State investigates managed care company Empower for alleged Medicaid fraud

Empower Healthcare Solutions, a managed care organization that serves roughly 20,000 high-need Medicaid beneficiaries in Arkansas, is under investigation by state regulators and the attorney general's office for allegedly defrauding Medicaid.

In a letter sent to the state's Office of Medicaid Inspector General on Tuesday, Deputy Attorney General Lloyd Warford said a full investigation into allegations of fraud was only now getting under way. But an initial review found "sufficient credible evidence" to support the suspension of Empower from the Medicaid program, he wrote.

The Office of Medicaid Inspector General notified Empower the next day it was being sanctioned and would be subject to enhanced monitoring. The inspector general stopped short of suspending all payments to the company, however, "due to the fact Empower currently serves over 20,000 Medicaid beneficiaries who depend on Empower for continuity of care."

Empower is the largest of the state's four Provider-led Arkansas Shared Savings Entities, or PASSEs: managed care organizations that contract with the Arkansas Department of Human Services (DHS) to pay for and coordinate care for high-need, high-cost Medicaid beneficiaries with intellectual or developmental disabilities, behavioral health disorders or both.

PASSEs must be majority owned by health care providers, but their role is similar to insurance companies. Each PASSE receives a fixed monthly sum per member from DHS, the agency that administers Medicaid in Arkansas. The PASSE then pays for care for all its members, which can include costly services like inpatient treatment or around-the-clock help for people with disabilities. In 2020, Medicaid paid out almost $1.3 billion for the state's roughly 50,000 PASSE beneficiaries, according to documents provided to a legislative committee in June.

Allegations denied

Mitch Morris, Empower's CEO, said in an email Thursday evening that the organization "denies any allegations of fraud or any other misconduct."

"As stated by the AG's office, a final determination has not been made and Empower will continue to cooperate with the investigation. We look forward to resolving these issues with the state of Arkansas and continuing our focus on advancing health services and outcomes for the 20,000 Arkansans served by Empower," Morris said.

The letter from Warford, the deputy attorney general, gives limited information about the nature of the allegations. Empower is accused of misappropriating money claimed as "community investment" expenses – a type of capacity-building expenditure allowed under the PASSE program. Almost $4.7 million in community investments claimed by Empower in 2020 have "no support," the letter says.

The letter also says a group of 25 behavioral health providers "were collectively overpaid approximately $3.7 million" by a program set up by Empower in the early months of the COVID-19 pandemic. At the time, medical and community services across the country were being interrupted by shutdowns. Empower created a "stabilization" program designed to give short-term payments to the 25 behavioral health providers that treated the largest number of the PASSE's members. But an actuarial consultant hired by Empower determined those providers were collectively overpaid some $3.7 million, the letter says.

Empower also allegedly protected some providers from its internal audit process, Warford wrote.

Morris said in an email that "the programs under review comply with federal and state laws and are designed to enhance the delivery of services and to improve care to our beneficiaries."

"The issues being investigated do not involve care provided to members," he noted.

Mounting problems

Empower faced mounting problems even before the fraud allegations surfaced. Fallout from the departure of one of the company's co-owners has raised questions about whether the PASSE will have the capacity to keep operating next year.

DHS temporarily suspended new enrollments to Empower on Nov. 19. The agency completed a "readiness review" of Empower last week but has not yet made a decision about the PASSE's status for 2022, a DHS spokesman said Thursday afternoon.

Nonetheless, DHS sent a letter to Empower clients Thursday notifying them of Empower's partial suspension from Medicaid and letting them know they may change to a different PASSE if they so choose.

"Don't worry. You're not losing coverage, and nothing will change for you at this time," the DHS letter says. "To ensure you continue to have the access to care and services that you need, Empower will continue to get payment from Medicaid for services. You may remain in your current PASSE. However, should you want to switch to another PASSE you may do so by contacting 1-833-402-0672."

Danette Smith, a Hot Spring County resident whose daughter is an Empower member, had already decided to change to a different PASSE before news of the fraud allegations broke this week.

Smith's daughter, Sophia, 28, is autistic and mostly nonverbal. She requires 24/7 assistance and has other complex medical needs, Smith said. When the PASSE system was first rolled out, in 2018, Sophia was initially assigned to a different PASSE, Summit Community Care. But not all of Sophia's doctors were included in Summit's network at that time, Smith said, so she switched to Empower.

Smith hasn't been satisfied with Empower in the years since. The PASSE has denied claims for medications and supplements, she said, and often has failed to communicate with her and other parents. The recent uncertainty over Empower's future has been the final straw. She believes Empower is unlikely to be re-authorized to participate in the system in 2022, which would mean its thousands of members would be reassigned to other PASSEs by DHS.

"I have already chosen to move [Sophia], because I'm not going to wait until January," Smith said. "It's very concerning to parents, because we put our trust in them."

"On the front end, they made a lot of promises that didn't come through. And now we have a PASSE that's going under. … It's all about money. Not about the members, not about my daughter – it's all about money," she said.

Breakup turmoil

The recent turmoil within Empower stems from its ongoing breakup with Beacon Health Options, a Boston-based company that is one of the nation's largest behavioral health organizations. Beacon has owned a 16.66 percent stake in Empower since the PASSE was formed in 2017. (The remainder of Empower is owned by several health care entities based in Arkansas.) Beacon also contracts with Empower to provide administrative services and has played a critical role in Empower's day-to-day operations.

But in 2020, Beacon was acquired by insurance giant Anthem. Anthem also owns a stake in Summit Community Care – another PASSE and a rival of Empower. A state law passed earlier this year prohibited companies from owning portions of more than one PASSE, and Beacon soon began separating itself from Empower.

On Nov. 2, Empower sued Beacon, accusing it of sabotaging Empower for the benefit of its new owner. The lawsuit claims Beacon has refused to turn over phone numbers, email accounts and critical databases and documents as the two companies worked towards finalizing their divorce at the end of the year. Empower and Beacon have also sparred over the issue of credentialing providers within Empower's provider network.

"Since the merger, Beacon has engaged in conduct that suggests that it is functioning as a Trojan-horse for Anthem," Empower's complaint says. (The lawsuit was originally in federal court but was refiled in Pulaski County Circuit Court on Nov. 15. No hearing date had been set as of Dec. 2.)

In addition to Beacon, Empower is co-owned by five Arkansas-based health care organizations. They are Arkansas Community Health Network, a consortium of four hospital systems; Statera, a long-term care company; Independent Case Management, a provider of home and community-based services for people with developmental disabilities; The Arkansas Healthcare Alliance, a group of providers for behavioral health and developmental disability services; and, ARcare, a network of clinics and other providers.

According to documents provided to a legislative committee in June, Empower has the largest share of beneficiaries among the four Arkansas PASSEs, with some 20,000 members. Summit Community Care, the PASSE that is co-owned by Anthem, had more than 16,000 members. Arkansas Total Care, which is partially owned by health insurance company Centene, had over 13,000 members. The fourth PASSE is a newcomer to the state: CareSource PASSE, partially owned by an Ohio-based managed care company, was licensed earlier this year and is also undergoing a readiness review.