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

Resolving the lawsuit between the Cabinet for Health and Family Services “probably will take several weeks and months,” Williams said in an earnings call Tuesday evening.

“Given (Passport’s) long history of working collaboratively to serve the Medicaid population, we’re hopeful that Passport and the state Medicaid agency can work out a reasonable compromise on rates that works for both parties,” he said.

Frank Williams

Passport, one of five organizations in Kentucky that manage Medicaid benefits, has said that the new way the state distributes Medicaid dollars has severely reduced the nonprofit’s revenue and could push it into insolvency as early as next month. The organization’s leaders have said that losses last year were near $70 million and this year are projected to reach about $144 million.

On Feb. 15, Passport filed a lawsuit 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, is the primary revenue source for Evolent, an Arlington, Va.-based health care consulting company.

Evolent said Tuesday that uncertainty related to Passport’s lawsuit and possible insolvency “could result in significantly reduced fees or a significant customer loss in 2019.”

Passport has paid Evolent about $400 million in the last five years for services including claims processing and prescription drug management. Evolent officials said that while they are projecting those fees to decline this year, they still expect Passport to pay the company about $90 million.

The company reported a fourth-quarter loss of $17.5 million, 27 percent worse than the loss from the fourth quarter of 2017, though results a year ago were skewed by a tax gain of more than $4.6 million. Before income taxes, income fell 4.8 percent.

Evolent’s shares fell sharply in after-hours trading Tuesday. And shortly before 11 a.m. Wednesday, shares traded at about $14.15, down 3.5 percent. Since late September, Evolent’s share price has fallen more than 50 percent.

Several analysts asked Evolent executives in Tuesday’s earnings call about Passport’s troubles.

“So, on Passport, can you give us any of your views on maybe likely scenarios that are going to happen?” asked Sean Weiland, managing director and a senior research analyst at Piper Jaffray.

“I would say it’s pretty hard to speculate on the outcome,” Williams answered. “If you think about it, there’s a lot of moving pieces as they work through the process probably will take several weeks and months before it’s settled.”

Stephanie Demko, senior health care analyst with Citigroup, asked whether Evolent, given Passport’s importance, might be interested in “acquiring some of their assets, if not the whole business.”

Williams said, “I don’t think we’ve thought about acquiring a full Medicaid plan.” Instead, he said, the company is focused on supporting Passport’s operations.

Officials from Passport and the state are scheduled to be in Franklin Circuit Court on Tuesday on a motion by Passport to force the state to distribute Medicaid dollars as it once did before it changed distribution rates. The move is a bid by Passport to avert insolvency as the lawsuit makes its way through court.

Through the end of this week, Passport projected that its losses for 2019 so far would exceed $22 million.

Uncertainties about its future prompted Passport on Friday to announce that it was halting construction on its new $87 million headquarters at 18th Street and West Broadway. Community leaders have said they hoped the project would stimulate the economy and inhibit further social degradation in an underserved part of the city. Evolent was to be the project’s primary tenant.