The Closing Bell: Passport appeals Medicaid reimbursement rates; Schnatter wins access to Papa John’s documents; shutdown hurting automakers; and more

Welcome to The Closing Bell. This is your last stop for biz scoops and big news before the weekend — a roundup of stories that can’t wait till Monday.

Passport files appeal with state over reimbursement rates

The future of Passport Health Plan, which is building a new headquarters and health-and-wellness campus in west Louisville, appears to be at risk. | Photo by Boris Ladwig

Passport Health Plan is involved in a dispute with the state over recent reductions in reimbursement rates that the local nonprofit says are threatening “its solvency and continued existence.”

Passport, one of the managed care organizations that administers Medicaid benefits in Kentucky, said it has filed an appeal with the Kentucky Cabinet for Health and Family Services “to ensure continued services to our 310,000 members and 26,000-plus physician partners.”

Passport, which is building a high-profile health-and-wellness campus and headquarters at 18th Street and West Broadway, explained that “recent reductions in reimbursement rates that unfairly impact the Greater Louisville region have forced us to operate at a financial loss for months. This is simply unsustainable, putting in jeopardy our ability to serve members, pay providers, and maintain more than 700 local jobs.”

The dispute involves the Medicaid managed care contract between the state — on behalf of the Department for Medicaid Services — and Passport for the state fiscal year 2019, effective July 1, 2018, through June 30, 2019.

“The Secretary (Adam Meier) is currently reviewing the appeal filed by Passport and will do so in good faith just as he and his predecessors have reviewed previous issues they have raised,” a statement from the Cabinet says.

Rates payable to managed care organizations changed after the U.S. Centers for Medicare & Medicaid Services asked Kentucky to simplify its rate structure, according to the state. Kentucky’s regional restructuring resulted in “reduced rates paid to Passport while increasing the rates paid to the other MCOs,” according to Passport’s appeal.

The Cabinet said, “It is true that Passport is disproportionately impacted by Region A rates; however, that impact flows primarily from Passport’s own data and historical trends due to their market share within that region.”

In Passport’s appeal, obtained through an Open Records Request, the nonprofit wrote that “because of the Contract’s arbitrary rates, Passport projects significant financial losses which will jeopardize its fiscal solvency and continued existence.” It also says the contract infringes upon Passport’s constitutional rights and that the wrong process was used for renegotiating the rate changes.

The appeal also indicates that Passport is worried about possibly losing its license to operate as a health maintenance organization.

“An annual loss of $60 million in calendar year 2018, followed by an additional annual loss of $144 million in 2019, both such losses resulting directly from the Contract’s untenable and unreasonable current capitation rates, would cause Passport’s statutory net worth to fall below its underwriting goal and would cause Passport to fail to meet its RBC (risk-based capital) requirement,” the document says. “… Passport’s operations would then potentially be subject to the control of a court-appointed rehabilitator and/or liquidator.”

The state noted that the rates were developed by an independent actuary and approved by the U.S. Centers for Medicare & Medicaid Services.

“We have met with Passport on several occasions and have asked for data in support of their claims that our rates are not sound — however, nothing has been provided in that regard,” the state said. “Instead, Passport has raised several issues in our discussions with them, such as the investment that it is making in the west end of Louisville, which cannot be incorporated into the rate-setting process under CMS guidelines irrespective of the merits of these issues.”

Jean Porter, a spokeswoman for Mayor Greg Fischer said, “We work closely with Passport, and they do great work in our city and across the state. They are a national model, and these proposed cuts would ultimately result in cuts in services to our residents. We know they are working to resolve this impasse, and we hope that happens quickly.” —Darla Carter

John Schnatter wins access to Papa John’s documents

John Schnatter | Courtesy of Papa John’s

Papa John’s founder John Schnatter came out victorious in Delaware Court earlier this week when a judge ruled that the company’s current leadership must turn over documents requested by Schnatter.

“We are pleased that Mr. Schnatter was vindicated today by the Delaware Court of Chancery, which ruled that Papa John’s must give Mr. Schnatter numerous documents it has wrongly withheld from him for months,” attorney Garland A. Kelley said in a statement published on Schnatter’s website, “Mr. Schnatter sought access to those documents after the unexplained and heavy-handed behavior of various Company insiders — including members of the Board and some in management — who may have placed their own self-interests ahead of the best interests of the Company, its shareholders, employees and franchisees.”

In the ruling, Chancellor Andre G. Bouchard wrote that the company did not prove that the inspection of its books and other documents is for “an improper purpose.”

“Given his unique role as the Company’s longstanding public spokesman, Schnatter’s concerns that the Company made no effort to defend him in response to the controversies arising from his comments about the NFL and the publication of the Forbes Article, and that the Company instead appeared intent on abruptly severing ties with him, are relevant concerns that any director, including Schnatter, would have about the Company’s management and oversight,” the judge wrote.

Bouchard ruled that Papa John’s must hand over documents and communications, including text messages on personal devices and emails, related to Schnatter’s firing.

Schnatter, who owns a roughly 30 percent stake in Papa John’s, was ousted last summer after Forbes reported that Schnatter used a racial slur. He has since been fighting the company, making allegations of mismanagement, and the company has been fighting to recover from a sharp decline in revenue and negative publicity surrounding its battle with Schnatter.

Papa John’s stock closed Thursday up 1.8 percent, at $42.95. —Caitlin Bowling

Automakers say tariffs, shutdown hurting them

Automakers this week asked President Donald Trump and U.S. Congress to end the government shutdown and resolve trade disputes because the uncertainty is decreasing sales and increasing costs and vehicle prices.

According to Reuters, FiatChrysler Automobiles NV CEO Mike Manley said at the Detroit auto show that “U.S. metals tariffs will raise the automaker’s 2019 costs by $300 million to $350 million, or about $135 to $160 a vehicle, based on the automaker’s 2018 U.S. sales.”

Ford previously has said that metals tariffs were projected to cost the automaker $1 billion in 2018 and 2019 — though it was unclear how much of that the company was recouping from customers through higher vehicle prices.

Meanwhile, Manley also said this week that the government shutdown was delaying certification of one of FiatChrysler’s new pickup models.

Ford Executive Chairman Bill Ford Jr. told Reuters, “There’s a lot of balls in the air right now that are unresolved. Certainty is something we really desire because of our product lead times. We don’t have that right now.”

Courtesy of Ford Motor Co.

Ford Motor Co. this week also told investors that as U.S. consumers increasingly are steering away from cars and toward SUVs and trucks, the automaker is shifting how it allocates its resources. In its previous plan for North America, Ford expected dedicating roughly equal shares on SUVs, trucks and cars through 2020, but its new plan calls for 52 percent of spending on SUVs, 42 percent on trucks and 6 percent on cars.

That plan should be good news for Louisville’s two manufacturing plants, where Ford primarily makes the Super Duty truck and Escape SUV.
However, Ford also said this week that fourth-quarter sales would be coming in below expectations, sending shares down 4.5 percent on Wednesday. —Boris Ladwig

Norton Children’s Hospital opens new unit

Courtesy of Norton Healthcare

Norton Children’s Hospital celebrated the opening this week of a $12 million unit for sick and injured children.

The 24-bed unit, housed on the sixth floor, serves children with respiratory, gastrointestinal and neurological diseases as well as patients recovering from various types of surgery.

“This new medical/surgical unit will make a significant difference to our patients and their families,” Norton Healthcare’s chief development officer, Lynnie Meyer, said in a news release.

The 31,000-square-foot unit is part of a $78.3 million effort to renovate several parts of the downtown Louisville hospital and clears the way for construction of the Jennifer Lawrence Cardiac Intensive Care Unit to start next month.

Support from the Children’s Hospital Foundation and the community and a gift from the WHAS Crusade for Children helped to make the completed unit possible.

Features include private rooms, a teen entertainment room, a toddler playroom and small, kitchen-like areas, where families can snack and store food.

“We’ve designed this unit to include family-oriented amenities so that patients can focus on healing,” Emmett C. Ramser, the hospital’s chief administrative officer, said in a news release. —Darla Carter

Old Forester to release a rye whisky, first new mash bill in brand’s 150 years

Spice bomb | Courtesy of Old Forester

It’s time to make some room on your bar shelf because Old Forester is coming out with its take on rye whisky, which marks the brand’s first new mash bill in 150 years. The new product will be released Feb. 1 for a very affordable $22.99.

“Our signature bourbon recipe has done this brand proud through Prohibition, world wars and changing consumer palates,” said Old Forester President Campbell Brown in a news release. “This January, we will create a new tradition with a Kentucky Straight Rye that will capture the hearts and excite the palates of experienced rye drinkers and curious whisky enthusiasts alike.”

The whisky was created by Master Distiller Chris Morris and Master Taster Jackie Zykan and was inspired by an old recipe for Normandy rye, a brand Brown-Forman acquired in 1940, according to the release.

And for those wondering if it has any relation with Woodford Reserve’s rye whisky, it does not. The two have completely separate mash bills, Old Forester being 65 percent rye, 20 percent barley and 15 percent corn.

The whisky will be bottled at a respectable 100 proof.

Insider received a sample of the new whisky, and our immediate reaction was “spice bomb.” It has the peppery, textured notes of Old Forester, yet it packs a punch that’ll stand up well in standard cocktails like the Old Fashioned and Manhattan. We also tasted some bitter chocolate and spicy cinnamon notes as well, making it just as likely it’ll be enjoyed neat. —Sara Havens

Ballotin Whiskey rolls out a new flavor: Chocolate Cherry Whiskey Cream (!)

Cherry bomb | Photo by Sara Havens

If a spicy rye isn’t your cup of tea, then perhaps you’ll enjoy this new release from the folks of Ballotin Chocolate Whiskey — the Chocolate Cherry Whiskey Cream. This is the fifth flavor they’ve released, and it also marks the first cream-based liqueur for the local company.

The product is a blend of craft chocolate, cream and whiskey, and it’s bottled at 34 proof. As a liqueur, it can be added to a variety of cocktails — a news release contained four recipes for a Black Cherry Russian, a Cherry Bomb, a Cherry Chocolatini and a Grasshopper Cream — or just sipped neat.

In fact, when a sample was shared with the Insider newsroom, a majority of the tasters said they’d enjoy sipping this as a dessert. The cherry flavor is kept to a subtle note, as the chocolate and whiskey are the clear stars of this show. It could also be a fine addition to a cup of coffee or even a Coke.

Chocolate Cherry Whiskey Cream joins Ballotin’s family of chocolate whiskeys, including Bourbon Ball, Caramel Turtle, Chocolate Mint and Original Chocolate. It should hit area liquor stores by Valentine’s Day, and it retails for $19.99. —Sara Havens

In Brief

Ben Ruiz, the former CEO of Adhawks Advertising and Public Relations Agency, has joined millennial-owned and minority-owned marketing agency Haaylo Media. Ruiz has worked with clients including GE, Toyota, Humana, Brown-Forman, Fifth Third Bank and other prominent brands.

Dean Dorton Allen Ford has added Tom Buetow and David Dick, formerly of CPA and advisory firm BLD, PLLC. Buetow, Dick and BLD’s dozen other employees joined Dean Dorton effective Jan. 1.

Humana has named Dr. William Shrank its new chief medical officer. The appointment is effective April 1. Shrank will succeed Dr. Roy A. Beveridge, who is retiring.