FRANKFORT — A Louisville managed health care program announced Wednesday it has found a new interim CEO to correct a host of problems found in a scathing audit of the organization.
After a meeting with Passport Health Plan's main investors, Gov. Steve Beshear said the group's board has hired Mark B. Carter, a Louisville CPA with previous health care experience, as its new chief executive. Beshear's administration must also approve the hire.
The move is one of several that state officials are asking of Passport after State Auditor Crit Luallen found widespread problems at the organization that manages Medicaid services in Jefferson and 15 surrounding counties.
Beshear said if the state's demands — which include the replacement of CEO and Chairman of the Board Dr. Larry Cook and two other key Passport executives — are not met, the state will terminate its contract with Passport on June 30.
Cook has not yet stepped down as chairman of the board. Beshear said Wednesday the state wants Cook to step down from that position immediately.
In a written statement, Cook did not address the administration's demands that he sever all ties with the organization.
Beshear said Passport's investors told him during Wednesday's meeting they wanted to see changes at the organization as well, but Beshear said no specific details of the state's corrective action — besides the hiring of Carter — was discussed at the meeting.
"The management of Passport must change, and it must change now," Beshear said.
Cabinet for Health and Family Services Secretary Janie Miller believes Carter will make the necessary changes at Passport, Beshear said. The cabinet oversees the Passport contract.
Beshear said Carter has a son-in-law who works in his administration as a deputy policy adviser, but he said he does not believe there is a conflict of interest. According to state records, Carter also gave $2,000 to Beshear's 2007 campaign for governor.
Senate President David Williams, R-Burkesville, and a Republican candidate for governor, called Beshear's changes a "government takeover" of Passport. He questioned why Beshear had not made changes at the Cabinet for Health and Family Services for failing to properly oversee the contract.
Luallen's audit found a host of problems at the nonprofit, including excessive spending on travel, lobbying and meals and conflicts of interests between Passport executives and its main subcontractor.
Passport has received about $2.5 billion over the past three years in state and federal money to manage health care for about 164,000 people in its service area. It receives state and federal taxpayer dollars to fund the health-care program for the poor and disabled.
Passport, which was created in 1997, was started by five investors: University of Louisville Medical Center, Jewish Hospital and St. Mary's Healthcare, Norton Healthcare and Louisville/Jefferson County Primary Care Association. Representatives of those organizations met with Beshear Tuesday.
Beshear's administration is asking for 11 changes to the organization, including:
■ Eliminating all spending on lobbying. Passport announced Tuesday it had terminated all lobbying contracts as of Jan. 1, 2011. According to the Legislative Ethics Commission, Passport has spent $635,000 on lobbying the legislature since 2005.
■ Reviewing its governing structure and hiring a corporate compliance officer and an internal auditor to ensure it complies with accounting and other standards.
■ Participating in a full audit.
■ Opening all meetings of the Passport board to the public.
Beshear said cabinet officials and Passport will meet Dec. 7 to discuss more details of the corrective action plan. That meeting will be open to the public. The Passport board will meet on Dec. 8.
Cook, in a written statement, said "the Board is reviewing the Governor's list of corrective action items. We'll be making changes as needed and look forward to a continuing dialogue with the state to work through some of the more complex issues. "
Williams, at a legislative task force meeting on Wednesday, questioned why the cabinet had not caught problems at Passport sooner and why Beshear was not asking for changes in the state's Department for Medicaid services.
"What corrective action has he taken for the people who were supposed to oversee (the Passport contract)?" Williams said Wednesday.
Passport was not given the opportunity to correct those problems before Beshear "decapitated" the organization, he said.
Luallen, who testified before the legislative task force on Medicaid cost containment, said Passport's board met Nov. 18, and few changes were announced after that meeting, she said.
"That was a clear signal that they were not making changes," Luallen said.
Kerri Richardson, a spokeswoman for Beshear, questioned why Williams was defending Passport.
"Once again, we are not surprised that Sen. Williams is defending Passport when they spent millions of taxpayer dollars to lobby him, as well as to host an event for his legislative caucus," Richardson said.
Legislators also questioned on Wednesday what the legislature and the cabinet could do to ensure that private contractors spend taxpayer dollars wisely. The audit found that the cabinet did not have adequate information to negotiate the state's contract with Passport.
"There was a breakdown at the cabinet level," said House Speaker Greg Stumbo, D-Prestonsburg. "We need to find out why it occurred."