The acquisition is taking place in
the aftermath of a heated Medicaid managed care contract dispute in which
Passport Health Plan lost its managed care contract.
July 22,
2020 - Molina Healthcare (Molina) will acquire the Passport Health
Plan (Passport) Medicaid and dual special needs plan, Molina announced.
The healthcare
companies have agreed to a price of around $20 million for the purchase. In
addition to the initial cash transaction, Molina may make an additional payment
in 2021 based on Molina’s Kentucky health plan performance during 2020 open
enrollment.
“Acquiring the
operations as well as transferring over employees of Passport Health Plan
provide us with a well-known brand in Kentucky and position us well to compete
even more effectively in the market,” Joe Zubretsky, president and chief
executive officer of Molina, said in Molina’s press release on
the acquisition.
“We look forward to
being able to achieve a major objective of this transaction, which is the
continuity of care for Passport’s members.”
By mentioning
continuity of care, Zubretsky alluded to the major upset of the Kentucky
Medicaid managed care contracts which were awarded earlier this year.
Passport lost its
Medicaid managed care contract for 2021 after offering Medicaid plans in
Kentucky for 20 years. According to a press release from late May 2020,
Passport planned to
protest the contract decision.
The payer is also
headquartered in Kentucky along with its owners—Evolent Health, the University
of Louisville, Norton Healthcare, and other Kentucky providers.
Molina Healthcare,
based in California, was one of the new awardees for Kentucky’s Medicaid
contract. Assuming the acquisition gets approval, Molina will now take on
Passport’s 300,000 Medicaid members.
“While we are
disappointed that Passport was not awarded a new MCO contract, we firmly
believe that this agreement provides the best path forward for Passport
members, providers, employees and our community,” Scott Bowers, chief executive
officer of Passport, said in the company’s press release announcing
the acquisition..
“The trusted Passport
name and brand will live on and, more importantly, this agreement provides
continuity of care and coverage for our members during these challenging times
for our community.”
The brief press
release also noted that Molina would be purchasing Passport’s Louisville real
estate through a separate contract. As Bowers mentioned, the Passport name will
remain under the new Molina leadership.
“We believe this
agreement is a testament to Passport's unique legacy of service to its
community, as well as the plan's ability to innovate and drive strong
operational and clinical performance,” Frank Williams, chief executive officer
at Evolent Health, said in Evolent’s press release on
the subject.
“We are heartened
that this agreement provides continuity of care and coverage for Passport
members during the ongoing public health crisis. We also feel that this outcome
is very positive for Passport's members, the city of Louisville and
the hundreds of employees who support the plan, as well as the current owners.”
Although the
transaction still needs to undergo regulatory approval, the companies are
confident that the acquisition will be finalized before 2020 ends. Passport has
agreed to assist in the transition period through the end of the calendar year.
Molina has already
agreed to extend employment opportunities to current Passport and Evolent
Health employees.
Kentucky’s Medicaid
program has been the source of a lot of contention in the past year.
Rate cuts nearly
drove Passport out of business, leading to a lawsuit, local news outlets reported.
The lawsuit also alleged that the state was undercutting Passport in order to
bring in larger payers like Centene-WellCare.
Ultimately a greater
percentage of ownership going to Evolent kept the payer afloat, the state announced.
“I believe this
purchase will help ensure our most vulnerable citizens continue to receive the
care they need and deserve,” then Attorney General Andy Beshear said at the
time.
Anthem, which also
saw its contract get cut, alleged that the contract awarding process was biased
by an individual within Governor Andy Beshear’s office, local news
outlets shared.
Many in the industry
have voiced concerns about the Centene-WellCare merger, which they see as
threatening to overturn the Medicaid managed care markets in several states.
The American Hospital Association included Kentucky in its list of states that
could see major consolidation as a result of this deal when it wrote to
the attorney general in the spring of 2019.
Meanwhile, the
state’s section 1115
Medicaid demonstration that would have instituted work
requirements also came under fire. Commonwealth Fund warned that the state
might see confusion and uninsurance much like Arkansas.
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