Kentucky Spirit can’t terminate its Medicaid contract with the state a year early without facing fines, judge rules

By Molly Burchett
Kentucky Health News

A Frankfort circuit judge ruled Friday that Kentucky Spirit, one of three companies hired by the
state in November 2011 to manage health care for more than 540,000 Medicaid recipients, cannot pull out of its contract with the state a year early with no financial penalty.

Kentucky Spirit, a subsidiary of St. Louis-based Centene Corp., announced in October 2012 that it was pulling out of Kentucky’s managed-care system because it was losing money, but the company could face fines if it terminates its three-year contract before expiration in July 2014, Franklin Circuit Judge Thomas Wingate said in his ruling.

Kentucky Spirit argued in its lawsuit that the state rushed to privatize Medicaid in 2011 and provided incorrect cost information to the bidders, causing the firm to lose about $120 million. It made
the lowest bid, and on average, gets about $100 less per month for
each patient than the other two MCOs, Coventry Cares and WellCare.

The Cabinet for Health and Family Services replied that Kentucky Spirit had breached its contract with the state. Wingate said it had not, because it gave notice of early termination, but it will be subject to fines if it pulls out of the state before July 2014, reports Beth Musgrave of the Lexington Herald-Leader.

Kentucky Spirit had argued that its contract allows it to to be terminated with six months notice. The six-month provision could only be interpreted to mean six months prior to the end of the three-year contract, said Wingate, because there has to be enough time for the state to move hundreds of thousands of Medicaid patients from Kentucky Spirit to another managed-care provider.

Jill Midkiff, a spokeswoman for the cabinet, told Musgrave that state officials were thrilled with Wingate’s decision. “The cabinet’s priorities are the members who receive health care through Medicaid and the taxpayers who pay for the program,” she told Musgrave. “This is the right decision for both.”

Friday’s decision came three days after another Franklin Circuit Court judge ruled that Kentucky Spirit must reimburse health departments for services provided by school nurses to Medicaid-eligible children, which is estimated include about $8 million in back payments.

Centene officials say they are considering options for both cases, which include appeals.

Kentucky Spirit’s legal battles are part of ongoing tensions between health-care providers and managed-care companies, and providers have repeatedly complained that the companies are delaying payments for services. The cabinet is hosting a series of forums across the state designed to help providers resolve such issues with the managed care companies.

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