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State Defends Passport Reimbursement Rates Amid Calls For Fix


State officials say Passport Health Plan’s calls for a change to its Medicaid reimbursement rates are futile.

During a news conference Monday, Democratic federal, state and city leaders said Louisville-based Passport is being treated unfairly by the state and suggested rate cuts that disproportionately affected the company may have been political.

State officials pushed back during a surprise visit to Monday’s news conference. Scott Brinkman, the secretary of the Executive Cabinet in Gov. Matt Bevin's administration, said the state is being open about how rates were set, and offered to hold a public meeting to further explain.

“If you would like to have a public hearing, and we’ll bring our actuaries in, Passport can bring their actuaries in, and we’ll have this discussion and go through the rate setting process,” Brinkman said.

U.S. Rep. John Yarmuth, who hosted Monday’s event, said the offer was, “perfectly legitimate.”

A spokesman for Yarmuth later wrote via email that a date and time for a potential public hearing have not been set.

Last year, the state reduced Passport’s Medicaid reimbursement by 4.1 percent in the Louisville region, whereas rates increased an average of 0.8 percent statewide. Company officials said the change would create an annual budget shortfall of $140 million.

The federal government lays out the process for setting pay rates. A few years ago, the Centers for Medicare and Medicaid asked the state to make the rates more statistically valid, according to Adam Meier, the secretary of the Kentucky Cabinet for Health and Family Services.

“They [CMS] said in a letter that we needed to … make it less complicated and also increase the statistical significance of it, or the credibility of it,” Meier said.

Which is why, Meier said, the state consolidated MCO regions. But Yarmuth on Monday said the Cabinet didn’t need to consolidate regions, and that is why Passport’s rates were cut. But Meier noted that Louisville’s current region is the same as it was before and that Passport’s pay rate would have been cut even without consolidating regions.

But Yarmuth said that Passport has been singled out by the state.

“First and foremost, this is a question of fairness,” he said.

Yarmuth said, incorrectly, that Passport was the only organization to have rates cut last year when the state changed how much it reimburses Medicaid managed care organizations. In fact, rates were adjusted by region. They dropped in Louisville, where Passport is the largest provider and where most of its enrollees live.

Brinkman said there are three Medicaid managed care organizations in Louisville affected by the rate cut, and Passport was not singled out.

“Passport, although it has two-thirds of this market, is not the sole MCO in this market,” Brinkman said. “The rate cut applies to all MCOs, all three in this region, not just Passport. Passport was not singled out for rate cut.”

Cabinet Secretary Meier also denied claims that the administration is trying to run Passport out of business.

“There's nothing that we gain by having Passport go out of business,” Meier said. “Except for you know, increase work we're going to do if they go out of business.”

Meier said the Cabinet would have to find another insurer to take over Passport’s enrollees if the company folded.

“That's a big administrative lift for us, so certainly there's no incentive for us to see them go out of business,” Meier said.

Passport sued the state over the pay cuts in February. The company wrote in its suit that the rates weren’t determined using the best and most accurate data.

Threats To West Louisville Development Project

Speaking in west Louisville near the site where construction on Passport’s new headquarters is stalled, Rep. Yarmuth expressed concern that the company’s financial state could prevent that project from moving forward. 

“I would say, until there is assurance that they can afford to go forward with the project, they’re not going to continue with the project,” he said.

Less than two weeks ago, Passport announced it would halt construction on the $130 million complex as it mounts a legal challenge to the state’s reimbursement changes. And on Friday, the company said it would implement spending cuts to stave off a state takeover.

Yarmuth also suggested that the state’s treatment of Passport may be linked to the fact that the company currently rents office space at a building owned by an LLC whose manager is Hal Heiner, chair of the Kentucky Board of Education.

Heiner did not immediately respond to requests for comment by phone or email.

If the west Louisville development is completed, Passport and its administrative partner Evolent Health would presumably move their nearly 700 employees out of Commerce Crossings. But Passport CEO Mark Carter has said that if the state does not reverse the rate changes, the company could go bankrupt by this summer.

Ben Adkins, a representative for Passport, said in an email he is not surprised that groups are advocating for the company.

“Many people — from business and community leaders to political leaders on both sides of the aisle — have been vocal about the impact Passport Health Plan continues to have on the lives of Medicaid beneficiaries and others in the region. We appreciate that they feel passionately enough to speak up,” Adkins said.

At the press conference, state senator Gerald Neal, of District 33, called on all the parties to come together to find a solution and eliminate the atmosphere of uncertainty surrounding Passport’s future.

“It takes leaders to bring people together, it’s our responsibility,” Neal said. “It’s my responsibility, it’s the mayor’s responsibility, it’s the congressman’s responsibility, but guess what — it’s the governor’s responsibility.”

Others at Monday’s news conference who spoke in support of Passport also cast blame on the governor and his administration. Representatives for Bevin did not respond to a request for comment.

Louisville Mayor Greg Fischer, who has frequently praised Passport for its decision to build its new headquarters in an underinvested area of the city, referred to the project as an “opportunity creator.”

“I’m asking the leadership of Passport and the leadership in Frankfort, including the governor, to come together to find a solution,” he said. “There’s too much at stake here for everybody not to say, ‘We gave it our all.’”

Amina Elahi is LPM's City Editor. Email Amina at aelahi@lpm.org.