Passport providers settle with AG Conway, but managed care saga may not be over

07/21/2011 02:44 PM

FRANKFORT — The announced settlement for the medical providers that make up Passport Health Services to return $26.4 million to the state is the latest set-back for the managed care program and not necessarily the end of the saga.

The settlement, announced Thursday, comes at the end of a civil investigation by Attorney General Jack Conway’s office. That followed state Auditor Crit Luallen’s scathing audit of Passport that found that the programs leaders spent excessively on travel, lobbying and meals.

In addition to discovering that spending, the audit questioned why Passport’s partners — University of Louisville Hospital, University Physicians Associates, Jewish Hospital and Norton’s Hospital — received a total of more than $30 million from non-profit Passport board as “dividend” payments, or excess profits.

Conway said those payments shouldn’t have gone to those medical providers but, instead, should have gone back to the state’s Medicaid program. The state’s Medicaid Services has a nearly $1 billion-a-year contract with Passport to provide health care for the poor and disabled in Louisville and 15 surrounding counties.

While Conway said that decision ends the civil investigation into Passport, he said he couldn’t comment on whether his office was conducting a criminal investigation.

If a provider defaults on a settlement payment or tries to back out, Conway said his office will seek triple damages. Here are the settlements, according to Conway’s office:

  • University Physicians Associates (UPA): $14.38 million, with $7.2 million paid within 10 days and remainder paid in four equal payments by July 31, 2015.
  • Norton Hospital: $4 million in one payment
  • Jewish and St. Mary’s Hospital: $4 million paid in equal payments beginning July 31, 2011
  • University of Louisville Medical Center: $4 million over five years, with first payment on Dec. 31, 2011

Conway blamed Passport’s problems on its management culture, saying the organization never asked whether the payments to the providers were legal.

But the one legislator who initially blew the whistle on Passport’s troubles isn’t entirely happy.

State Sen. Tim Shaughnessy, a Democrat from Louisville, praised Conway for his ability to land the settlements.

But the senator lashed out at the University of Louisville’s board of trustees because Shaughnessy said that group has ultimate oversight over anything the physicians group or University Hospital does, including Passport.

Shaughnessy said he was upset that Norton Hospital was the only provider to repay it’s kickback in one lump sum, while the others slowly paid out over time.

Shaughnessy said U of L had the money to pay its settlement up front. Not doing so was a slap in the face of the elderly and poor who used Passport for their Medicaid-covered health care.

In a statement, Mark Hebert, a spokesman for U of L, said Shaughnessy’s stance was “unfortunate.”

“It is unfortunate that Senator Shaughnessy has turned his anger on the president and trustees of his hometown university, who had nothing to do with the operation of Passport,” Hebert said.

Meanwhile, Kentucky recently contracted with three other managed care companies, who will manage Medicaid elsewhere in the state. Shaughnessy said unless U of L changed its ways, Passport might not get another state contract.

The senator also called for more community representation on its board, which was revamped at the urging of Gov. Steve Beshear. That board will have 12 of it’s 15 members affiliated in some way with the providers who make up Passport. Shaughnessy said more community members needed to be on the board to prevent a repeat of the scandal Passport is currently involved in.

And Shaughnessy took his legislative peers to task for not making a bigger deal about Passport’s spending. Shaughnessy compared the saga to high-profile investigations into spending at the Kentucky Association of Counties, Kentucky League of Cities and Blue Grass Airport.

Republican State Sen. Damon Thayer, chair of the Senate State and Local Government committee, said before his committee’s meeting Thursday afternoon that he wasn’t familiar enough with the Passport investigation to respond to Shaughnessy.

-Reporting and video production by Kenny Colston


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