Kentucky Spirit appeals court ruling that it can't quit Kentucky early

By Molly Burchett
Kentucky Health News

Centene Corp.
 announced Monday that it has appealed the Franklin Circuit Court ruling in May that said its managed care subsidiary, Kentucky Spirit, cannot terminate its contract with the state a year early. The company said it plans to be out of the state by September. Click here to view the appeal.

This move represents the continuation of a long, tumultuous relationship between Kentucky's Cabinet for Health and Family Services and Kentucky Spirit, one of three companies hired by the state in November 2011 to manage health care for more than 540,000 Medicaid recipients.

First, Kentucky Spirit announced in October 2012 that it was pulling out of Kentucky's managed-care system because it was losing money, and the company also filed a formal dispute with the cabinet for damages incurred under the contract. Centene said in its annual report that Medicaid beneficiaries were retroactively assigned to the plan and non-inpatient claims receipts were higher than anticipated, leading to a $38.8 million loss in the second quarter of 2012.

"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, Centene’s executive vice president of operations, told St. Louis Business Journal in October of last year. In response CHFS Secretary Audrey Haynes said, “I am deeply frustrated that this publicly traded, Fortune 500 company has chosen to put profits above people and will not honor the terms of its contract."

Next, Franklin Circuit Judge Thomas Wingate ruled that the company could face fines if it terminates its three-year contract before expiration in July 2014, and Centene said it would consider an appeal. Now, as Michael Neirdorff told investors on Monday, Centene is appealing that decision, reports Samantha Liss of St. Louis Business Journal.

“After a few months of operations, it became clear that our financial performance was much different than our projections based upon the data provided by the Commonwealth during the bid process. Our analysis concluded that inaccurate and incomplete data led to actuarially unsound rates for our health plan,” said Nerdorff at Monday's Investor Day event.

All managed-care companies received the same information, and Centene made the lowest bid. Kentucky originally signed a three-year contract with Centene in the summer of 2011, and the company was estimated to service about 180,000 Medicaid beneficiaries, generating an annual revenue of $700 million. Instead, it serves 140,000 recipients and lost $38.8 in one quarter.

However, Centene's $38.8 million quarterly loss in 2012 came alongside $2.2 billion in revenue, and the company's publicly-traded shares surged 11 percent after it announced that it was leaving the state. In April of this year, Centene raised its full-year forecast for premium and service revenue to $10.1 billion to $10.4 billion, Reuters reports.
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