By Sarah Ovaska-Few

North Carolina’s ongoing transition to Medicaid managed care system could screech to a temporary halt if an administrative law judge agrees with rejected managed care groups that the process to select contractors was flawed and unfair.

Lawyers for three prepaid health care plans —  Aetna Better Health, a commercial managed care company; Optima, a health care group connected to Virginia’s Sentara health care system; and My Health by Health Providers, a provider-led group formed by a dozen of the state’s hospital systems – appeared in administrative law courtrooms in Raleigh this month. All three tried to make the case that each deserved another shot at consideration for a lucrative Medicaid managed care contract.

The groups contend the N.C. Department of Health and Human Services used an inconsistent and flawed process to decide what groups received lucrative contracts in the new managed care system, in which the state will prepay managed care companies to handle the health care needs of low-income seniors, disabled persons, children and their families who depend on Medicaid.

Accusations lobbed against DHHS in court and in legal filings include assertions the state treated companies differently even when answers to questions were substantially similar; used a process that favored large, commercial plans over state-based, provider-led offerings; and a willingness to overlook compliance issues vendors had in other states.

At stake is a lot of money – an estimated $30 billion over five years – and health care coverage for 1.6 million North Carolinians who depend on Medicaid.

Attorneys for the state essentially argued in court that objections and accusations raised by the managed care groups amount to sour grapes – that the agency’s evaluation committee took its job seriously and selected the best applicants of the bunch.

“Nobody is going to be happy,” said Robert Knowlton, an attorney representing DHHS. “We think everything was done properly.”

North Carolina had long been using a fee-for-service system, where the state managed and paid for every Medicaid patients’ flu shots, hospital stays and other health care needs.  In 2015, the Republican-led legislature passed legislation to move to privatized managed care in hopes prepaying for health care would bring about budget predictability and better health outcomes.

Halting the process could throw DHHS off its current schedule of launching the transition of Medicaid to managed care in two regions of the state in November, with the rest of the state to follow in 2020. A delay to reconsider applicants would introduce more questions into an already complicated process, Knowlton said.

But the passed-over groups argued that the evaluation process wasn’t consistent, and thus unfair.

“This is just another example of the state and the evaluation committee picking and choosing,” said Kevin Cosgrove, an attorney for Aetna Better Health, in a hearing held in a Raleigh courtroom Wednesday. Cosgrove was referring to a question in which he contends DHHS gave different scores to applicants when similar answers had been provided.

His client missed getting a statewide managed care slots by a hair, ending up just 2 points out of 1,025 possible points, just behind the 4th-place finisher which  received a contract.

table shows the varying scores of the different managed care companies
How managed care companies stacked up NC DHHS decision.

The four entities selected in February for managed care contracts by DHHS were AmeriHealth Caritas, Blue Cross Blue Shield of North Carolina, United HealthCare and WellCare. Carolina Complete Care, the N.C. Medical Society plan that will be administered by Centene, didn’t initially receive a recommendation for a contract until DHHS Sec. Mandy Cohen and Medicaid Director Dave Richard intervened, citing the need to have at least one provider-led group in the mix.

N.C. Administrative Law Judge Tenisha Jacobs has yet to rule on the requests for a temporary injunction, a move that could at least temporarily stop DHHS from moving forward with the existing statewide contractors to meet the Nov. 1 start date. As of Wednesday, Jacobs hadn’t issued any rulings in the three pending cases.

Dave Richard headshot
Dave Richard heads North Carolina’s Medicaid program.

Richard said while he and others at DHHS were aware of the ongoing protests, it was full-steam ahead for him and others.

“There are very few things that would stop us, one would be the courts,” he said, in an interview. “We don’t anticipate that – we think the state has made our case”

Another potential buzzkill could be the state budget, with funds needed to make the transition from the existing fee-for-service system go smoothly, Richard said. He and others at DHHS are anxiously waiting for the release this week of the state Senate’s budget proposal to get a sense of what the funding landscape will look like in the coming year.

Big mission ahead

Medicaid is one of the largest government programs run by the state of North Carolina, its $14 billion annual cost funded through a mix of federal and state dollars with the federal government chipping in $2 for every $1 the state spends.

North Carolina is the largest state that does not have a significant presence of commercial managed care companies running Medicaid. The state does have locally grown managed care organizations running the state’s mental health Medicaid programs, but the legislature retains significant control over those organizations.

The 2015 legislation that orders the change in Medicaid included slots for up to a dozen regional provider-led groups, though only three applied and just one – Carolina Complete Health – ended up with a contract in the end.

In the new system, the state will pay these independent managed care groups a yet-to-be-determined rate per patient to handle all the health care needs of what will initially be 1.6 million Medicaid patients. Those patients will be able to choose what plan they want to sign up with. If no choice is made, the individual will be enrolled in plans their current providers are affiliated with and then have the option of switching if dissatisfied.

The first groups of Medicaid recipients in the Triangle and Piedmont regions will transition to the new managed care setup in November, with the remainder of the state to follow in 2020.

An approximate half-million other Medicaid patients with more complex behavioral health needs will stay on the state’s current fee-for-service system until specialized tailored plans are offered later on.

Ombudsman contract draws no applicants

The ongoing protests from managed care groups are not the only speed bump the state health agency has faced.

One key piece ensuring Medicaid recipients receive care that’s up to par is the creation of an outside ombudsman position, which would work out issues among beneficiaries, managed care groups and the state.

DHHS put out a bid for an ombudsman in early March, hoping to make its decision in April and have that office up and running this summer as beneficiaries in the Piedmont and Triangle begin receiving information about enrollment.

But, as it turns out, no one applied.

“We probably went a little too far,” Richard said, in describing how applicants needed to be free from conflicts of interest, unintentionally excluding non-profit or advocacy groups that already work closely with individuals but may have attorneys on staff to elevate health access issues with the courts.

The state will put out a retooled request for proposal (RFP) this week for the ombudsman role, with more clarification offered about how applicant groups could still maintain advocacy or legal arms.

“We fully anticipate when it goes out this time we’ll get the response from folks capable of doing that work,” he said.

The ombudsman role is important to have in order to flag concerns or issues beneficiaries have and work quickly to resolve those that are easier fixes, Richard said.

“There will be things that go wrong,” he said. “What we want is a place they can go to get those things addressed without having to go to court.”

Elsewhere on the Medicaid managed care front, Richard said the department is aware the switch to managed care may be rocky at times.

The agency learned, Richard said, from the problems following the troubled 2013 roll-out of the Medicaid payment processing system N.C. TRACKS, in which Medicaid providers around the state went months or longer without pay.

One big lesson learned there was the need to hold several readiness reviews later this year, to make sure the contracted managed care groups are ready to take on Medicaid patients as well as ensure the state is ready from the viewpoint of the federal Centers for Medicare and Medicaid Services, Richard said.

And while the agency has lofty goals over time of improved health outcomes from the managed care switch, the goals on the first day will be much simpler.

“Beneficiaries will get seen,” he said. “And providers that provide care, they will get paid for that care.”

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Sarah Ovaska is a freelance writer based in Orange County, who has called North Carolina home for well over a decade. She’s reported on criminal justice, education, health and government issues at publications...

2 replies on “Would-be Medicaid managed care groups ask judge for second look”

  1. great observations. Managed care in NC should be thoroughly investigated to insure legally binding, quality and morally sound health care services rendered to our elderly, low-income, and mentally impaired populations. Otherwise, the already fraudulent practices in place by most care-facilitated groups will undermine all policies and federal regulations, as deemed acceptable at state level, based upon the wiles of contracted facilities and management by established providers. It’s been my experience (only two short years) that billing is the bottom line for these care facilities, which allow for and influence a culture nd workplace environment not amicable for individuals who actually care for those receiving state managed funds and who desire to follow all policies and procedures according to state, federal and company, profit and non-profit guidelines. Awful and disgusting practices are being employed from the top down, with no oversight to warrant any accountability, until there are unfortunate situations that occur. Monies that are legislated to afford people services should be better managed and not left to the sole discretion of contracted providers. If we really care about people, we should have some moral oversight as to who, when, what, why, and where all provider care service managers as well as state managers are prioritizing and qualifying their services under billing.

  2. Great article, just reporting the facts.
    But how will this conversion help the North Carolina taxpayer, the Medicaid recipient and providers? The outcome is very predictable. The managed care companies are not in it to lose money or break even or because of their good will, they must make a profit and will.
    Currently, The state pays per service with no middle man (managed care companies). There are subcontractors that handle all the billing for the state (NC tracks), CCME (preapproval process) and a private company that handles audits. But for the most part the state handles the management and of course doesn’t take a profit. Managed care companies will be paid a certain rate per recipient regardless of what services they provide. Thus if the recipient is very healthy they make a profit but if the recipient needs medical care it will cost them.
    Under the new plan, the state will still have its current DHHS staff that will be assigned to tasks to monitor the managed care companies. There are no planned DHHS staff cuts when the managed care companies take over. This staff is just going to be converted over to new tasks. The state is also hiring a company to act between the recipients, the managed care company and the state (ombudsmen), which isn’t currently necessary. The providers at least initially will be paid their current rates.
    The question is how is this going to save the North Carolina tax payer money while providing the same level of quality care to the recipients? The short answer is its not! Not only is it going to cost the taxpayer more but also the recipients will no doubt get fewer services
    It would seem very obvious that the legislators didn’t think this through carefully. This new plan will definitely cost the taxpayers more as it will be evident in its first year. There also will be a dramatic increase in lawsuits and other costly hearings from critical services being denied. Most importantly, the poorest of our population and most in need will not get the medical services they require. Perhaps the best solution would have been to leave the old system in place while trying to create a more efficient and effective audit system to recover the costs of unnecessary and fraudulent procedures.
    This comment was edited for length to adhere to our comments policy

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