The battle between Medicaid providers and Medicaid managed care organizations now is in state and federal courts.

In Franklin Circuit Court, Lexington-based Appalachian Regional Healthcare is suing Kentucky Spirit Health Plan, operated by St. Louis-based Centene Corp., and the state of Kentucky.

ARH officials claim Kentucky Spirit has delayed paying $5.9 million in unchallenged services as of March 19.

“Eighty-three percent of those claims have been submitted to Kentucky Spirit for payment for more than 30  days, ” the complaint states.

At the same time the insurer is dragging its feet paying, the ARH suit states, Kentucky Spirit is collecting millions monthly in capitated payment from Kentucky Medicaid Assistance Program.

ARH also is claiming that Kentucky Spirit underpays for services, as well as renewing charges that state Medicaid reimbursment methodology is “grossly inadequate.”

ARH is suing Coventry Cares, based in Bethesda, Md., in federal court. Insider Louisville is waiting for a copy of that complaint.

Suits only represent one side of the issue. Neither Centene nor state attorneys had filed a reply to the ARH suit, which was filed April 12.

Deanne Lane, Centene vice president of media and community affairs, did not return calls for comment.

ARH’s suit in Franklin Circuit Court references Kentucky and federal payment rules and requirements for insurers.

Federal law requires insurers pay 90 percent of “clean” claims – undisputed claims requiring no further approval – within 30 days, and 99 percent paid within 90 days. The ARH suit adds that state law is even stricter, with Kentucky requiring all “clean” claims be paid within 30 days.

In April, 2011, Centene, Coventry and Tampa-based WellCare Health Plan were winning bidders for about $6 billion in annual Medicaid managed care contracts for about 800,000 Medicaid members as Kentucky. Passport Health Plan, based in Louisville, already was the managed care organization for Jefferson County and the surrounding area. No complaints have been made against Passport.

The suits against Centene/Kentucky Spirit and Coventry come after months of complaints and hearings related to problems with the five-month old implentation of managed care in Kentucky, a move the Beshear administration touted as saving the state millions. (Medicaid care is funded 80 percent by the federal goverment, 20 percent by states.)

Since Kentucky switched to managed care organizations from fees-for services last November, the Lexington Herald-Leader has reported in detail on problems Medicaid members are having getting care, as well as on the problems providers are having getting paid by the managed-care insurers.

ARH operates eight acute care hospitals and a number of medical practices and medical centers in Eastern Kentucky, is one of dozens of hospitals, practices, pharmacies and other providers claiming the managed care insurers have failed to pay providers as well as failed to approve legitimate procedures and medicines.

In February, according to the Herald-Leader, ARH officials testified in state senate hearings about problems getting the managed care organizations to approve ordinary procedures such as deliveries, with hospital staff waiting for approval long after mothers and babies had gone home.

The problem is, in the managed care system, health care providers must get preauthorization to get paid in a system designed to deny unneeded services.

In addition, in February, Insider Louisville reported thousdands of Medicaid-covered patients dumped Kentucky Spirit/Centene after they figured out Kentucky Spirit’s cut-rate provider network means their doctors aren’t included in their coverage.

Insider Louisville sources said then that about 40,000 Medicaid members assigned to Kentucky Spirit/Centene bolted during an open enrollment period because they noticed their local docs or pharmacies AREN’T part of their plan.

One stock analyst who covers Centene said Centene officials confirmed 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.

More as we know more.

About Appalachian Regional Healthcare:  Appalachian Regional Healthcare is a not-for-profit health system serving 350,000 residents across Eastern Kentucky and Southern West Virginia. Operating ten hospitals, multi-specialty physician practices, home health agencies, HomeCare Stores and retail pharmacies, ARH is the largest provider of care and single largest employer in southeastern Kentucky and the third largest private employer in southern West Virginia. The ARH system employs nearly 5,000 employees and has a network of more than 600 active and courtesy medical staff members representing various specialties.

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, 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.