ARH can add federal agency to lawsuit against Coventry and state, judge rules

vhoneycutt@herald-leader.comMarch 29, 2013 

The newly renovated Morgan County ARH hospital in West Liberty had a grand opening in August 2012. Photo by Mark Cornelison | Staff

MARK CORNELISON — Herald-Leader Buy Photo

A federal judge has ruled that attorneys for Appalachian Regional Healthcare can add the Centers for Medicare and Medicaid Services as a defendant in the health care chain's lawsuit against the managed-care company Coventry and the state of Kentucky.

The ruling was a response to ARH's motion, filed in January in U.S. District Court in Lexington, that said the federal agency's failure to scrutinize the Cabinet for Health and Family Services has resulted in an unstable managed-care system that "is heading toward eventual collapse.''

In granting ARH's motion Thursday, U.S. District Senior Judge Karl S. Forester said ARH's proposed complaint against CMS sets out the ways in which the federal agency's actions have "resulted in the numerous issues evident in Kentucky's hastily concocted managed-care program and the harms ARH has suffered. The claims are not 'speculative.'"

Officials with Centers for Medicare and Medicaid Services and with Coventry did not immediately respond to questions Friday.

With CMS in the lawsuit, "maybe we can get some explanation for why things were done and maybe we are on the road to getting things corrected,'' Steve Price, an attorney for ARH, said Friday. Three managed-care companies were hired by the state in November 2011 to help control costs in the federal-state health care program for the poor and disabled. More than 540,000 Medicaid members from 104 Kentucky counties were moved to Kentucky Spirit, Coventry Cares and WellCare.

The transition has been beset with problems. Doctors, hospitals and other providers have complained about late payments and cumbersome reimbursement processes. Managed-care companies have threatened to end contracts with health care providers.

Under managed care, the state pays the companies a set fee for each patient regardless of the amount of services the patient needs.

ARH has previously said in court documents that CMS did not ensure that the state was paying "actuarially sound" rates and did not ensure that managed-care companies provided members with adequate access to medical services.

The lawsuit says CMS failed to comply with federal law.

When Coventry told ARH, a predominant provider of health care services in Eastern Kentucky, that it was ending its contract with the health care chain, ARH filed the original lawsuit against Coventry and the Cabinet in April 2012. ARH was then granted a temporary injunction that allowed members to be covered for an extended period.

In a separate ruling issued Thursday, Forester ordered that Coventry will pay ARH the "reasonable value" of non-emergency services provided by ARH to Coventry members. The ruling said the rate would be determined later.

Forester also granted a motion by King's Daughters, a group of health care providers in Northeastern Kentucky, to join ARH's lawsuit against Coventry.

Valarie Honeycutt Spears: (859) 231-3409. Twitter: @vhspears.

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