Medicaid Oversight and Advisory Committee




<MeetMDY1> October 19, 2016


Call to Order and Roll Call

The<MeetNo2> Medicaid Oversight and Advisory Committee meeting was held on<Day> Wednesday,<MeetMDY2> October 19, 2016, at<MeetTime> 1:30 PM, in<Room> Room 129 of the Capitol Annex. Senator Ralph Alvarado, Chair, called the meeting to order at 1:35 PM, and the secretary called the roll.


Present were:


Members:<Members> Senator Ralph Alvarado, Co-Chair; Senators Julie Raque Adams, Morgan McGarvey, and Dan "Malano" Seum; Representatives Robert Benvenuti III, Joni L. Jenkins, and Ruth Ann Palumbo.


Guests: Stephen P. Miller, Commissioner, Department for Medicaid Services, Cabinet for Health and Family Services; Veronica Cecil, Deputy Commissioner, Department for Medicaid Services, Cabinet for Health and Family Services; Sarah Comley, Director of Central Billing Office, Clark Regional Medical Center; and Bob Thomas, Billing Manager, Clark Regional Medical Center.


LRC Staff: Jonathan Scott and Becky Lancaster.


Approval of Minutes from June 17, 2015, September 16, 2015, August 17, 2016, and September 21, 2016 Meetings

A motion to approve the minutes of the June 17, 2015, September 16, 2015, August 17, 2016, and September 21, 2016 meetings was made by Senator Raque Adams, seconded by Senator Seum, and approved by voice vote.


Presentation and Discussion of Managed Care Organizations Profit Margins and Contracts

            Stephen P. Miller, Commissioner, Department for Medicaid Services, Cabinet for Health and Family Services, stated Medicaid provides coverage for approximately 1,377,000 Kentuckians including 435,700 children. Approximately 90 percent of enrollees are covered under Medicaid Managed Care. Medicaid Expansion (ACA) covers approximately 440,300 people and approximately 802,400 people are covered under Traditional (Non-ACA). For fiscal year 2013, the total Managed Care Organizations (MCOs) capitated payments were $3.2 billion, and for fiscal year 2016 the total was almost $6.9 billion, a substantial increase.


The Department of Medicaid Services (DMS) spends approximately 70 percent of each dollar with MCOs. The other 30 percent deals with the waiver population and long-term care. There have been no fiscal reports on the MCOs contracts that became effective July 1, 2016 because the quarter ended on September 30, 2016. The ACA expansion rate changed with a 9 percent decrease. There was an overall 4 percent decrease in the total rate change per member per month for the state fiscal year (SFY) 2017, first quarter.


Veronica Cecil, Deputy Commissioner, Department for Medicaid Services, Cabinet for Health and Family Services, stated the new MCOs contract are six-month contracts. DMS raised the minimum medical loss ratio (MLR) to 90 percent, with a 75/25 (MCO/DMS) split between 86 percent and 89 percent. SFY 2015 contracts had a minimum MLR of 85 percent, with an 80/20 (MCO/DMS) split for 84 percent and below for the non-ACA population. Previous contracts had a risk corridor for the ACA population, mandated by Centers for Medicare and Medicaid Services (CMS), so there could be a shared loss or shared gain in what was happening with the ACA population. The previous risk corridor had a target MLR of 87 percent with a plus or minus of 5 percent. If the MCOs spent under the 82 percent then there was a premium refund that would come back to the state. However, if the MCOs spent over 92 percent an additional payment was sent to the MCOs. The new contracts effective July 1, 2017 changed that provision to align with the MLR for the entire Medicaid population required by DMS.


In the new contracts, DMS required the use of either Interqual or Milliman for the majority of the services provided, except for some specific services for behavioral health. DMS clarified that the executive management had to be based in Kentucky. The new contracts require the use of a common prior authorization and appeal form. DMS will have a common prior authorization form for both prescription and non-prescription services. The 2016 Kentucky General Assembly passed Senate Bill 20 that added an external, independent third party review process and an appeal to an administrative hearing for providers. DMS is in the process of finalizing that process, the anticipated date for filing the regulation is November 15, 2016. The new contracts require MCOs to contract with at least one Federally Qualified Health Center (FQHC) and one Rural Health Clinic (RHC) in each region. The new contracts were restructured with penalties to focus on timeliness, completeness, and accuracy.


Commissioner Miller stated that, for calendar year (CY) 2015, Kentucky ranked highest in nation for Medicaid managed care profits. The underwriting ratio operated with an 11.3 percent profit while the national average was 2.6 percent profit. DMS reduced premium rates to help bring the profit number closer to the national average. The rate reduction is an actuarial process that calculates rates based on the historical costs of all the MCOs. All five of the MCOs are paid the exact same rate for an individual within that rate sale within a region, there is no distinction between MCOs. The rates are not dictated but based on choices that are given to DMS by an independent actuary, then approved by CMS. The average margin range from Milliman is approximately at a low of 2 percent to a high of 28 percent.


The contract and rate review process is ongoing because the current contracts end on December 31, 2016. Aon, the actuary for DMS, is now calculating and developing new rate ranges. DMS does not anticipate any material changes in the contracts, however there are certain issues DMS will want to clarify to incorporate the CMS managed care final rule where required and appropriate. His goal, as Medicaid commissioner, is to get the five MCOs operating very close to the national average and maintain quality standards in the upper quartile.


Representative Benvenuti commented that the goal of Medicaid needs to be to get able-bodied people to work so they are able to provide health insurance for themselves and their families. Other agencies with very important missions like Child Protective Services and the Kentucky State Police should not allow Medicaid, no matter how efficient DMS becomes at managing it, to consume the entire state budget.


In response to questions from Senator Alvarado, Deputy Commissioner Cecil stated she does not have the data as to where Kentucky’s Medicaid programs rank nationally in terms of quality care. DMS looks at Healthcare Effectiveness Data and Information Set (HEDIS) scores. Senator Alvarado stated the HEDIS score measures things that physicians have to report such as diabetic measures, blood pressure control, and hospitalizations. Commissioner Miller stated he does not have a breakdown of individual MCO profits, only the margin range of 2 percent to 28 percent but could provide that information at a later date. Commissioner Miller stated that if Kentucky had been at the national average of profit over 2014 and 2015 that would have equaled approximately $1 billion over two years. Deputy Commissioner Cecil stated there is some fall back that happens with the minimum MLR and the risk corridor but it does not equal a $1 billion. Unfortunately, DMS does not get to the recoupment process for at least a year or after the end of a fiscal year. For instance, DMS just called back some money on behalf of the ACA for the federal government from the calendar year 2014, as a result of the risk corridor of the MCOs.


Senator Alvarado commented that he does not have issues with MCOs making profits but his perception as a provider is that the MCOs are not doing what they are supposed to be doing to get large profit ratios. He is concerned that Kentucky’s medical spend margin is approximately 5 percent lower than the national average. In regards to the lower administrative loss ratio, he hopes that Kentucky is very efficient at administration. However, he is concerned that providers are not getting paid and that providers may not have the adequate administration staff needed.


In response to questions from Senator Alvarado, Commissioner Miller stated DMS is tracking information regarding the five percent spending difference. DMS drove the change from an 85 percent MLR in previous contracts to the current 90 percent MLR. The MCOs on average will have to spend 90 cents of every premium dollar on medical related items. If the MCOs do not, DMS will claw back money so the MCOs profit cannot come just as a result of MLR. MCOs have modified operations to accommodate the changes. DMS cannot allow a continued high margin of profit to come in at the expense of care or lack thereof for Medicaid members. However, DMS and Medicaid are working in a partnership with five MCOs and must make sure that they have a reasonable amount of profit margin that is not excessive.


 Deputy Commissioner Cecil stated there is no specific language in the new contracts that prevent MCOs from using money for non-medical items like baby strollers or baby showers to incentivize people to sign up with specific MCOs. The issue has been brought to their attention for clarification as to whether or not those are expenses can be considered as administrative expenses. DMS wants to make sure that Kentucky tax payers are not paying for such items.


Deputy Commissioner Cecil stated that the credentialing process is not fully unified between the five MCOs. DMS is working on the provider portal that will allow for an opportunity for the enrollment process to be consistent and a lot quicker. The National Committee for Quality Assurance (NCQA) gives the MCOs the guidelines under which it must credential providers. DMS started to monitor closer if the MCOs were processing the provider credentialing applications within 90 days and would inquire if there were issues. Generally, applications not approved within 90 days were still awaiting additional information. DMS is trying to hold the MCOs more accountable to the 90 day timeframe.


Deputy Commissioner Cecil testified that DMS is monitoring provider payments and handling provider complaints if MCOs do not send payments in a timely manner. DMS follows its penalty process by sending an inquiry, sending a letter of concern, creating a corrective action plan, and if not resolved with the provider in a timely manner, then penalties could be assigned to the MCO. Prior to July 1, 2016 the Department of Insurance (DOI) handled prompt payment complaints.


In response to questions from Senator Seum, Commissioner Miller stated he is not aware if Kentucky is losing smaller, independent providers due to the MCOs slow pay processes but there have been complaints and concerns raised regarding this issue. He stated the smaller providers do not have the capital to sustain and carry the cash flow needed if payments are being sent out 90 days after the claim, if not denied. Deputy Commissioner Cecil stated that CMS required the new MCO contracts to clarify that the use of subcontractors outside of the United States is prohibited.


Provider Billing Issues

            Sarah Comley, Director of Central Billing Office, Clark Regional Medical Center, stated her billing office covers the Bourbon Community Hospital, Clark Regional Medical Center, Jackson Purchase Medical Center and Logan Memorial Hospital physician offices and ten rural clinics. The rural clinics are required to see Medicaid patients regardless whether the claims get paid or not. The total accounts receivable outstanding with the Kentucky Medicaid managed care plans are approximately $3.1 million. The unpaid claims date back to 2014 for services provided by the physician offices. Aetna Better Health of Kentucky and WellCare of Kentucky are responsible for two-thirds of the outstanding balance. The billing office has tried to resolve the payment issues through multiple phone conferences and emails with no resolutions.


            In addition, Kentucky Medicaid can take six to nine months to complete the credentialing process but they will make the provider effective date retroactive for purposes of claims payment that have accumulated. However, Kentucky MCOs do not follow the same process, the MCOs credentialing process does not begin until the Kentucky Medicaid credentialing is complete. After Kentucky Medicaid’s process is completed, there could be an additional three to six months before the MCOs credentialing process is complete and the provider effective date for the MCOs does not correspond with the Kentucky Medicaid effective date. Instead the MCOs assign an effective date for the month that a clean application was submitted therefore, for many providers there is the possibility of at least 6 months of unpaid services.


            In response to questions from Senator Alvarado, Ms. Comley stated the $3.1 million outstanding balance includes services from 40 to 50 physicians that work in rural health clinics. She stated that if a provider applied for credentialing April 1 and immediately started seeing patients that Kentucky Medicaid will pay retroactively for visits from April 1. However, the MCOs will not retroactively pay claims so providers are basically giving patients free service.


            In response to questions from Senator Raque Adams, Ms. Comley stated the delay in payment is in part due because the Medicare credentialing must happen first, which means a provider would have to do a change of ownership. Once that is complete, then the provider can proceed with Medicaid credentialing. For example, the billing office’s Medicaid effective date is April 2014 however they did not receive the letter stating that information until June 2015. The office is still working on getting paid for patients seen from April 2014 to June 2015. Typically claims are denied because of taxonomy, provider’s tax ID were not loaded or updated to a specific group, or other administrative type errors. The billing office schedules calls with WellCare of Kentucky twice a month and sends them provider information regularly to try to resolve the errors and have the claims paid.


            In response to questions from Senator Alvarado, Ms. Comley stated that once a provider completes their notes electronically, it shows up in a queue for the staff to submit the claim. The claim will go to Emdeon to be reviewed and checked for errors. If errors such as ID numbers, taxonomy, physicians not loaded, or other errors are detected the claim is sent back to the office to correct. If the claim is sent to the payer, the MCOs, it is processed for payment or denied. Denied payments are usually for taxonomy because different MCOs have varying requirements to allow for the payment of claims. Taxonomy are codes used for diagnosis, level of billing, and how the providers are credentialed. All the claim payment processes are completed electronically. MCOs have also denied claims initially because the provider is termed or not associated with a specific group of providers when in fact the provider is with the group of providers. The office must then go through several steps and agencies to prove that the provider is associated with the provider group, usually taking 10 to 15 days if not denied again. The billing office has a similar case in the Mayfield office that has been in transition for three months.


            In response to questions from Senator Seum, Ms. Comley stated the billing office has worked with LifePoint and has been to the DOI regarding issues with WellCare with no resolutions. She stated the $3.1 million is a moving target because the MCOs are not paying older claims but may pay new claims.


            In response to questions from Representative Benvenuti, Ms. Comley stated that claims waiting on credentialing approval were retroactively paid in fee-for-service Medicaid but now the claims are denied by the MCOs. She agreed with Representative Benvenuti that it was intended for the MCOs to follow a standard policy or at least to certain base line of policy and that is not the case because retroactive claims are not being paid. She agreed with Representative Benvenuti that if a healthcare provider makes an investment and hires a new practitioner, they do so now realizing that they will be paying the salary and expense of that practitioner for five to seven months. The provider will not be getting paid for the MCOs patient encounters, which in some counties make up the vast majority of their encounters until they are ultimately credentialed. She stated the MCOs maintain that billing offices can call and get a prior authorizations, for each claim individually, but that has not been successful.


            Representative Benvenuti commented that is unrealistic to expect a healthcare provider to essentially provide free-services for five to seven months.


            Senator Alvarado requested Commissioner Miller to return to testimony table. Senator Alvarado stated that he located information that states the five Medicaid MCOs percentage of profit margins for 2015 by provider: CoventryCares of Kentucky, better known as Aetna Better Health of Kentucky, at 25 percent, WellCare of Kentucky at 9 percent, Passport Health Plan at 2 percent, Anthem at 23 percent, and Humana at 10 percent. The average of the five MCOs at 11.6 percent. The information also stated the five Medicaid MCOs percentage of MLR for 2015 by provider: CoventryCares of Kentucky, better known as Aetna Better Health of Kentucky, at 65 percent, WellCare of Kentucky at 83 percent, Passport Health Plan at 91 percent, Anthem at 72 percent, and Humana at 81 percent. The average of the five MCOs at 11.6 percent.


In response to questions from Senator Alvarado, Commissioner Miller stated the information could be correct, that it may not be exact to what Milliman calculated but it does show the range for who is at the highest and lowest.


In response to questions from Senator Seum, Commissioner Miller stated that when the state contracts with a MCO, the MCO then contracts with a hospital. However, if the MCO refuses to adhere to the contract with the hospital it is not in breach of contract with the state and that is a problem.



            There being no further business, the meeting was adjourned at 2:28 PM.