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Passport Health CEO: Reimbursement Rates Could Bankrupt Company


The CEO of Passport Health Plan said the company could be facing bankruptcy by the middle of the year if Kentucky does not reverse cuts to Medicaid reimbursement rates in the Louisville region. The threat of bankruptcy raises questions about Passport’s $130 million planned development for West Louisville.

During a legislative committee meeting in Frankfort Wednesday, Passport CEO Mark Carter said the company is “not on the verge of bankruptcy,” but he said the threat is real.

“But if the run rate of losses continues – and of course we’ve made our estimates of what those might look like – that is a real threat down the road,” Carter said. “And by down the road, I mean mid-year 2019, that that could be a possibility.”

The state cut Passport’s Medicaid reimbursement rates by 4.1 percent in the Louisville region, compared to an average .8 percent increase statewide. Carter said Passport has faced incremental rate decreases over the past eight years. But over half of Passport’s Medicaid enrollees live in the Louisville region.

“So the decrease in rates, which hits all five plans, hits us in a disproportionate fashion,” Carter said. “And so while every other region and every other [Managed Care Organization] received an increase in rates, Passport was the only plan to receive a decrease in rates based upon market share for those regions.”

Carter said company officials want to meet with the Cabinet for Health and Family Services to come up with a solution. He said he thinks the process of setting reimbursement rates needs to change.

“While there are [rate] review meetings, there’s really never exposure to the rates ahead of time with any of the MCOs,” Carter said. “That is a practice in other states so they can be addressed before it become a significant Issue.”

Sen. Ralph Alvarado, a Republican from Winchester, said Cabinet for Health and Family Secretary Adam Meier plans to attend the next committee meeting to address how reimbursement rates were set.

Passport In West Louisville

Another potential victim of insolvency could be the company's planned $130 million mixed-use campus at 18th St. and Broadway, a recently-redesigned intersection that is intended to be a locus of redevelopment in that area.

“The social implications in terms of what that building could do in West Louisville are dramatic,” Carter said. “By putting something there, it’s an economic development engine for that community that will transform it flat-out. And that’s what will reduce health care costs over time in West Louisville, is people being able to get an education, get a job - those kinds of things that will spur out of that economic development.”

Carter said the project is supported by two New Market Tax Credits, which are designed to attract investment in low-income areas. And in 2017, the Louisville Metro Council approved a Tax Increment Financing District for the project. In response to a question from Democratic Senator Morgan McGarvey of Louisville, Carter said that the Bevin administration has been supportive of the development.

Carter said the financing of the project was “easily explained,” and that the company’s occupancy costs would increase $2 million a year, whereas its budget is $2 billion a year. However, he also said those figures would be applicable once Passport’s corporate employees transition into the new building, “if that indeed occurs.”

Representatives from Passport did not immediately respond to questions regarding how the company’s financial state might affect its plans for the West Louisville campus.

In a written statement, Sarah Davasher-Wisdom, chief operating officer of Greater Louisville Inc., Louisville's Chamber of Commerce, touted Passport's impact on the area. And she said the company's planned new headquarters could help transform West Louisville.
"Passport has a tremendous positive impact on our region. The project at 18th and Broadway will be transformational for that neighborhood and the greater Louisville community. It can be a catalyst for redevelopment and growth along the West Broadway corridor."
The proposed 62,000-square-foot facility is intended to house 500 corporate employees to start. Officials including Louisville Mayor Greg Fischer have hailed it as an economic development driver for West Louisville.

“Passport is a great and growing company, and its decision to relocate its headquarters to 18th and Broadway is a huge win for West Louisville – and for the city at large,” Fischer said in 2017. “Passport and its employees are driven by the same core values that we embrace as a city – compassion, health and lifelong learning. Metro government is honored to help make this deal a reality.”

Lisa Gillespie is WFPL's Health and Innovation Reporter.