Evolent Health to buy 70% of Passport Health Plan; will continue to serve the company’s more than 300,000 Medicaid beneficiaries
Evolent Health, a for-profit national health management company, has agreed to purchase Passport Health Plan, the struggling, nonprofit Medicaid insurer based in Louisville.
Evolent, which has provided services and staff to Passport since 2016, will purchase a 70% share of Passport for $70 million, and invest additional funds to shore up the company’s finances.
Passport has struggled since the state cut its Medicaid rates for the Louisville region last year, where it does most of its business, notes Deborah Yetter of the Louisville Courier Journal.
Scott Bowers, Evolent’s national Medicaid president, has been named the new CEO of Passport, replacing Mark Carter on June 7, Yetter reports. Carter will remain on for a period as an adviser.
The company will continue to serve the more than 300,000 Kentuckians who get their Medicaid health coverage through Passport and will continue to operate under the same name, it said.
The remaining 30 percent of Passport will remain with its founding members, including the University of Louisville, the U of L Medical Center, University of Louisville Physicians, the Jewish Heritage Fund for Excellence and Norton Healthcare. U of L will get nearly $45 million from Passport’s sale to Evolent, Morgan Watkins reports in a separate Courier Journal article.
The university owns 64% of Passport, and 70% of that will be sold for about $44.7 million, U of L President Neeli Bendapudi told reporters. That will leave it with a 19.2% stake in the company.
Bendapudi said $16 million from the sale would be used to retire U of L Physicians’ bank debt; $3.5 million to stabilize U of L Physicians’ cash position; and $16 million to reduce the School of Medicine’s deficits. She declined to provide details on the nature of the deficits, and said the sale wouldn’t be enough to resolve financial issues at the school and the physicians’ practice.
The deal is subject to approval of state and federal regulatory authorities including the federal Securities and Exchange Commission, a process that is expected to take 60 to 90 days.
Officials with Passport and Evolent told Yetter that they are committed to resuming work on the company’s new headquarters in West Louisville, which was suspended in February. Carter and Bowers told Yetter that they are still in discussions about how to revive the stalled project.
Passport is one of five companies that manage most of the state’s $11 billion-a-year Medicaid program that serves around 1.3 million people. Passport is the only nonprofit; the others are subsidiaries of for-profit insurance companies.
Passport fell into trouble last year when the Cabinet for Health and Family Services changed its geographic allocation of Medicaid money, cutting the Louisville region that Passport serves by 4.1% while the rest of the state was raised 2.2%. State officials have held firm that the new rates were developed with the aid of an independent actuary and were not aimed at any individual company.
The state recently enacted revised rates that effectively restored Passport to its original, higher rate, Yetter reports, but Carter told her that that wasn’t enough to make up for the roughly $100 million it lost since July 1. He said the additional investment by Evolent should make Passport solvent.
This isn’t the first time Passport, which was founded in 1997 as a pilot project to control Medicaid costs in the Louisville region at the request of state officials, has found itself in the news.
In 2010, a state auditor’s report found “wasteful spending of Medicaid funds” at Passport. Along with a strong reprimand from then-Gov. Steve Beshear, the report resulted in sweeping reforms, including a restructure of Passport’s board, hiring new executive leadership, cutting expenses and firing its outside lobbyists, Tom Loftus reported in a 2015 Courier Journal article.
And while Beshear asked Passport to stop spending money on anything not directly related to patient care, he later asked for, and Passport provided in May 2015, a $25,000 contribution to the Democratic Governors Association in May 2015, which had already given “$600,000 to Democratic super PAC supporting the election of Attorney General Jack Conway as governor.”
Beshear and Carter told Loftus that the $25,000 was not a political contribution, but for sponsorship of a one-day health policy conference co-hosted by the DGA in Louisville. Senate Republican Leader Damon Thayer, of Georgetown, disagreed, saying, “I’m not saying this is illegal, I’m just saying call this what it is — a political contribution.” Only three states elected governors in 2015.
At the time, Conway was running against Republican Matt Bevin, now governor, and they had starkly different opinions about Beshear expansion of Medicaid to people who earn up to 138% of the federal poverty line, under the 2010 Patient Protection and Affordable Care Act. Conway fully supported the expansion, while Bevin said he would end it if elected. In July, he changed positions, saying he would seek a waiver from federal rules that would make Kentucky Medicaid more like the program in Indiana, in which beneficiaries pay small premiums based on income.
Since being elected, Bevin has sought a waiver that includes premiums and “community engagement” requirements, including work, for “able-bodied” beneficiaries. A federal judge twice rejected the plan, which is now before the U.S. Court of Appeals for the District of Columbia.