State sanctions Empower, says Medicaid managed care company ‘misrepresented' facts

The Arkansas Department of Human Services has suspended new enrollment for Empower Healthcare Solutions, a managed care organization serving about 20,000 Medicaid beneficiaries with intellectual or developmental disabilities, behavioral health disorders or both.

Empower is one of 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 clients. But recent turmoil within Empower has raised questions about whether the PASSE will have the capacity to keep operating in 2022. Earlier this month, DHS gave it a deadline of Nov. 24 to complete a "partial readiness review."

On Tuesday, David Jones, a DHS Medicaid official, notified Empower that new enrollments to the PASSE would be suspended as of Friday, Nov. 19. "This sanction is imposed due to Empower's misrepresentation of information furnished to DHS," Jones wrote in a letter.

A lawyer for Empower wrote a sharply worded reply on Thursday, denying the PASSE had misled DHS and declaring the agency had acted illegally.

"Empower demands that DHS immediately retract the imposition of the sanction, which as you must know, will irreparably harm Empower," wrote Marshall Ney, an attorney with Friday Eldredge & Clark LLP. "Absent this, Empower will be required to take all steps necessary to mitigate this harm, and as you know, DHS is not immune from suit for ultra vires acts such as this." (An ultra vires action is one taken beyond an entity's legal authority.)

PASSEs depend on enrollments for revenue. A PASSE plays the role of an insurance company, receiving a fixed monthly sum from DHS per each person it enrolls. The PASSE then pays for the cost of care for all its members, which can include costly services like inpatient treatment or at-home help for disabled people. The price tag can be huge: In 2020, Arkansas 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. (Empower's revenues for 2020 were over $460 million.)

Empower CEO Mitch Morris said in an email Friday that Empower typically receives about 150 new beneficiaries each month. About 20,000 members are enrolled in the PASSE as of now.

Empower's current problems are the result of 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% stake in Empower since the PASSE was formed in 2017. (The rest 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 another Arkansas PASSE, Summit Community Care, 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 filed in federal court, but earlier this week the company withdrew it and refiled in Pulaski County Circuit Court. As of Friday, no hearing date had been set.)

The DHS sanction letter sent on Tuesday says the claims made by Empower in its lawsuit reveal that Beacon's departure has created far more problems for the PASSE than it had previously admitted to the state.

In July, "Empower identified certain areas that would change due to the transition away from Beacon," Jones, the Medicaid official, wrote. "Empower represented that the issues identified in the letter were the only areas that were changing and, therefore, a full readiness review was not necessarily. DHS agreed to a partial readiness review based on Empower's representation[.]" The letter then lists statements Empower made in its lawsuit that describe how Empower's business activities have been allegedly hobbled by Beacon.

Had DHS known Empower would lose access to phone numbers, email accounts and documents in the process of the divorce, "a full readiness review would have been required," Jones wrote.

Empower's reply letter claims the PASSE has always kept DHS informed of its progress: "Empower has been cooperative, forthcoming, acted in good faith, and acted in the best interest of its members. Empower also has previously communicated to DHS, on multiple occasions, that Empower may have to seek legal action based on Beacon's uncooperative behavior."

Morris, the Empower CEO, continued to express optimism when asked for a response on Friday.

"Despite the sanction, which will be dealt with by Empower in due course, the transition process with DHS is going extremely well from my perspective," he wrote in response to emailed questions.

Amy Webb, a spokeswoman for DHS, said Friday that the agency is "continuing to monitor the situation closely and will provide more information to our clients as it becomes available."

If a PASSE cannot continue to participate in the program, Webb said, "clients would be transitioned to another PASSE. With rare exception, PASSEs have the same providers in their networks, which would minimize disruptions for affected clients."

Loretta Cochran, a parent advocate, said moving to a new PASSE could nonetheless entail "a huge change" for clients and their families. Cochran is the mother of one PASSE beneficiary and the legal guardian of another (neither is enrolled in Empower or Summit).

"Theoretically, all the PASSEs should have had the same provider networks and the same reimbursement relationships, so it would be seamless to move from one to the other," she said. But switching PASSEs could still require clients and their families to wade through paperwork, such as verifying their current health care providers are in-network, Cochran said.

"If I were an Empower parent, or client, now I have to go look at this big notebook - which may or may not be accurate - to see if the dentist I use, the mental health provider I use, the hospital I use, the pediatrician I use, the therapist I use, the psychiatrist I use, the pharmacy I use, the durable medical equipment company I use, that all those companies are in my new PASSE," she said. "These are medically complex people here."

Cochran said changing care coordinators - which are employed by PASSEs to manage services for enrollees - could also create disruptions.

"My care coordinator can call my son, and they'll have a chat, and she'll figure out what to do. They have a great relationship now - that took years to build. That's not something you do on a dime, and not with someone who has communication challenges, particularly."

The uncertainty created for beneficiaries and families by the split between Beacon and Empower, she said, is "unacceptable."

"If I were an Empower parent, man, I'd be mad. I'd be completely angry and hurt and scared, because the person I've entrusted my child's life with - there's now a situation there," Cochran said.

In addition to Beacon, Empower is co-owned by five other 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 almost 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 currently undergoing a readiness review.