Passport Health slashes costs to reduce insolvency risk


Passport Health Plan has implemented “drastic and potentially devastating cost-cutting measures” to avert an insolvency and state meddling, the nonprofit said Friday afternoon.

Passport said in a news release that its leaders have cut “tens of millions of dollars from its budget” by taking steps including lowering payments to health care providers, restructuring its arrangement with the consulting company Evolent Health and cutting administrative overhead, in part by leaving vacant positions unfilled.

“We had hoped to avoid these drastic and potentially devastating cost-cutting measures, but the state’s rate reduction followed by a lack of cooperation from the Cabinet (for Health and Family Services) and (Department for Medicaid Services), have left us no choice,” Passport CEO Mark Carter said in the release.

Mark Carter

“While these steps have the potential to negatively impact our community and the care we coordinate for our members, we have a responsibility to do everything we can to keep Passport in business,” he said. “We remain willing to compromise and be a good partner to the state, just as we’ve been throughout our 20-year history.”

A crucial Tuesday court hearing related to the lawsuit Passport has filed against the state has been canceled, Passport said, though the lawsuit has not been withdrawn.

“The expense reductions remove the imminent threat to Passport’s existence, but do not alleviate the need for” more Medicaid dollars from the state, the nonprofit said.

Passport also said that it took the steps to restrict the state’s ability to interfere in its affairs.

“Passport leaders believe the painful cost-cutting measures will limit the extent to which the state Department of Insurance … exerts oversight or intervenes in the plan’s operations,” the nonprofit said.

Passport, one of five organizations in Kentucky that manage Medicaid benefits, had filed a lawsuit Feb. 15 that asserted that the state had breached its contract with the nonprofit by unilaterally changing the way that it distributes Medicaid dollars.

The nonprofit, which serves about 315,000 beneficiaries, including about 209,000 in the Louisville area, had said that the new disbursement rates, which the state instituted in July and which benefited its four for-profit competitors, could push Passport into insolvency as early as this month.

Passport’s leaders have said that the nonprofit has lost nearly $70 million last year and they were projecting a loss of $144 million this year.

Adam Meier, secretary of the Cabinet for Health and Family Services, in an emailed statement to Insider blasted Passport for the “lack of veracity” the nonprofit was exercising in its dealings with the public.

“In reality,” Meier said, “the withdrawal of Passport’s motion for a preliminary injunction appears to be an admission that its financial plight never was as bleak as it claimed in the lawsuit filed against the Cabinet.”

While the state’s disbursement changes have played a role in Passport’s fiscal troubles, an analysis by Insider of Internal Revenue Service and Securities and Exchange Commission records indicate that the nonprofit’s finances also have been undermined by about $400 million in non-employee management fees to Evolent, based in Arlington, Va.

Frank Williams

Evolent CEO Frank Williams said this week that he hopes the state and Passport can reach a compromise that prevents the nonprofit’s insolvency — though he warned that the outcome was all but certain.

Passport and Evolent could not be reached immediately Friday afternoon to say how much money the restructuring of their arrangement would save the nonprofit. Evolent said this week that it expected Passport’s fees to decline this year, though Evolent leaders still expected the nonprofit to pay the company about $90 million.

This post has been updated with comments from Secretary Meier.