Aetna To Purchase Coventry

Aetna to acquire Coventry in $5.7 billion deal

By Gregg Blesch

Posted: August 20, 2012 – 8:15 am ET


Aetna plans to buy Coventry Health Care for $5.7 billion in a cash and stock deal that will expand the company’s reach in Medicaid and Medicare.

The deal is the latest big play by a national insurer to get a bigger footprint in Medicaid as the programs are poised to grow dramatically under the Patient Protection and Affordable Care Act.

The transaction is valued at $7.3 billion including assumption of Coventry’s debt, Aetna said in a news release.

Coventry covers about 4 million members in medical plans and 1.5 million in Medicare Part D prescription drug plans, according to the release.

Kentucky Agency Asks Judge to Drop Contempt Order over Medicaid Lawsuit

Kentucky Agency Asks Judge to Drop Contempt Order over Medicaid Lawsuit


The Kentucky Cabinet for Health and Family Services has apologized to a federal judge and is asking him to drop a contempt order against the agency. U.S. Senior Judge Karl Forester held the agency in contempt last month after ruling that the cabinet did not comply with his order to process thousands of requests from Appalachian Regional Healthcare patients who wanted to switch Medicaid managed-care companies.

The issue stems from a lawsuit ARH filed against Coventry Cares, a Medicaid managed-care company that has decided to cut ties with the ARH system.

The Lexington Herald-Leader reports an attorney for the state agency filed a motion on Friday that said the judge’s order wasn’t clear and specific and the cabinet’s failure to abide by it was “inadvertent.”

Coventry sends out letters alerting Medicaid patients

Coventry sends out letters alerting Medicaid patients their physicians have left E. Ky. practices … except they haven’t

By Terry Boyd | Published: May 23, 2012


Click to enlarge.

How do Medicaid managed care insurers give the ol’ heave-ho to physicians who might have too many high-risk Medicaid patients in Kentucky’s poorest counties?

Apparently, they send out letters to members announcing those physicians no longer work at their respective practices, even though the doctors are still very much in place.

For example, last Friday, insiders started telling Insider Louisville that Medicaid managed care members in Eastern Kentucky were getting letters from Bethesda, Md.-based Coventry Health stating their physicians were no longer at Big Sandy Health Care.

Big Sandy is a private, non-profit corporation based in Prestonsburg that operates medical clinics, dental clinics and women’s practices  in various parts of southeastern Kentucky including Pikeville.

Big Sandy CEO Ancil Lewis confirmed yesterday his system’s Medicaid patients have received letters from Coventry stating certain doctors are no longer with the health care system.

Whether they were sent to deceive Medicaid members into leaving Big Sandy and possibly shifting them ultimately to one of the other two Medicaid managed care contractors isn’t clear, Lewis said. “Those letters are in error. I can’t say whether it’s a ploy or incompetence. But the letters are in error.

“The doctors named in the letters are still with Big Sandy.”

Other sources say Medicaid patients in Eastern Kentucky received similar letters from Coventry notifying them their doctor is no longer employed at their clinics, or their pharmacy was no longer covered under Coventry.

The common denominator in the moves is the doctors, clinics and pharmacies all have large numbers of high-risk patients, our sources say.

This latest issue arises after Coventry ended up with a disproportionate share of high-risk patients for several reasons including the insurer waiving drug co-pays during the initial open enrollment period.

Matt Eyles, vice president of Public Affairs and Policy at Coventry’s headquarters in Bethesda, Md. initially asked for time to research the issue, but did not get back to Insider Louisville.

Circulating inaccurate information is only one issue Big Sandy is having with Coventry. Coventry’s reimbursement methods make it impossible for Big Sandy’s accounting system to document whether the system is getting properly reimbursed for services.

“Their accounting is very different” from the previous system, Lewis said. “We don’t know exactly what we’re being reimbursed for, or whether we’re being reimbursed the correct amounts.”

The letters and other problems are the latest round of breakdowns as Kentucky shifted to a Medicaid managed care system from a fee for services system starting last November.

Insider Louisville, the Herald-Leader in Lexington and newspapers out in the state have documented the problems, ranging from suits accusing the MCO of not paying health care providers such as Appalachian Regional Healthcare to a decision – later rescinded – that Coventry would stop covering an opiate-withdrawal drug to notifying Louisville-based Baptist Healthcare System that Coventry intends to renegotiate for more favorable reimbursement rates and other changes.

The back story on Medicaid changes in Kentucky: In April, 2011, state officials asked health insurers to submit managed-care proposals for the $6 billion worth of care 800,000 poor and elderly Kentuckians receive annually under the federal/state Medicaid program. At the time, Gov. Steve Beshear touted the switch to managed care from fee-for-services as saving the state $375 million over the life of the initial three-year contracts. Insiders said officials in other states such as Georgia took as long as 18 months to make the change while Kentucky tried to do it in less than six months.

Denton Has Concerns About More Private Medicaid Operators in Louisville

by Kenny Colston on May 10, 2012

The problems with privatized Medicaid in Eastern and Western Kentucky could be coming to Louisville.

Passport Health Plan has run Medicaid in Louisville and the surrounding area for more than a decade. The system was the model for last year’s Medicaid privatization, which brought three new Medicaid management companies into the state.

The federal government has ordered the state to open the Passport region to competition by next year. But Medicaid privatization isn’t working too well in the rest of the state. Hospital officials claim two of the private companies aren’t paying enough to reimburse Medicaid-covered care. The private operators say they are only adhering to their contracts with the state.

“Let’s make sure we have a plan,” says Senate Health and Welfare Committee Chairwoman Julie Denton. “If we are going to be bidding out with the Passport region for next year, starting January 1st, the Cabinet sure as heck better be working on an RFP and putting it together in a more thoughtful and steady fashion than they did the Medicaid managed care RFP for last year.”

The state has until July 1 to tell the federal government its plan to open Louisville to competition. But the Cabinet for Health and Family Services hasn’t yet begun work on the plan.

The current three statewide operators all have offices in Louisville, making them obviously competition partners for the region. But Denton says she’s not sure bringing those three in is a good idea.

“I don’t think they can just take three bids from the three MCOs and open those up and let those three MCOs in. And frankly with the way Coventry has been working thus far, I have no interest in letting them into the Passport region,” she says.

Currently, many healthcare systems are having contract issues with CoventryCares, one of the three new statewide MCOs. Coventry officials say they need more operating money and the company is looking to providers and patients to recoup profits.  That has led to lawsuits and threats from lawmakers that Coventry could be barred from operating in the commonwealth.

UPDATE 1-Coventry profit just misses analysts’ target

UPDATE 1-Coventry profit just misses analysts’ target

8:33am EDT

* Q1 EPS 62 cents vs 63-cent Street view

* Medicaid costs weigh

* Follows Aetna’s Q1 miss on Thursday

April 27 (Reuters) – Insurer Coventry Health Care Inc reported quarterly profit that was slightly lower than expected on Friday, hurt by high costs in its Medicaid plans for low-income Americans.

While overall enrollment in Coventry’s Medicaid plans nearly doubled, costs for a plan in the state of Kentucky were well above premiums.

“Unfortunately, concern over the higher costs in Kentucky will overshadow the otherwise solid results this quarter,” Goldman Sachs analyst Matthew Borsch said in a research note.

Shares of Coventry, a mid-sized health insurer, rose 2 cents to $32.70 in light pre-market trading.

Coventry’s report comes a day after larger rival Aetna Inc’s profit missed Wall Street’s target and said healthcare-claim costs may be about to rise, sending its shares tumbling.

The quarterly earnings of UnitedHealth Group Inc and WellPoint Inc, the two biggest health insurers, exceeded expectations, and both raised their outlooks for the year.

Coventry’s first-quarter net income rose to $170.7 million, or $1.20 per share, from $110.2 million, or 73 cents per share, a year earlier.

Results in the quarter got a big boost from a release of reserves related to its Medicare plans for seniors. Excluding the reserve release, earnings of 62 cents per share were a penny shy of the average estimate of analysts, according to Thomson Reuters I/B/E/S.

Revenue grew 21 percent to $3.69 billion, about $200 million ahead of estimates. Its membership jumped about 16 percent to 5.26 million, as Medicaid enrollment nearly doubled to 924,000.

Coventry saw greater-than-expected medical claims expenses in Kentucky for its Medicaid plan, which became effective late last year. The Kentucky contract represents about 5 percent of company revenue, according to Goldman’s Borsch.

The company backed its 2012 earnings forecast of a range of $3.10 to $3.30 per share. Analysts have been looking for $3.26.

Through Thursday, Coventry shares had risen more than 7 percent this year, less than the 12-percent climb for the Morgan Stanley Healthcare Payor index of health insurers.

Insider Louisville Medicaid story

February 8, 2012

Insiders are telling Insider Louisville Gov. Steve Beshear’s big plan to switch to managed care from fee for services – announced last spring during the gubenitorial race as a way to to close Kentucky’s $1 billion Medicaid budget gap – is looking like it will add to the pain on every possible level from personal to financial.

Those insiders are telling Insider Louisville Kentucky’s managed care system is in chaos after a rushed implementation, a situation that may take years to fix.

“If you’ve ever been in the military … you’ll know the term ‘FUBAR’ (fouled up beyond all repair). That comes as close to describing this as anything,” said one source who represents health care providers and pharmacies.

The Lexington Herald-Leader has reported on problems Medicaid members are having getting care, as well as on the problems providers are having getting paid by the managed-care insurers.

Insiders are telling us the story from the other side – the insurer side – and it’s not pretty, with one company shedding customers after its executives low-balled a bid under a state request for proposal last April.

A huge number of Medicaid-covered patients have dumped low-ball bidder, St. Louis-based Centene Corp. after they figured out the cut-rate provider network means their doctors aren’t included in their coverage.

Insider Louisville’s sources say about 40,000 Medicaid members in Kentucky who’d been assigned to Centene have bolted because they noticed their local docs or pharmacies AREN’T part of their plan.

One stock analyst who covers Centene said Centene officials confirmed during a Tuesday earnings conference call that the insurer’s managed care membership in Kentucky dropped by 40,000 – to 140,000 from 180,000 members – during a two-month open period in November and December, “and they didn’t give a good reason.

“They said it was a ‘benefit design adjustment,’ which makes no sense at all.”

A well-placed insider said Centene executives approached top Health & Family Services Cabinet officials last month, essentially asking for an adjustment on their contract.

“They were asking for more money,” the source said. “(The request) was not well received.”

The reason it’s not well received is in the grade-school math: Those 40,000 Medicaid Members who were going to cost the state $12 million per month at Centene’s $330 per member, per month bid now could cost as much as $17.2 million per month if they all went to Coventry, which is getting 40 percent more per member, per month.

Times 12 months, times the three year life of the contracts.


But the request for an adjustment also raises the specter of Centene walking away from its managed-care contract, willing to take a chance that a legal fight would be less expensive than sticking out the contract.

A report this morning by investment services giant Morgan Stanley raises questions about how the contract implementation in Kentucky will affect Centene.

But as Centene bleeds Kentucky Medicaid membership, it’s Bethesda, Md.-based Coventry Health Care that’s getting the negative publicity for not paying providers.

Sources confirm officials from Kentucky’s Director of Medicaid Services – part of Kentucky’s Department of Health and Family Services – descended on Coventry Health Care’s offices in Louisville yesterday in an unannounced visit related to Coventry’s failure to reimburse health care providers treating Medicaid patients.

State officials did not return Insider Louisville’s calls, which came just as Health & Family Services Cabinet Secretary Janie Miller resigned yesterday.

The Herald-Leader and other state newspapers– though not so much the Courier-Journal – have documented the big flaw in Beshear’s plan: Health care providers, pharmacies and others report they aren’t getting paid by Coventry and other health insurers that won billions worth of state contracts.

Those who are getting paid are having to negotiate long waits to get procedures approved, or to get denials of care reversed, according to media reports.

All of which are threatening to put providers out of business is a state that already is woefully short of docs and health care professionals.

Now, sources tell us CJ reporter Deborah Yetter is playing catch-up with a series of articles:

Her focus will be on the impact of the changes on providers and patients, but will miss an important point … whether the approach will generate the savings the Governor and Secretary of Health and Family Services Cabinet Janie Miller have touted.

Our sources say the answer is, “No.”

Here’s why:

So, the much-touted plan cut Medicaid costs by $375 million is on track to lose an additional $43. 2 million.

(Editor’s note: Miller resigned yesterday, though it’s not clear if her departure is related to the medicaid changes, or to the controversy growing out of the state’s refusal to release information related to the deaths of abused children.)

Back in April, Centene, Tampa-based WellCare and Coventry were among a number of health insurers bidding on about $6 billion in annual Medicaid managed care contracts for about 800,000 Medicaid members as Kentucky switched to managed care from a fees-for-services system.

Beshear’s plan was, critics say, grandstanding – a way to claim to be closing the state’s Medicaid funding gap during a campaign against Sen. David Williams, who called Beshear’s budget schemes “smoke and mirrors.”

Centene, WellCare and Coventry are all publicly traded companies. Passport Health Plan, a Louisville-based non-profit controlled by providers, is the managed care insurer for Jefferson County and 17 surrounding counties.

Each bid was based on per-member, per-month health care costs projections. Low-bidder Centene bid $330 per member, per month, according to documents submitted to Insider Louisville. WellCare bid was based on $400 per member per month and Coventry bid $436 per member, per month.

The algorithm state officials used to choose the winners favored the low-cost plans, obviously, because therein lies the savings Beshear was touting.

The state methodology initially assigned members to a plan, with the two lowest cost plans getting more members than the highest.

If Centene’s manged care system, for example, could actually get each member to spend less than $330 per month, they’d make a profit. But crucial to getting costs that low would mean lowering reimbursements to health care providers such as doctors and pharmacies, which meant losing some.

Sources in the meeting or with direct knowledge of events confirm state officials were congratulating themselves on implementation until a January meeting between Kentucky Hospital Association members and Miller.

Instead, “agitated” KHA members told Miller the implementation was a disaster, with providers from doctors groups to pharmacies not getting paid, said a source.

“What you’re seeing is, they slammed this thing through, and now it’s coming home to roost,” said an insider. “Any complex business transaction … when you rush it, you’re going to have a bunch of stuff happen that you didn’t anticipate.”

In April, 2011, state officials asked health insurers to submit managed-care proposals for the $6 billion worth of care 800,000 poor and elderly Kentuckians receive annually under the federal/state Medicaid program. At the time, Beshear touted the switch to managed care from fee-for-services as saving the state $375 million over the life of the initial three-year contracts. Insiders said officials in other states such as Georgia took as long as 18 months to make the change while Kentucky tried to do it in less than six months.