Judge denies KanCare company’s legal challenge, says new contracts should go forward

A pair of brothers who ran a chiropractic clinic in Lenexa have agreed to pay $350,000 to settle allegations they cheated Medicare.
A pair of brothers who ran a chiropractic clinic in Lenexa have agreed to pay $350,000 to settle allegations they cheated Medicare.

A Topeka judge ruled against one of the KanCare contractors Friday, in a decision that affects hundreds of the company’s employees, thousands of Kansans the company covers under Medicaid and billions in taxpayer dollars.

Amerigroup has had a contract to administer KanCare since 2012, when then-Gov. Sam Brownback started the privatized Medicaid program. This year state officials announced they had chosen Aetna to take its place, and Amerigroup sued.

Shawnee County District Court judge Franklin Theis ruled that the bidding process was fair and that the state can move forward with the new contracts, which start next year.

“The bid documents in the RFP (request for proposals) was the same for each bidder,” Theis wrote. “There is no sufficient proof the same parameters for evaluation of each bid were not applied.”

Amerigroup spokeswoman Laurie Roberts said the company wasn’t ready to say Friday whether it would appeal.

“Amerigroup is reviewing the court’s decision and is evaluating its options,” Roberts said.

Theis’ decision lets stand the plan choices available to the 400,000 Kansans on Medicaid, who could begin open enrollment Oct. 1.

It’s especially significant to the 127,000 currently covered under Amerigroup. They will either have to choose a new plan for 2019 or be auto-assigned to one. It’s also key to the jobs of about 300 Amerigroup employees in Kansas. The KanCare contract is the company’s only business in the state.

Amerigroup’s suit argued that the Kansas Department of Health and Environment and Kansas Department of Administration should have re-opened the bidding process after the Legislature enacted new guidelines for KanCare in May.

AmeriHealth, one of the other three bidders that didn’t get a contract, joined Amerigroup in its legal challenge. The three that did get contracts — Aetna, Sunflower State Health Plan (a division of Centene) and UnitedHealthCare — joined the state in defending the process.

The result was a courtroom overflowing with attorneys. There were so many, in fact, that the ones arguing the case orally had to wear numbers around their necks so the court reporter could keep them all straight.

Amerigroup attorney Michael Gay opened the proceedings by reminding the court that the KanCare contracts, worth about $1 billion each annually in state and federal money, are the biggest Kansas awards.

“You would think with a contract this monumental, the state would want to make sure everything was perfect,” Gay said.

Instead, Gay argued, the bidding process was “fatally flawed” because of last-minute instructions that the Legislature passed after the bids had already been submitted.

The plan the companies bid on, dubbed “KanCare 2.0,” included a number of changes to the program, most notably a work requirement.

But in a budget bill passed May 4, wary legislators included a proviso that blocked spending on a KanCare program “substantially different” from the current one.

“They didn’t judge us on the contract they awarded,” Gay said. “They judged us on the contract the Kansas Legislature said you can never award.”

Amerigroup’s lawyers cited the words of Rep. Dan Hawkins, a Wichita Republican who said during a legislative hearing that his understanding was that the budget bill meant the state would have to keep KanCare exactly the same as it is now.

Hawkins, reached by phone, said that’s true but he didn’t think the state should have to re-bid the contracts because all of the companies that bid did so with the same information and assumptions.

“We just need to move on so we can get the new contracts started and start down the road,” said Hawkins, the chairman of the House Health and Human Services Committee. “It’s going to be painful enough changing one (company). The longer we put it off, the harder it’s going to be.”

Rep. Jim Ward, a Wichita Democrat and persistent KanCare critic, said legislators debated bills earlier in the session that would have made their intent more clear, but Republican leaders didn’t let them get to the floor of the House or Senate because they feared amendments to expand Medicaid under the Affordable Care Act.

So the proviso was tacked on to the budget late in the session instead.

Theis, who ordered Amerigroup and AmeriHealth to pay the other sides’ legal costs, said the companies had not proven their case, and to put the new contracts on hold just months before they begin could cause major disruption to Medicaid services.

“Unquestionably the greatest risk of harm would be to the Kansas beneficiaries of the Medicaid and CHIP programs,” he wrote. “To risk the loss to individuals in legitimate need of Medicaid services due to program delay or confusion is a risk too great in itself.”

Kansas Medicaid Director Jon Hamdorf said there should be no disruption to services.

“Despite the distraction this challenge created,” he said, “we have prepared all along for a Jan. 1, 2019, implementation.”

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