Kentucky to Overhaul Medicaid Managed Care Contracts

The move comes after an auditor's report found several rural hospitals in poor financial shape, with low Medicaid reimbursements cited as a reason.

To the delight of patient advocates and hospital leaders, Kentucky health officials announced Monday they will seek new bids from contractors seeking to run the commonwealth’s Medicaid managed care program, which has experienced ups and downs in its 4-year run.

“We determined it was time to retool, rebid, and strengthen the contracts to appropriately address concerns expressed by advocates and providers,” Audrey Tayse Haynes, Secretary of the Kentucky Cabinet for Health and Family Services, told the Louisville Courier-Journal.

The decision comes after an auditor’s report found several rural hospitals in difficult financial circumstances, as well as surveys reporting providers leaving the most remote parts of the state. Inadequate Medicaid reimbursements have been blamed for both. Democratic Governor Steve Beshear has said, however, that the auditor’s report did not reflect an influx of $506 million that occurred when 400,000 consumers became covered through Medicaid expansion in 2014.

Beshear has received national acclaim for Kentucky’s successful launch of Kynect, its marketplace exchange to sign up consumers under the Affordable Care Act, and its education efforts to drive down rates of uninsured. But as Medicaid managed care troubles threaten to leave a stain on his health care legacy, the Beshear administration moved this week to find solutions before he leaves office.

Proposals are due by May 5, 2015, and officials said they will award multiple contracts to take effect July 1, 2015. The new agreements will be for 1 year with for 4 yearlong renewal options. Medicaid managed care serves 1.1 million consumers in Kentucky.

In interviews with Evidence-Based Oncology in the summer of 2013, Kentucky officials acknowledged a rough transition to Medicaid managed care in 2011. The state was among the first to see that squeezing a transition through in a matter of months, to close a budget gap, would create disruptions for providers and patients alike. Similar scenarios have played out in other states, such as Ohio, where longtime home care providers left for other jobs after going unpaid for weeks following the switch to managed care.

Reports from other states have made Iowa legislators skeptical about a plan by Republican Governor Terry Branstad to convert that state’s $4.1 billion program to managed care. The state’s Medicaid expansion effort, which involved a CMS waiver, is considered a success in driving down charity care rates. Hospital leaders worry that a move to managed care will disrupt the positive momentum.

Hospital leaders in Kentucky welcomed the opportunity for new contracts. “This should create real uniformity for providers in dealing with Medicaid programs, so hospitals won’t have to use different rules and forms for five different managed care organizations,” Michael Rust, president of the Kentucky Hospital Association, told the Courier-Journal.

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