Appalachian Regional Healthcare, the largest health care system in Eastern Kentucky, has filed lawsuits against two of the state's Medicaid managed care companies, alleging that the managed care companies had not paid claims promptly.
The move comes after Coventry, one of three companies paid to manage health care in Medicaid, announced it would terminate its contract with ARH after May 4. ARH operates eight hospitals in Eastern Kentucky.
About 25,000 people use Coventry managed care in ARH's service area.
On Nov. 1, the state contracted with three companies — Coventry Cares, Kentucky Spirit and WellCare of Kentucky — to manage Medicaid services outside of the Louisville area. About 560,000 Medicaid patients were moved to the managed care model in Medicaid, a the state-federal healthcare program for the poor, disabled and elderly.
Since the switch, providers have complained about long delays for payments from the managed care companies and cumbersome pre-approval processes for treatment.
On April 12, ARH filed a lawsuit in Franklin Circuit Court against Kentucky Spirit Health Plan Inc. and the Cabinet for Health and Family Services. On Monday, ARH filed a lawsuit in U.S. District Court in Lexington against Coventry.
In both lawsuits, ARH said that it has provided health care to numerous low-income patients covered by Medicaid but has not been properly reimbursed by either Kentucky Spirit or Coventry.
Jill Midkiff, a spokeswoman for the Cabinet for Health and Family Services, which oversees Medicaid, said the cabinet believes ARH's issues with the managed care companies are an isolated problem.
"Cabinet does not feel that this represents a problem with the managed care model," Midkiff said.
Since managed care was implemented, the cabinet has worked closely with the three MCOs and providers to resolve payment problems and other issues, Midkiff said. "The cabinet continues to hold regularly scheduled meetings with the MCOs and has seen significant improvement in claims payments, processing and other issues as a result."
On March 29, Coventry told ARH that it was terminating its contract with ARH effective May 4, according to the lawsuit against Coventry.
"We were effectively forced to break our ties with ARH until the Commonwealth takes steps to treat all MCOs equally and makes some key decisions to guarantee greater stability in the program, such as paying MCOs fairly based on whether they have healthier or sicker members," said Matthew Eyles, a Coventry spokesman.
The contract termination would affect about 25,000 Medicaid recipients who are treated by Appalachian Regional Healthcare, according to Jerry W. Haynes, ARH's president and CEO.
It could mean that in some cases patients "are going to travel over many counties" before they can get health care services, said Joe Grossman, vice president and chief financial officer of ARH.
ARH officials said that under federal law, ARH will have to continue treating Coventry members who need emergency services .
"A provision in the contract between Coventry and the Cabinet for Health and Family Services provided that after May 4, Coventry will pay ARH as an out-of-network provider only 90 percent of the Cabinet's Medicaid rates," Haynes said in a statement. "The Cabinet's Medicaid rates do not cover ARH's costs already." As of Monday, ARH was waiting for payment on about $12.5 million in claims submitted to Coventry since Nov. 1, Haynes said.
Midkiff said it was premature to say how the termination of Coventry's contract with ARH will affect Medicaid patients with Coventry.
Coventry said in a written statement that it felt ARH's claims were without merit.
"It's unfortunate that ARH felt the need to sue because there are no merits to the claims against Coventry," said Eyles, the spokesman for Coventry.
"Instead of wasting time and money on lawyers, we'd rather work together with ARH on getting the Commonwealth to address the ongoing problem of inadequate Medicaid payments and improving the health of our members. Litigation doesn't solve ARH's problems, and we urge them to reconsider. But if ARH moves forward with the suit, Coventry will vigorously defend itself," Eyles said.
As of April 16, ARH was waiting for payment on about $5.7 million in claims submitted to Kentucky Spirit since November 1, Haynes said. Eighty-three percent of those claims have been awaiting payment from Kentucky Spirit for more than 30 days, and nearly half have been submitted for payment for over three months, he said. In addition, Haynes said Kentucky Spirit under-reimbursed ARH for care ARH has provided to emergency room patients.
"We do not discuss pending legal matters," said Deanne Lane, a spokeswoman for Centene, the parent company of Kentucky Spirit.
ARH officials said they included the cabinet, the state agency responsible for setting Medicaid reimbursement rates and overseeing the three managed care companies, in the lawsuits because the Cabinet has set rates for inpatient, acute care hospital services that cover only about 75 percent of ARH's costs. ARH claims that this violates Kentucky law.
Although ARH and other Kentucky hospitals have had appeals of these rates pending since October 2007, the Cabinet has not taken any action to change its rates or to process the hospital rate appeals, Haynes said.