State Senate passes bill for independent appeals process for managed-care claims; hearing gets into details of the problem

By Melissa Patrick
Kentucky Health News

Managed-care organizations' contracts allow them to deny Medicaid claims and not reimburse for services if they deem them not medically necessary. That means health-care providers often don't get paid for providing care, and their only recourse is an internal review by the MCO.

Sen. Ralph Alvarado

"It appears some of our MCOs are using this denial method in order to, as they term it, 'manage care'," Republican Sen. Ralph Alvarado said at a Senate Health and Welfare Committee hearing on his Senate Bill 120, which would set up an independent appeals process for providers, much like those in Georgia and Virginia.

The  bill, which had been in the works for several years, passed the Senate March 2 and was received in the House March 3. Its prospects in the House appear poor because it is opposed by the Cabinet for Health and Family Services, which oversees Medicaid. Its main targets are MCOs WellCare of Kentucky and Coventry Cares of Kentucky.

Alvarado, a Winchester physician, said in an interview that he pointed out these companies because they have the highest denial rates. While other companies also have complaints, "They are very small and minor, what you would expect in the normal course of business," he said. "It is WellCare and Coventry; these two are the names that keep coming up over and over again."

Asked for comment, Coventry said in an e-mail, "Coventry continues to monitor the legislation as it moves through the process. We are working with lawmakers to protect the integrity of the managed Medicaid program and be responsible with taxpayer dollars."

WellCare said in an e-mail that its appeals process is adequate, offering two additional remediation alternatives, negotiation and arbitration. The company said MCOs are "continuously subjected to rigorous oversight by state, federal and national accreditation entities," which ensure that they "adhere to strict standards and evidence-based guidelines in determining medical necessity."

Nina Eisner, board member of the Kentucky Hospital Association and chair of its Chemical Dependency Treatment Program, told the committee that providers deserve the same sort of state appeals process that patients have for denial of service.

"Kentucky's providers are under tremendous pressure from payment cuts from Medicare and slowed and denied payments by MCOs," Eisner said. "It is untenable and unreasonable to expect that Kentucky providers can provide health care services for free."

She said that many of the disputes stem from MCO reviews using out-of-state physicians who "don't always understand the rural nature of our state and the lack of resources." She said one example is discharging rural patients from inpatient to outpatient behavioral-health or substance-abuse treatment where no outpatient services are easily acessible.

"The MCOs in Kentucky are quite profitable," Eisner said, citing a November analysis by Citi Research that found Kentucky's MCO plans generated over $450 million in earnings before interest, taxes and depreciation from the state Medicaid program. "This is a margin of 10.6 percent, which is more than two times the 3 to 5 percent margin most Medicaid plans target."

Sen. David Givens, R-Greensburg, said he was compelled to remind those at the hearing that private companies need to be profitable to keep the system working. Later, Sen. Danny Carroll, R-Paducah, disagreed, saying MCOs' profits need to be more balanced.

Medicaid Commissioner Lisa Lee said that it is balanced, because MCOs were required to spend 87 percent of their payments on the population newly eligible for Medicaid or give it back to the federal government, and that rates going forward depend on what they spend today.

KHA's Nancy Galvagni said another reason for a state appeals process is the variation between plans' denial rates, ranging from a low of 7 percent to a high of 18 percent. She said that providers have gone to state hearings on behalf of their patients and had favorable opinions, only to have them overturned by the Cabinet.

Tina Heavrin, general counsel for the cabinet, said that occurs because the cabinet only has authority to decide whether patients received services, and if they did, there is no claim and any dispute regarding payment is between the MCO and the health-care provider.

Sen. Julie Raque Adams, the committee chair, replied, "I think that is the impetus behind this bill, that once the patient receives their service, they are done, but the provider is not. ... I don't want to go to work and not be paid for it. And I don't think that is an unreasonable thing to request or require and I think that is all that this bill does."

Heavrin said that providers do have a process to resolve these issues, "It is called the judiciary." She said the cabinet can't run an appeals process for MCOs because it "as part of the executive branch, doesn't have jurisdiction or legal authority over an adjudication of private contract rights." She added, "The MCOs are our contractors and it would be difficult to not have a financial interest in the outcomes of those appeals," meaning that upholding an appeal would cost the state money.

Lee said the cabinet acknowledges issues with MCOs. She said that while state officials should not get in the middle of contract disputes, "We do listen to our providers" and "want to hold our MCOs accountable," noting that they had "made some significant progress with managed care" since its inception in 2011.

Carroll, who deals daily with MCOs through his non-profit agency that provides therapy services and medical-based child care, said, "It is an absolute nightmare dealing with MCOs," because of all the "hoops to jump through in order to get reimbursement."

He asked if there was any way for the cabinet to work these issues out in its new contracts and said it felt like the state had "brought in these MCOs and basically washed their hands of all the issues associated with it."

Lee told Carroll that state officials had not "washed their hands" of the MCOs and closely monitor their activities. "We also have an obligation to the Center for Medicare and Medicaid Services to make sure that every single thing that we pay for does meet medical necessity," she said. CMS is the federal agency that oversees those programs.

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