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State court upholds challenge to Medicaid contracts

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Pennsylvania officials may be going back to the drawing board in their efforts to bring on new insurers for more than 2.3 million Medicaid beneficiaries around the state.

A state court this week ruled in favor of insurers that challenged the process for awarding contracts, which could mean the state has to start over again.

If it does, it would be the third time since 2015 the state has issued requests for proposals (RFP) from insurers for its Medicaid managed care program, known as HealthChoices. The contracts at issue cover the provision of physical health services. Separate insurers cover behavioral health and long-term care.

At stake are billions of dollars in Medicaid spending

The Department of Human Services, which administers the state Medicaid program and oversaw the contracting process, has been mum on its next steps.

"The Department of Human Services (DHS) is committed to providing the highest quality health care available to the individuals we serve across the commonwealth," the department said in an emailed statement. "DHS is currently reviewing the decision."

The decisions came down from Commonwealth Court on Tuesday and Wednesday in cases brought by Aetna, United Healthcare and Vista Health Plan Inc., which operated through affiliated subcontractor AmeriHealth Caritas and Keystone First Health Plan, according to court documents

The three insurers challenged the bid process, focusing in part on a December 2016 meeting between state officials and executives from Centene Corp., a Medicaid managed care insurer that ultimately won a contract.

The department rejected the protests. But they were upheld by the court, which said the December meeting violated the state’s procurement code.

As a result of the violation, the court wrote, "the remedy the court shall order is limited to canceling the solicitation or award and declaring void any resulting contract."

In such situations, the bidding process typically starts over again, said Ted Adler, a partner at Camp Hill-based law firm Reager & Adler. He was not familiar with the ruling in the Medicaid bidding case but was speaking in general about contract disputes.

"That’s typically what’s done when a bid protest is upheld in a court," Adler said. He represented an insurer in an earlier dispute over the same contracts

United Healthcare, which stood to lose customers, praised the ruling.

"We are pleased with the Commonwealth Court’s decision and look forward to continuing to serve the more than 1 million Pennsylvanians who have entrusted us with their health care needs," the company said in a statement.

Centene, which does business in the commonwealth as Pennsylvania Health & Wellness, said it was disappointed but was continuing to work under other state contracts. It is a Medicaid contractor in southwestern Pennsylvania under the program for the elderly and people with disabilities, known as Community HealthChoices.

"Pennsylvania Health and Wellness is committed to transforming the health of our community, one person at a time" it said in an emailed statement. "We have a solid track record of bringing healthcare innovation and high quality care through a local approach. The response to the HealthChoices Request for Proposal that we submitted would have brought value to members while moving the Commonwealth forward toward Value Based Purchasing."

Medicaid recipients, meanwhile, are unlikely to see much impact, said Laval Miller-Wilson, executive director of the Pennsylvania Health Law Project, a nonprofit law firm that represents Medicaid beneficiaries. Based in Philadelphia, it has offices in Harrisburg and Pittsburgh.

Nonetheless, he said, the legal challenges are frustrating in that they hold up efforts to bring new insurers into Pennsylvania’s Medicaid program, which he described as well-managed.

"That’s not a judgement about United’s challenge or Aetna’s challenge or existing insurance companies," he said. "It’s just that it is, I think, a sign of good systems when you evaluate and make some choices about who stays in and who needs to leave. We haven’t really been able to get to final decisions on that for about three years now."

Under the state’s Medicaid program, known as Medical Assistance, the state is carved into five regions, with managed care insurers selected to serve beneficiaries in each region. Harrisburg, Lancaster and York are in the Lehigh Capital region, which covers 13 counties: Adams, Berks, Cumberland, Dauphin, Franklin, Fulton, Huntingdon, Lancaster, Lebanon, Lehigh, Northampton, Perry and York.

The Lehigh Capital region is currently served by Aetna and United Healthcare, as well as AmeriHealth Caritas Pennsylvania, Gateway Health Plan Inc. and UPMC for You, an affiliate of Pittsburgh-based UPMC Health Plan. As of February, they enrolled about 504,000 members in the region, according to the state Department of Human Services

The existing insurers were supposed to be replaced starting in 2017 with a new crop of insurers, with similar changes taking place in the other four regions. But the bid protests and legal challenges delayed the process. An initial RFP went out in September 2015, followed by a revised version in 2016.

Aetna and United Healthcare did not win contracts under that second RFP. But others did, including St. Louis-based Centene, whose meeting with state officials led to protests. Another newcomer would have been Philadelphia-based Health Partners Plans.

A spokesperson for Health Partners said Tuesday the company was monitoring the situation and awaiting guidance from the state. It provides coverage in southeastern Pennsylvania and had been gearing up to provide coverage in Lehigh Capital.

Gov. Tom Wolf announced April 5 that Centene was planning to spend $20 million to buy land in Blair County and build a 53,300-square-foot facility to serve as a national inbound customers claims center. As part of the project, the company also said it would hire about 300 people over the next four years.

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Joel Berg

Joel Berg

Joel Berg is editor of the Central Penn Business Journal. Born in Philadelphia, raised in Northern Virginia and now living in York, he's a graduate of Franklin & Marshall College and the University of Maryland. Have a question or story idea? Email him at jberg@cpbj.com. Follow him on Twitter, @JoelBYorkPa.

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