The number of Medicaid providers in Kentucky has dropped 8 percent since the state moved to a managed care system in November 2011, according to a review of the system released Wednesday by State Auditor Adam Edelen's office.
Edelen said the decline raises concerns about the state's ability to provide adequate health care to an additional 300,000 Kentuckians who are expected to join Medicaid next year as part of the federal Affordable Care Act.
The review also found that rural hospitals are struggling with financial stresses caused by the switch to managed care. The 97-page report contains a series of recommendations to the Cabinet for Health and Family Services for improving the system.
"I am concerned about the long-term viability of some of our rural hospitals and in turn, even more worried about access to health care by all rural Kentuckians," Edelen said in a statement.
The state hired three managed care providers in November 2011 to help control costs in the federal-state health care program, which provides health care to about 787,000 low-income Kentuckians.
Edelen created a Medicaid Accountability and Transparency Unit in his office in February 20 12 after hearing widespread complaints about the Medicaid managed care program.
"I have said from the beginning that I believe managed care is the right thing to do, but it has to be a fair deal for providers, members and taxpayers," Edelen said.
Cabinet spokeswoman Jill Midkiff said the agency welcomes the evaluation, but that Edelen's review "is a limited and somewhat outdated review of anecdotal data which doesn't fully and accurately reflect the scope of the current managed care environment."
She said the auditor's office should have consulted with Medicaid patients, who are receiving "prompt, effective medical services with measurable improvements in health outcomes."
The report concluded that some of the problems with the managed care system were the result of a quick transition that required the companies to establish operations in Kentucky within four months.
One of the most significant concerns, the report said, is whether Kentucky's rural hospitals could continue to afford to "float" Medicaid-related costs.
The review found that one hospital reported a nearly 300 percent increase in the amount of outstanding claim payments due to errors in claim processing, lack of clarity about policies, and contradictory communication with the managed care companies.
Cash flow problems create a strain on finances, making it difficult for hospitals to pay employees, vendors and others, Edelen's statement said. They also can impact a hospital's debt capacity and debt rating, making it more expensive to acquire financing.
Some hospitals and other health care providers have stopped serving Medicaid members. The most significant change was among general hospitals, which saw a reduction of 586 providers, or 57 percent, the review found.
However, only seven of those 586 providers were located in Kentucky, according to the review. Another 310 were in the seven border states, which could affect Medicaid members living in or around border counties, the review found.
"Managed care is designed to save taxpayer dollars, but it can't be at the expense of the health of our citizens," Edelen said.
Midkiff, however, said state data indicates that health care provider networks have broadened and individual providers have increased since the implementation of Medicaid managed care.
Compared to one year ago, the cabinet has seen a huge increase in the number of providers receiving payment for treating Medicaid patients, including a 20 percent increase in dentists, a more than 150 percent increase in certified nurse practitioners and a more than 300 percent increase in physician assistants, she said.
Some of the topics cited in the report existed prior to managed care, Midkiff said. For example, the adequacy of Kentucky's health care workforce is a long-standing concern.
"Medicaid expansion does not expand the population of Kentuckians in need of health care; it simply provides a source of payment for those services," Midkiff said.
She said the cabinet has formed an internal workgroup to determine what actions or policy changes may be needed to increase the number of Medicaid providers in Kentucky.
Valarie Honeycutt Spears: (859) 231-3409. Twitter:@vhspears