Dr. Mandy Cohen, North Carolina Department of Health and Human Services secretary, discusses coming changes to the way Medicaid is provided to recipients in North Carolina. Courtesy of DHHS.

by Sarah Ovaska, North Carolina Health News

While a move to switch Medicaid to a managed care system in North Carolina is on indefinite hold, several companies rejected by state health officials for lucrative managed care contracts are still vying for seats at the table.

If N.C. Administrative Law Judge Tenisha Jacobs agrees with lawyers in her Raleigh courtroom this week who claim the selection process was flawed, it will throw yet another wrench into the already beleaguered transition of the state’s massive Medicaid program to managed care.

“They’re asking you to go in and basically rework the [selection] process,” Mary Mandeville, an attorney for AmeriHealth Caritas North Carolina, a company that did get one of the state’s four statewide slots, said in arguments to Jacobs. “If that Pandora’s box is opened, other offerors are going to want to do that.”

The N.C. Department of Health and Human Services announced its statewide picks last winter of four for-profit managed care companies –  AmeriHealth Caritas, Blue Cross and Blue Shield of North Carolina UnitedHealthcare and WellCare – to handle the health care needs of an estimated 1.6 million vulnerable North Carolinians in the state’s Medicaid program. Also chosen to serve a regional swath of the state was Carolina Complete Health, a provider-led group backed by the N.C. Medical Society that will be run by the managed care giant Centene.

But the companies not selected – Aetna, which lost a statewide slot by a razor-thin margin; Optima Health, a provider-led group connected to Virginia’s Sentara Healthcare; and My Health by Health Providers,  a consortium of N.C.’s major hospital systems — were predictably unhappy. The three quickly filed protests to the department and then appealed the DHHS decision at the N.C Office of Administrative Hearings, the quasi-judicial body that considers disputes in state contracts.

The collective thrust of the passed-over groups’ arguments roughly amounts to this: that DHHS’ selection process was beset with issues from the start. They allege a series of problems:

  • conflicts of interest stemming from the fact that a member of the seven-person DHHS selection team was in a serious dating relationship with a high-up BCBS employee;
  • preferential and inconsistent treatment shown by the selection committee for how points were tallied for applicants;
  • DHHS veering away from the enabling legislation calling for more homegrown options of provider led-groups and not just managed care companies operating on a profit model.

Conspiracy or sour grapes?

DHHS, for its part, refutes each of these accusations, as their lawyers argued in a series of hearings this week and in court filings. The department maintains that the contracts should stand as they are.

“Petitioners have spun a grand conspiracy and a conflicts analysis premised solely on suspicion and innuendo, as well as a fundamental misunderstanding and misconstruction of the conflicts of interest policies and procedures actually applicable,” DHHS attorneys wrote in a court filing. “They bypass entirely the decisional deference due to the Department and further ignore the abundant record evidence that the Department has sufficient knowledge and expertise in Medicaid and Medicaid managed care.”

Jacobs, the administrative law judge, did not make a decision from the bench this week on the motions for summary judgment. She is expected to issue her decisions in the coming weeks.

She could agree with DHHS that the process worked just fine, and dismiss the claims, or agree with one or all of the passed-over groups that the evaluation process wasn’t conducted properly. Jacobs could then either rework the scoring process herself or order the selection process be redone in part, or completely.

Given how much money is on the line – $30 billion worth of contracts over five years – whatever decision Jacobs makes will leave someone unhappy. Appeals could push the issue on to a state Superior Court courtroom for another judge to weigh in.

In other words, don’t expect any of this to be settled soon.

Late to Medicaid managed care

Medicaid is the federally administered, state-run health care program for some of the nation’s most vulnerable citizens. At its core, the program provides health care for impoverished seniors, persons with disabilities, children and some of their family members. In North Carolina, that amounts to nearly 2.2 million people, or one out of five people in the state, depending on Medicaid for care. The program comes in at an annual cost of $14 billion, with the federal government approximately paying $2 for every $1 the state chips in.

Most states in the country have already moved to a managed care model. Under that model, states pay a set rate per person to health care companies to handle individuals’ entire health care needs instead of the fee-for-service model, under which North Carolina currently operates. Right now, the state essentially pays for every doctor visit, hospital stay and therapy appointment for Medicaid recipients. But the N.C. General Assembly made a decision to make the move to managed care in 2015, and plans were put in place to switch a good portion of the Medicaid rolls to managed care in 2020.

The courtroom calls this week for a potential do-over of the lengthy contracting process comes as the transition to Medicaid managed care is itself on indefinite hold because of a months-long state budget stalemate.  N.C. DHHS Sec. Mandy Cohen canceled the planned Feb. 1 start date this past fall, saying that without additional funds earmarked in a state budget, her department couldn’t make the switch to managed care happen.

And there are no signs the move to managed care will be starting up anytime soon, with the legislature not scheduled to come back into town until April.

The state budget stalemate is largely over the separate, but related, issue of Medicaid expansion. Gov. Roy Cooper, a Democrat, vetoed the $24 billion budget bill because it lacked a path to expand Medicaid coverage to what may be up to 550,000 low-income adults in the state. He also gave the thumbs down to a legislative “mini-budget” that would have funded the Medicaid transition over the Medicaid expansion disagreement.

Republican lawmakers in control of the Senate have been unable to get the votes to override Cooper’s veto, nor have they shown signs that they plan on giving in to Cooper’s demands.

Yet another complication

Meanwhile, there’s yet another wrinkle. DHHS will have to decide how to handle the impending move by health care giant Centene to buy out its rival, WellCare.

The new companies announced this week that they had finished with all the regulatory hurdles needed for Centene’s $17 billion acquisition of WellCare, they expect the deal to close this week. The purchase will make Centene the third-largest publicly-traded managed care company in the country.

It’s unclear how, or if, the acquisition will change the Medicaid managed care offerings here in North Carolina.

Centene had been selected by Carolina Complete Care to handle the day-to-day management of its regional managed care plans. WellCare received one of N.C.’s statewide managed care slots.

In a settlement DHHS entered with Carolina Complete Care over the administrative court disputes, it made clear that the provider-led group will need to maintain its own governance structure separate from Centene, or WellCare.

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