A hearing that could determine the fate of Passport Health Plan has been postponed until March 5.

Passport, one of five organizations in Kentucky that manage Medicaid benefits, had asked a judge to force the state to distribute Medicaid dollars as it once did before it changed distribution rates. The move was seen as a bid by Passport to avert insolvency as a lawsuit between the parties is making its way through court.

A hearing on that motion for a temporary injunction had been scheduled to take place Tuesday in Franklin Circuit Court. Passport said in a news release Monday that a judge has postponed the hearing at the request of attorneys for the state. 

The state told Insider via email that it was not consulted on the initial hearing date and requested the delay in part to coordinate travel and availability for national, independent actuaries.

Mark Carter

Passport CEO Mark Carter warned in the news release that swift resolution is critical to the nonprofit’s survival.

“While we appreciate the court’s willingness to give this matter the fair and thorough consideration it deserves, time is of the essence to ensure that Passport remains viable for the long-term future,” he said.

The organization filed a lawsuit Feb. 15 that asserted that the state, the Cabinet for Health and Family Services and its Secretary Adam Meier had breached their contract with Passport, acted in bad faith and violated the state constitution by unilaterally changing the way that they distribute 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 next month.

According to the lawsuit, Passport lost $65.5 million last year, lowering its net worth by more than 30 percent. Passport projects that it will continue to lose about $4 million per week, which will reduce its capital below statutorily required thresholds by March 31. Passport said that unless the state changes its distribution rates, it will become insolvent and, most likely, its assets will be liquidated.

Given that a judgment in the lawsuit would occur after Passport’s projected insolvency, the nonprofit said that until the case is decided, the court should order the state to distribute Medicaid dollars the way it did before it “arbitrarily, retroactively and in violation of the parties’ contract began paying rates that it knows will cause the imminent demise of Passport as an insurance business.”

Reverting to the previous distribution model could mean an additional tens of millions of dollars for Passport, though Carter said Monday that a “relatively modest amount of state funding would keep Passport in business, preventing care disruption for our members and the loss of hundreds of good-paying jobs.”

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.

While disbursement rates are contributing to Passport’s fiscal problems, an analysis by Insider, based on Internal Revenue Service records and Securities and Exchange Commission filings, showed that the nonprofit’s finances also were being undermined by hundreds of millions of dollars in management fees to Arlington, Va.-based health care consulting company Evolent Health.

This post was updated to include a statement from the Cabinet for Health and Family Services.