Medicaid managed care plan draws fire for lavish spending

A report by Kentucky's auditor finds officials at Passport Health Plan spent hundreds of thousands of dollars on limousines, meals, lobbying and salary bonuses.

By Doug Trapp — Posted Nov. 24, 2010

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Directors of Kentucky's only Medicaid managed care plan spent hundreds of thousands of dollars on limousines, expensive meals, lobbying and bonuses from 2007 to 2009, according to a report released Nov. 9 by Kentucky Auditor of Public Accounts Crit Luallen.

The 273-page audit of the Passport Health Plan called for tighter controls on the plan's spending on travel, lobbying and executive salaries, among other areas. The audit, which was requested by a Kentucky state legislator, concluded that Passport leaders spent:

  • Nearly $230,000 on travel, including luxury hotels and limousine services. Auditors found almost $73,000 spent on meals, with a high percentage of meals costing more than $200.
  • About $1 million on lobbying and public relations, despite language in Passport's articles of incorporation and contract language that may ban it from lobbying.
  • $242,000 for employee bonuses. One vice president's salary grew by 33% from 2007 to 2009.

Passport is the only health plan model of its type in the country without competition, Luallen said. Passport's fiscal year 2010 contract -- the state's largest -- is worth $793 million. The plan had $77 million more in reserves at the end of 2009 than insurance regulations require, she said.

"As Passport's excessive revenues grew, it increased spending on lobbying, public relations, travel and salaries, and provided financial benefits that favored its original investors over other area providers," Luallen said in a statement.

The audit's findings prompted Kentucky Gov. Steve Beshear to call for greater oversight. He directed Janie Miller, secretary of the Kentucky Cabinet for Health and Family Services -- the state's Medicaid agency -- and other state leaders to develop a plan with Passport directors to immediately correct practices addressed in the audit and tighten program controls.

"Funding for state agencies, in particular Medicaid, is scarce. Any waste of those dollars is completely unacceptable and will not be tolerated," Beshear said in a statement.

Passport is the operating name of nonprofit University Health Care of Louisville, Ky. Passport is administered by AmeriHealth Mercy, a multistate Medicaid managed care organization headquartered in Philadelphia. The plan has about 164,000 enrollees in 16 counties, including the city of Louisville, said Kentucky CHFS spokeswoman Vikki Y. Franklin.

Larry N. Cook, MD, chair and CEO of University Health Care, wrote in a Nov. 2 letter to Luallen that the plan expects to reduce its reliance on consultants, but a certain number are necessary to administer the plan and develop innovations. Passport also will review staff compensation.

Dr. Cook said business expense forms do not always provide all the details needed to understand the nature of the spending. For example, a sedan might be rented from a limousine company, he said.

Dr. Cook noted that Passport has successfully managed health care costs. Medicaid spending on Passport enrollees by 2008 was $203 million less than projected in the absence of the plan, he said. Passport expects to save an additional $133 million between November 2008 and October 2013. Luallen said quantifying Passport's savings is difficult because no institution has compared Passport's cost of providing services with the cost of fee-for-service Medicaid.

Passport also has received high quality rankings. On Oct. 18, the National Committee for Quality Assurance named it the 15th-best Medicaid health plan out of the 104 plans it ranked in 2010. The committee is a private nonprofit established to improve health care quality. Luallen said the audit did not address health plan quality or delivery of medical services.

The Kentucky Medical Assn. could not comment by this article's deadline because leaders were still reviewing the audit, said KMA spokesman Marty White. KMA does not have a policy on Medicaid managed care plans.

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