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Medicaid Operator Kentucky Spirit Plans to Break Contract, Beshear says He's Disappointed

Governor Steve Beshear says he’s disappointed that one statewide Medicaid operator has announced it is leaving the state.Kentucky Spirit, part of Centene Corporation from Missouri, announced today that they would terminate their operations next July, before their contract is up.Kentucky Spirit is one of the private Medicaid operators that took over the program for the state last year. The company encountered problems, however, and was in dispute with the state and doctors over reimbursement rates and other details of Medicaid operations.Recently, its CEO blasted Kentucky officials for how they are handing privatized Medicaid.The company is owned by Missouri-based Centene. In a release, company officials say they've notified the state Cabinet for Health and Family Services of their intent. Kentucky Spirit says it will stop working in Kentucky on July 5, 2013.The company also plans to recover money from the state it says it lost unfairly.Beshear says the state will help members of Kentucky Spirit transition to the other statewide MCOs, CoventryCares and WellCare, before July.“There won’t be a problem with folks having the care, I’m just disappointed that a company that ought to know better is stepping up and breaking its contract,” Beshear says.Kentucky Spirit claims the state isn’t making the Medicaid system affordable for the private companies. Because of that dispute, Kentucky Spirit says it will close it's Lexington office and eliminate 200 jobs as it exits the state by July 5, 2013.Beshear says Kentucky Spirit’s decision is likely to end up in court. “Well Kentucky Spirit is breaking their contract and that will end up in court, because they don’t have a right to break their contract. There’s a dispute system that’s built into the contracts and they could have availed themselves to that. But there’s no right to just arbitrarily quit and go home,” he says.Beshear says the two other statewide MCOs, CoventryCares and WellCare, will be able to pick up the slack.In a release, Cabinet for Health and Family Services Secretary Audrey Haynes called Kentucky Spirit's move "frustrating."“I am deeply frustrated that this publicly traded, Fortune 500 company has chosen to put profits above people and will not honor the terms of its contract. The managed care model is working in many states and is working here in Kentucky.  The recent RFP process in Region 3 demonstrated that the managed care market in Kentucky is healthy and viable,” she says.And the state is unlikely to invite any other private company to bid to finish out Kentucky Spirit's contract. Instead, Beshear says the state will just send out requests for proposals next year to bid out 2014 to 2016.That also raises questions about savings in the private operator program, since Kentucky Spirit gave the lowest bid fees of the three original statewide operators. In response to questions from lawmakers that Kentucky Spirit's departure would add costs to the state, a cabinet spokeswoman says the state would try to recover those additional costs from Kentucky Spirit.The state also says there shouldn't be issues with the federal government's approval of statewide privatized Medicaid in Kentucky with Kentucky Spirit's departure. Here is the full announcement from Kentucky Spirit: Kentucky Spirit Health Plan (Kentucky Spirit), a wholly-owned subsidiary of Centene Corporation (NYSE: CNC), has notified the Cabinet for Health and Family Services that it is exercising a contractual right that it believes allows Kentucky Spirit to terminate its Medicaid managed care contract with the Commonwealth of Kentucky effective July 5, 2013. In addition, Kentucky Spirit has filed a formal dispute with the Cabinet for damages incurred under the contract. Kentucky Spirit entered the market in November 2011 with the intent of helping the Commonwealth achieve a high-quality healthcare program at a significantly reduced cost for tax payers. Since the inception of the contract, there have been concerns about the sustainability of the Commonwealth’s Medicaid managed care program. The decision to terminate the contract comes after months of effort by Kentucky Spirit and the Cabinet to resolve these concerns and only after it has become clear that there is not a viable path to a sustainable Medicaid managed care program in Kentucky, “We are proud of the outcomes we have achieved in the short time under the contract. In keeping with our mission of providing high-quality, cost-effective care delivered locally to the Medicaid population, Kentucky Spirit has achieved many successes,” said Kentucky Spirit President and CEO Jean Rush. These include: ·
  • a 30 percent increase in well child visits; ·
  • a 53 percent increase in diabetes testing; ·
  • a 94 percent decrease in ‘doctor shopping’ for narcotics; ·
  • a 30 percent reduction in pharmacy costs; ·
  • a 30 percent decrease in one-day hospital admissions; ·
  • a 23 percent reduction in hospitalreadmissions; and
  • a 17 percent decrease in medical and surgery costs.

Rush continued, “Kentucky Spirit remains committed to a smooth transition for the more than 140,000 individuals and families it serves.” Centene recognizes that the only way to achieve outcomes like these is through a strong local approach. As a result, Kentucky Spirit created more than 200 high-paying technical and specialized jobs in Lexington in order to meet the health needs of Medicaid recipients across Kentucky. “We regret the loss of these high quality jobs, which represent over $12 million in annual wages and benefits eliminated from the local economy and state tax base,” said Carol E. Goldman, Executive Vice President and Chief Administrative Officer of Centene. “The company is working closely with its employees to provide them with the appropriate levels of support and resources during this transition.” Kentucky Spirit also will continue to offer excellent service to its members and healthcare providers through the termination date and will work with the Kentucky Department for Medicaid Services to make sure the transition for members is easy. Members may call Kentucky Spirit’s Member Services at 1.866.643.3153 for more information.