By David A. Mann, Reporter
Date: Wednesday, October 17, 2012, 12:32pm EDT – Last Modified: Wednesday, October 17, 2012, 1:53pm EDT
Kentucky Spirit Health Plan has terminated its Medicaid managed-care contract with the Kentucky Cabinet for Health and Family Services. The termination will be effective July 5, 2013, about a year ahead of schedule, according to state officials.
The company, which is a subsidiary of St. Louis, Mo.-based Centene Corp. (NYSE: CNC), also has filed a formal dispute with the cabinet for damages incurred under the contract.
Specific information about the dispute was not immediately available.
In July, Centene reported a second-quarter net loss of $38.8 million on revenue of $2.11 billion, mostly on higher medical costs, including increased medical costs in its Kentucky health plan caused by the retroactive assignment of members and a higher level of non-inpatient claims receipts.
“Since the inception of the contract, we have been in discussions with the cabinet about our concerns with the Medicaid managed-care program but have been unable to resolve our differences.” Jesse Hunter , executive vice president of operations for Centene, said in a news release. “Consequently, we do not believe there is a viable path to a sustainable managed-care program in Kentucky. As a result, we are in the unfortunate position of having to take steps to terminate the contract and exit the market.”
The move will terminate 200 technical and specialized jobs in Lexington, Ky., which represent more than $12 million in annual wages and benefits, said Carol Goldman, executive vice president and chief administrative officer of Centene, told the St. Louis Business Journal.
Centene anticipates recording a pre-tax premium deficiency reserve ranging from $60 million to $70 million related to the Kentucky operations in the quarter ended Sept. 30. Third-quarter results will be released on Oct. 23.
Kentucky Spirit is one of three companies serving Medicaid recipients in 104 Kentucky counties, not including Jefferson County or those immediately surrounding it. CoventryCares of Kentucky and WellCare of Kentucky are the others.
The cabinet issued its own news release on the contract termination, saying Kentucky Spirit was abandoning its obligation to the commonwealth.
“Our top priority remains the continued health care of Medicaid patients, and we will make sure those patients experience no disruption in health services,” Kentucky Gov. Steve Beshear said in the state’s new release. “However, we are disappointed in Kentucky Spirit’s decision to break its contract. We have worked with the company toaddress its questions since Kentucky Spirit agreed on the contract terms last year. We will continue to work within the contract process to make sure members are provided health care services and providers get the payments they are due. We will hold this company accountable to its contractual commitments through whatever means necessary on behalf of both the members and taxpayers.”
The exact nature of the dispute was not discussed in either release. Phone calls to both Centene and the cabinet were not immediately returned Wednesday afternoon.