS violated federal laws in approving Kentucky’s Medicaid managed care waiver in 2011. In the meantime, while Coventry is not faring well in its suit with ARH, it did manage to wrangle a 7.7 percent increase in its capitated rates from the state effective January 1, 2013.