Kentucky health departments are laying off workers, cutting clinic hours and ending school health programs because of a $7.9 million debt being contested by the managed-care company Kentucky Spirit.
"This dispute has put them in severe financial crisis," said Scott Lockard, president of the Kentucky Health Departments Association. Twenty-two of the state's 59 health departments laid off 53 workers in 2012, he said, and 95 workers have been let go so far this year. (The Lexington Fayette-County Health Department laid off 25 employees in June 2012.)
Lockard, who heads the Clark County Health Department, said some departments' employees are facing 12 unpaid furlough days between now and July 1.
Well-child visits, family planning services and school health services have been affected the most, Lockard said. The Madison County Health Department, for example, announced the end of its school nurse program in February. Fayette County's health department cut its program last year but is serving students until July 2013.
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A spokesman for Centene Corp., the St. Louis-based company that owns Kentucky Spirit, declined to comment, citing litigation.
In October, the managed-care company, one of three hired by the state to serve Kentucky's 504,000 Medicaid patients, sued in Franklin Circuit Court to end its contract.
Kentucky Spirit claimed that the state provided incorrect information about the services its Medicaid patients would receive. The company contended that it based its bid for the job on that faulty information, and because of that had the right to get out of the three-year contract.
For example, the state's data indicated an average of 390 emergency room visits per 1,000 Medicaid clients, while Kentucky Spirit's experience over the last year was 942 visits per 1,000 members, according to the lawsuit.
As part of that lawsuit, Kentucky Spirit has declined to pay local health departments for school health programs and other services.
To rectify the problem, the state essentially subtracted the money owed to health departments from the total amount being paid to Kentucky Spirit and issued two-party checks, made out to each of the 59 local health departments and to Kentucky Spirit.
In a letter to Kentucky Spirit dated March 6, 2013, the general counsel for the state cabinet for finance and administration, Jeffrey Mosley, wrote: "To give necessary relief to the local health departments who have suffered in the wake of Kentucky Spirit's refusal to pay ... the Commonwealth has reduced your regular electronically transferred capitation payment for the month of March by the amount owed to the public health departments. Enclosed herewith are 59 checks made out to BOTH Kentucky Spirit and the respective local health departments that have not been paid."
The letter asked Kentucky Spirit to endorse the checks so payment could go to the local health departments, but the company hasn't done that. Therefore, the health departments haven't received the money.
The Cabinet for Health and Family Services is trying to minimize the impact on health departments, spokeswoman Jill Midkiff said. The state agency has offered health departments advances on money from the general fund and help in identifying federal grants that could cover some core services. But the shortfall is significant and difficult to overcome and services are being cut, she said. A February report, for example, noted a 6 percent decrease in family planning services for 2012.
Kentucky Spirit told 125,000 to 140,000 members that it would stop providing service to them in July 2013. Midkiff said the cabinet is working to make sure those members are provided other coverage.
The case involving the state and Kentucky Spirit is scheduled for a hearing Monday in Franklin Circuit Court.