State regulators give OK to Medicaid managed care company once dogged by investigations

Two months ago, things were looking dire for Empower Healthcare Solutions, a managed care organization that serves roughly 20,000 Arkansas Medicaid beneficiaries with developmental disabilities, severe behavioral health disorders and other complex needs.

The attorney general's office was investigating the company for suspected Medicaid fraud. The state Department of Human Services, which oversees Medicaid in Arkansas, suspended new enrollments to Empower in November due to alleged "misrepresentations" to DHS. And Empower was undergoing an acrimonious corporate divorce with one of its co-owners, Beacon Health Options, which Empower's lawyers said was trying to "sabotage" Empower on its way out the door.

Now, Empower looks to be in the clear with state regulators – and has found a new financial backer in the form of a Dallas private equity firm.

On Monday, DHS notified Empower CEO Mitch Morris that the company had officially passed a months-long "readiness review" process. DHS officials initiated the review last year out of concern that Empower might not have been prepared to continue serving its members in the wake of its separation from Beacon, one of the nation's largest behavioral health companies.

In addition to owning a 16.67 percent share of Empower, Beacon played a critical role in its day-to-day operations and provided key administrative services.

An independent consultant who reviewed Empower's operational capacity in November on behalf of DHS found "significant concerns" about Empower's transition away from Beacon. "The number and seriousness [of] issues identified without doubt draw into question Empower's current readiness to carry out required … functions," he wrote in a Nov. 30 letter to DHS.

However, that consultant ultimately recommended DHS allow Empower to keep operating in 2022, on a conditional basis, while it continued to monitor the company. With the readiness review now complete, Empower is able to resume enrolling Medicaid beneficiaries – and thus bring in more revenue.

Empower is the largest of four so-called Provider-led Arkansas Shared Savings Entities (PASSEs), organizations that contract with DHS to pay for and coordinate care for high-need, high-cost Medicaid beneficiaries. PASSEs must be majority owned by health care providers, but their role is similar to that of insurance companies. Each PASSE receives a fixed monthly sum from DHS for each of its members – the equivalent of a premium. The PASSE is then responsible for paying for care for all its members, which can include costly services like inpatient psychiatric treatment or around-the-clock help for people with disabilities. In 2020, Medicaid paid out almost $1.3 billion to PASSEs for the roughly 50,000 beneficiaries in the system, according to documents provided to a legislative committee in June. About 20,000 of those are Empower members.

"We are happy to achieve full and final approval and look forward to continued collaboration with DHS," Morris said in an emailed response to questions. He said Empower was "fully staffed and strongly positioned for continued operations."

The letter DHS sent to Morris says the agency "will continue to monitor Empower and will hold regular meetings with Empower for enhanced monitoring."

Empower is also free of the Medicaid fraud investigation. On Jan. 4, the attorney general's office announced it had reached an almost $8 million civil settlement with Empower, which denies wrongdoing.

Morris said the company's issues with the attorney general's office "have been fully resolved."

On Friday, Empower also completed a deal with a new co-owner: Trive Capital, a Dallas-based private equity firm. After gaining approval from the Arkansas Insurance Department – which regulates PASSEs to ensure they are financially solvent – Trive acquired the 16.67 percent share of Empower left behind by Beacon. The separation of Beacon and Empower was completed on Dec. 31, Morris said.

At an Insurance Department hearing Friday afternoon, Tanner Cope, a managing director at Trive, said the two sides had expected to close the deal by the end of the year but were delayed by the attorney general investigation and the DHS readiness review.

Morris said Trive and Empower began discussing the acquisition last summer. He declined to answer a question about the terms of the deal or the amount Trive was initially investing in the Arkansas company.

Asked whether Empower families should be concerned that a private equity firm had acquired a portion of their PASSE, Morris said no. "Empower's #1 priority is always to provide industry-leading services and support to our members and their families. With these changes, Empower is better positioned to do so," he wrote.

Trive did not respond to calls or emails on Friday seeking comment.

Trive will join the five Arkansas-based health care organizations that now co-own Empower: Arkansas Community Health Network, a consortium of 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.