Complaints down, more payments processed quickly, and health outcomes continue to improve

FRANKFORT, Ky. – Six months after Governor Steve Beshear implemented an intensive, multi-pronged action plan to address lingering implementation problems with the state’s Medicaid managed care system, the Governor reported today that most issues have improved and the system is running more smoothly for both providers and managed care organizations (MCOs).

“We can’t forget why we moved to managed care in the first place,” said Gov. Beshear. “A focused managed care program provides better health outcomes for patients, because it emphasizes wellness, disease prevention and consistent health management, instead of high-cost care for conditions that have been allowed to worsen without treatment. Managed care is also a better use of taxpayer dollars. In both health outcomes and financial savings, Medicaid managed care is succeeding in Kentucky.”

Next month marks the two-year anniversary of managed care in Kentucky. The vast majority of states – 47 – use managed care to save taxpayer dollars and to improve patient health.

Kentucky moved 560,000 Medicaid patients into managed care in November 2011 in order to close a $142.4 million shortfall in the biennial Medicaid budget. At the time, the only options to close that gap were to move from the fee-for-service model to managed care, or to implement 30 percent rate cuts across the board to all Medicaid providers. Gov. Beshear decided to move to managed care to prevent devastating cuts to hospitals and medical providers, while providing more wellness-focused health services to Medicaid recipients. The three companies contracted to serve the Medicaid population were Coventry Cares, Kentucky Spirit and Wellcare.

Last April, Gov. Beshear vetoed a well-intentioned bill designed to clear up billing disputes within Medicaid managed care because the bill language might have interfered with contractual rights between providers and managed care organizations. Instead, the Governor launched a multi-part plan to carry out the intent of the vetoed legislation and address concerns among legislators and medical providers – a plan that streamlined complaint and response processes, forced conversations between providers and MCOs, and provided clear oversight that parallels practices for private insurers.

Gov. Beshear reviewed each facet of the action plan in a media briefing today, and explained the measurable progress in each part.

“There will still be a few – be they hospitals or individual medical providers – who will say the program doesn’t work, but it’s tough to refute the facts,” said Gov. Beshear. “Many of those folks still hold out hope that we’ll return to the days when providers could make more money by simply performing more services, and weren’t held responsible for helping people manage or prevent health problems. Let me say it again, those days are gone. We expect more from our tax dollars, and we expect meaningful health management, not just disconnected treatment.”

Action #1: Streamlined Complaint Process
Gov. Beshear directed that complaints against MCOs be moved from the Department for Medicaid Services (DMS) into the Department of Insurance (DOI). This mirrors the complaint process for the private market.

DOI is assisting health care providers on payment issues with MCOs operating in Kentucky, and is providing regulatory oversight of issues involving prompt payment of claims and “any willing provider” claims. (“Any willing provider” law states that any provider who meets the terms to join an MCO network must be allowed to join said network.) DOI also is facilitating communication among these groups.

DOI has expedited the complaint process by providing online forms specifically for MCOs.

Since taking over the process on April 15, DOI has received 1,935 complaints. Some 67 percent are “closed” or “nearly closed.” On average, the closed complaints were reviewed and adjudicated within 43 days.

Of the ones that are closed, about 41 percent were found to be justified – that is, found in favor of the provider.

The rest – 59 percent – were found to be either unjustified (as in the MCO’s position was upheld), or were simple inquiries, or are questions of fact and issues that need to be answered by a court.
Most complaints were related not to prompt pay – which is what hospitals alleged – but instead related to claim denials, prior authorization disputes, or unsatisfactory settlement offers.

Coding errors and credentialing issues continue to pose problems for providers and will require careful monitoring by all involved parties.

Since DOI took over the complaint process, $223,518 has been recovered from MCOs to providers related to those disputes, along with $16,515 in interest.

In general, MCOs and providers have been cooperative with DOI on investigations, and the vast majority of issues raised by providers in complaints against MCOs are similar to complaints raised by providers regarding private insurers.

Action #2: Accounts Receivable Resolution
To address complaints that medical providers were not getting paid in a timely fashion by the MCOs, Gov. Beshear mandated that every MCO meet with every network hospital to fully review each provider’s Accounts Receivable (AR) records and ensure that each organization was operating from the same set of records. Most hospitals agreed to the meetings, and while some issues remain, the majority of hospitals that have been willing to engage in a meaningful discussion with the MCOs have resolved their AR balances. Through the review process, the hospitals and MCOs are able to develop better strategies to improve communications and prevent future problems.

Hospitals participating in these discussions collectively claimed AR of $346.6 million. But after the MCOs and hospitals sat down, they agreed that $59 million of that figure had already been paid. They also agreed that $26.5 million had never even been submitted.

The hospitals and MCOs also found $7 million in denied claims that upon review, the MCOs decided should have been paid after all. The final analysis – the MCOs and hospitals agreed that what was actually disputed and owed was a tiny fraction– just 2 percent of the original $346.6 million claim.

These conversations revealed several facts:

  • Many hospitals continue to report billed AR, instead of what they are contractually entitled to and expect to receive from the MCOs. This essentially inflates the amount the providers actually expect to receive fivefold.
  • Some hospitals claimed partially paid claims as fully owed in their accounts receivable. For example, if a claim worth $100 was submitted and the MCO had paid $95, some hospitals listed the entire $100 as still owed in the AR report – another artificial inflation.
  • Per the prompt pay statute, claims must be adjudicated in 30 days. Some hospitals include claims less than 30 days old into their AR balance, which inflates their numbers.
  • Some hospitals declined to send an AR report or to participate in conversations with MCOs. Some hospitals determined they had no problems to address with the MCOs.

A list of some of the hospitals and their agreed-upon reconciliation information is attached. A list of the hospitals which participated in the AR reconciliation process is also attached.

Action #3: DOI-led Joint Targeted Market Conduct Exams of MCOs
The Governor directed DOI to perform a “targeted market conduct exam” for each MCO, which is a type of audit.. Examiners have access to all MCO files to ensure transparency, and the cost is covered by the MCOs. The exams specifically reviewed the issues which garnered the most complaints from providers:

  • Preauthorizations
  • Pharmacy
  • Hospice
  • Emergency Room
  • Behavioral health
  • Handling of grievances and complaints.

The reviews identified a number of common concerns, including errors in processing and bill submittal. DOI reported that the MCOs tended to not explain the reasons behind denials well, which led to grievances. Provider coding and billing errors also led to problems, including a backlog of denials due to duplicate billings. Finally, the prior authorization process lacked consistency.

“The problems we found in the joint targeted market conduct exams of the MCOs are similar in scope and rate to the issues we usually find in private insurance,” said Sharon Clark, Commissioner of the Department of Insurance. “These are not unusual concerns, and the findings are not out of the ordinary compared to the private market.”

As a result of the targeted market conduct exams, DMS sent corrective action plans to Coventry and Wellcare. Each MCO will report progress each quarter to DMS.

Action #4: Public Education and Outreach through MCO Provider Forums
Since May 2013, more than 2,300 medical providers across the state participated in one of the eight Medicaid Managed Care Informational Forums to discuss issues with MCOs face-to-face, to meet local MCO representatives, and share information and questions. These forums provided an opportunity for individual and immediate contact that many providers had not had.

Most questions at the forums were driven by contractual issues, but other day-to-day issues were aired and resolved as a result of the face-to-face meetings.

“The presentation was very informative,” said Christine England, revenue cycle manager at Middlesboro Appalachian Regional Healthcare. “I received assistance with some claim denials, and I was pleased with MCO response.”

“The forum offered a unique opportunity for providers to connect with MCOs, ask questions, resolve outstanding issues and build ongoing relationships,” said Jay Hedges, contract administrator at Norton Healthcare. “It was informative and a great learning experience for my team and me.”

Action #5: Emergency Room Utilization
Kentuckians suffer poorer health than many other Americans, and they have utilized emergency rooms at a higher rate than other citizens as well. This is problematic for several reasons: the emergency room is the most costly health delivery option; many users don’t have insurance; many ER visits are preventable with proper health management; and the heaviest ER users often suffer from behavioral health issues that are either undiagnosed or untreated.

Kentucky has a large number of so-called “super utilizers” – patients who use ERs at least 10 times in a 12-month period. Based on information only from the Medicaid population in 2012:

  • 346,416 Medicaid recipients utilized the ER at least once, more than double the national average for that population
  • 4,401 recipients used the ER 10 or more times in 2012, accounting for 10 percent of ER costs
  • Two recipients visited the ER 121 times each
  • One recipient visited 30 different ERs in 2012 alone
  • Total ER expenses for Medicaid recipients exceeded $340 million.

Finally, some hospitals have depended on their ERs to create revenue to support operations – even advertising the average wait time in their ERs on their websites. For some communities, the ER has been the de facto primary care center.

“Our focus is to reduce unnecessary ER use and inpatient hospital days in favor of more consistent disease management and prevention,” said Audrey Tayse Haynes, CHFS Secretary. “As we reach that goal, the money that hospitals have grown accustomed to for those services will be reduced, so hospitals must develop a new business model that dovetails with the goal of preventive care and wellness instead of high-cost emergency treatment.”

To meet these goals, Gov. Beshear directed the faculty and staff at the University of Louisville and University of Kentucky hospitals to develop a system for emergency room care that represents best practices around the country.

Led by Dr. Stephanie Mayfield, the Kentucky Department for Public Health Commissioner, in collaboration with Dr. John Langefeld, the Kentucky DMS Chief Medical Officer, a workgroup is planning next steps in this broad initiative. Other key members include the Governor’s Office on Health Information Exchange, the Kentucky Hospital Association, all Medicaid MCOs, 16 additional hospitals, and the Kentucky Department for Behavioral Health, Developmental and Intellectual Disabilities.

Already, many of the workgroup hospitals have held at least one local meeting to review hospital-specific data and discuss ways to impact ER super-utilizers.

In July, Kentucky was named as one of the seven states to participate in the National Governors Association Policy Academy on emergency room utilization, with particular focus on managing super-utilizers.

Action #6: Prompt Payment Monitoring and Resolution
Issues surrounding prompt payment of bills for services rendered were key in sparking the full contingent of action items earlier this year.

Kentucky’s “prompt pay” law has specific requirements for MCOs. A so-called “clean claim” is a claim submitted with all information required for proper processing. Under the law, 95 percent of all clean claims must be adjudicated as approved, rejected or pending within 30 days. Of the claims categorized as approved, 90 percent of those must be paid within 30 days (this prevents insurers from just paying the smaller claims and “rolling” the larger bill claims into the next billing cycle). These standards are the same for both public and private insurers.

These percentages of claim classifications had been self-reported by the MCOs; however, beginning in April, DOI began acquiring raw claim data in order to determine whether the MCOs were truly meeting the standard rates of prompt payment.

After review, Coventry Cares was found to be out of compliance with prompt pay statues. DOI has proposed a civil penalty of $9,000 to be levied against Coventry Cares, and the company has been directed to comply with a corrective action plan to ensure compliance with the 90 percent standard.

Overall, the DOI reviews found no deliberate attempt by the MCOs to withhold payments on a regular basis.

Impact of Medicaid Managed Care – Budget Savings
When the state implemented managed care in November 2011, budget analysts anticipated that, using contracted MCO rates, the state could expect savings of $1.3 billion over the biennium. To date, Kentucky is still on target to meet that savings amount. Of that $1.3 billion, $390 million are state dollars – the rest is the federal Medicaid match.

Costs per patient have remained below forecasted amounts, and new enrollment is flat or declining, which adds to the anticipated savings.

Impact of Medicaid Managed Care – Health Outcomes Improving
More importantly, health outcomes have improved, particularly relating to preventive care.

“Two years is a short window to look for meaningful health improvements, because this is a long process of not only changing health attitudes but also changing health practices,” said Medicaid Commissioner Lawrence Kissner. “Yet we’re seeing some very encouraging signs that providers, MCOs, and patients are collaborating to create better health habits that will lead to long-term good health for Kentuckians.”

Among the improvements compared with statistics before managed care:

  • 93 percent increase in smoking cessation consultations
  • 33 percent increase in flu vaccines for childre
  • 14 percent increase in HPV vaccines
  • 4,655 percent increase in 12-lead electrocardiograms (to screen for heart problems)
  • 4,538 percent increase in mammograms
  • 17 percent decrease in amputations, often due to untreated diabetes
  • Nearly 11 percent decrease in CT scans

Gov. Beshear noted that when the state moved to managed care, the administration expected there would be some problems during implementation. However, the administration has worked with providers, MCOs, and other advocates to seek out where the process had flaws and to make improvements.

“Managed care is working in Kentucky,” said Gov. Beshear. “It’s slowly improving the health of our people, and it’s saving us money in both the short and long term. With continued cooperation, its operation will be smoother, and its benefits will be even greater.”


Hospitals and Accounts Receivable Reconciliation (PDF)
List of Hospitals Participating in Managed Care (PDF)



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