Judge denies Iowa Hospital Association's request for injunction in Medicaid transition

Meanwhile Wellcare working to keep contracts, employees

Enrollment information for managed-care organizations, including WellCare, in Iowa’s Medicaid privatization plan, photographed in Cedar Rapids on Friday, Dec. 18, 2015. (Liz Martin/The Gazette)
Enrollment information for managed-care organizations, including WellCare, in Iowa’s Medicaid privatization plan, photographed in Cedar Rapids on Friday, Dec. 18, 2015. (Liz Martin/The Gazette)

A Polk County district judge Thursday denied the Iowa Hospital Association’s request for a temporary injunction that had asked for a delay of the state’s plan to transition its $5 billion Medicaid program to out-of-state, for-profit companies.

“There is no longer any present need for some extraordinary remedy to maintain the status quo of the parties prior to final judgment or to protect the subject of this litigation,” wrote Polk County District Court judge Robert Hanson. “There is no longer any present emergency.”

Hanson cited the Centers for Medicare and Medicaid Services’s Dec. 17 decision to delay implementation of the managed care model from Jan. 1 to March 1.

The “controversy is not ripe and/or moot,” he wrote.

The Des Moines-based association, which represents all the state’s 118 hospitals, along with 11 of those member hospitals — including Mercy Medical Center in Cedar Rapids — in early November asked the court to delay the implementation of the managed-care plan until a legal conflict is addressed.

In its original filing, the Iowa Hospital Association raised questions over the legality of a transfer of fees to the managed-care program from the Hospital Provider Assessment program.

That program, passed by the Iowa Legislature in 2010, serves as a tax to hospitals and works to draw down federal funding for Iowa’s Medicaid program and increase Medicaid rates paid to hospitals. Funds are collected from hospitals based on net patient revenue and put into a trust fund that then is used to help pay Medicaid reimbursements.

The program collects about $34.6 million annually from Iowa’s hospitals, according to the original filing. The funds are matched by federal dollars.


Iowa Code explicitly instructs Iowa’s Department of Human Services to use Provider Assessment funds to reimburse “participating hospitals” and not other entities. The Iowa Hospital Association questioned if DHS will violate state law if the money no longer is directly paid to hospitals.

However, Hanson wrote that the delay allows for “approximately six weeks to bring Iowa statutes and regulations in compliance with the managed-care model.”

“We are obviously disappointed with the judge’s ruling,” IHA spokesman Scott McIntyre said Thursday. “While IHA’s legal team continues to evaluate the decision, it is clear that CMS’s delaying implementation of the state’s privatization plan was an important factor that largely provides IHA with the result we sought from the injunction.

“Nonetheless, in addition to being harmful and unnecessary, the state’s privatization plan clearly has legal issues that need to be resolved.”


Meanwhile, WellCare of Iowa — one of the four companies initially awarded an DHS contract — did not have the best December. But the managed-care company is not necessarily closing up shop just yet.

First, a state arbiter said in mid-December that the company’s contract should be terminated. Janet Phipps, director of the state Department of Administrative Services, said the WellCare failed to disclose a corporate integrity agreement that would have included information on $137.5 million in fines to resolves false claims litigation.

WellCare then requested a stay from DHS, which would allow the company to continue operating while it appealed the decision in district court. But Phipps denied that request — saying it could set back DHS efforts to implement managed care as well as harm the public.

Now the Tampa, Fla.-based company, which so far has hired 180 people, contracted with more than 14,600 providers and invested millions of dollars in startup costs — according to court filings — must sit tight until a Polk County district judge decides its fate.


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Crystal Warwell Walker, a WellCare spokeswoman, said in an email that the company is actively working to schedule a hearing and anticipates that it will take place in early January.

In the meantime, WellCare employees will participate in professional development training, she said, and the company is providing them regular updates.

The company had about 125,000 Iowans tentatively assigned to it before the original Phipps decision, and Walker said the company has not seen any significant enrollment changes.

Amy McCoy, a DHS spokeswoman, said in an earlier Gazette interview those Medicaid enrollees assigned to WellCare eventually will be reassigned to one of the three remaining managed care companies — AmeriHealth Caritas Iowa, Amerigroup Iowa and UnitedHealthcare of the River Valley.

In addition, provider contracts will remain in place, Walker said. The contracts are contingent on WellCare participating in the managed-care program, she said, so there will be no negative effect to the provider should WellCare not win its appeal.

“We strongly disagree with this decision, and we remain committed to serving the (Iowa Medicaid program) and continue to work toward the new implementation date of March 1, 2016,” McCoy said.



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