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Just when you thought Kentucky’s Medicaid managed care crisis couldn’t get any crazier, it gets crazier.

Coventry Health Care, one of four Medicaid managed care organizations in the state, has notified physicians and pharmacies it will no longer be covering a drug called Suboxone.

Which is causing a three-way showdown between the insurer, doctors and pharmacies and state officials.

Suboxone is used in treating withdrawal from opiates, with narcotics addition a huge problem in the state.

As of Thursday evening, Frankfort attorney Anna Whites says she’s heard from four physicians, upset that Coventry has stopped covering the drug.

The docs are thinking about filing a legal complaint against the Bethesda, Md.-based insurer as well as asking the Kentucky Cabinet of Health and Family Services to intervene, Whites said.

“But we’d be thrilled to work out a deal with Coventry,” she said.

She noted this isn’t a financial issue for the doctors … the pharmacies are reimbursed by Medicaid for the drug, not physicians practices. But without Suboxone, health care providers can’t treat patients, she said.

The denial of Suboxone coverage came totally out of the blue, Whites says.

But Matthew Eyles, vice president  of public affairs and policy at Coventry headquarters in Bethesda, said that’s not his company’s position.

Coventry officials notified the Cabinet for Health and Family Services March 28 via an official letter that Coventry was cutting off coverage of the drug – more than six weeks ago.

Apparently, CHFS officials never notified care providers, Eyles said.

Coventry is bleeding money in Kentucky after becoming one of three publicly traded companies to “win” Medicaid managed care contracts. It cut coverage of the drug to align with state Medicaid policy, Eyles said.

“We will still cover certain categories (of members) including women under 21, pregnant women, and for postpartum treatment up to 90 days,” he said. “Coventry is covering drugs used in substance abuse treatment for all individuals in these categories, which is the vast majority of our members.”

Moreover, Coventry isn’t cutting off reimbursement retroactively, Eyles added. Members with current authorization — which typically lasts several months — will get covered for Suboxone until their authorization period ends. Patients whose authorization is set to expire in the next week can request an additional 15 days of authorization so they can work with their treating physician on a transition plan.

So, where are state officials in all this?

Well, state officials say they never okayed Coventry’s decision to cut off Suboxone reimbursement.

In a written statement, Jill Midkiff, CHFS director of communications, wrote:

The Cabinet believes that Coventry cannot take this unilateral action without the Cabinet’s approval and, in doing so, is in violation of its contract. The Cabinet will be sending a letter to Coventry to that effect. Coventry should continue to pay for Suboxone for its members who have been prescribed this medication.

Frankfort attorney Whites says all this does nothing to provide a solution for doctors denied using an important addiction treatment drug.

On the other, other hand, Coventry has other issues, currently battling with hospital systems including Lexington-based Appalachian Regional Healthcare and Louisville-based Baptist Health Care after the state rushed a switchover last November to managed care organizations from fee-for-services structure.

The for-profit health insurer has charged it has taken on a disproportionately high percentage of the highest-risk patients, making it unlikely it can make a profit.

Suboxone represents “a very small piece” of the losses Coventry has incurred in Kentucky, Eyles said. “It’s been a challenge to say the least.”

Coventry has asked both state officials and hospital executives to change the original Medicaid managed care contracts.

And when we say “change,” we mean increase the amount per patient per month Coventry receives for Medicaid members, which currently is about $436, times about 100,000 members covered.

While all this may appear to be the insurers against care providers, insiders say the problems have been caused by the state.

And in an unprecedented letter, Timothy Nolan, Coventry executive vice president in Kentucky, wrote ARH CEO Jerry Haynes on April 19 that Kentucky’s mounting Medicaid services crisis only happened because of the Beshear Administrations’ ineptitude and conniving.

Financial analysts are predicting the Kentucky piece of Coventry’s business could lose big for years to come: The KY rollout headwinds proved worse than expected. Our new forecasts now incorporate this business remaining a drag in 2012 and beyond.

Insiders tell Insider Louisville if the losses grow too painful, Coventry could walk away. The insurer posted $25 million performance bonds as part of the contract process back in July, 2011. But if losses threaten to far exceed that, forfiture could be the quick way out.

 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, Gov. Steve 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.