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Lawsuit Against KanCare Company Puts Program In Spotlight Again

A lawsuit alleging that one of the for-profit companies running KanCare ordered employees to shift KanCare members away from high-cost providers has put a renewed spotlight on the program, one of the Brownback administration’s signature achievements.

In the lawsuit filed this week in federal court in Kansas City, Kan., a former official of the company, Sunflower State Health Plan Inc., claimed she was fired after she objected to the directive, saying it was unethical and possibly illegal.

KanCare, which put private companies in charge of managing the state’s Medicaid program, was launched by Gov. Sam Brownback in January 2013. The program moved nearly all of the state’s Medicaid enrollees into health plans run by Sunflower and two other managed care organizations, Amerigroup and UnitedHealthcare.

Brownback pledged that KanCare would control costs and improve care but the program has been mired in controversy almost from the start.

It recently drew fire from top Democrats on the KanCare Oversight Committee who want to look at whether any legal or ethical boundaries were crossed when it was set up. And Democratic gubernatorial candidate Paul Davis, the minority leader of the Kansas House, has said that, if elected, he will subject the program to a top-to-bottom review.

A 2014 annual report filed in July by the Kansas attorney general’s Medicaid Fraud and Abuse Division said that the three companies managing the $3 billion program had not provided the information it needed to pursue allegations of fraud.

Meanwhile, the FBI has been looking into allegations of “pay for play” deals involving KanCare. While the FBI has not confirmed the investigation, several people interviewed by the FBI have said that KanCare is at the center of the probe.

The lawsuit was filed against the backdrop of major financial losses by Sunflower, Amerigroup and UnitedHealthcare. Collectively they lost $72.6 million in the first half of 2014 after posting losses of $110 million in 2013.

Despite those dismal results, Clayton, Mo.-based Centene Corp., Sunflower’s parent company, on Tuesday reported a 69 percent increase in third-quarter profits.

The managed care provider boasted 144,200 members in Kansas as of the third quarter, up from 137,700 in the same quarter in 2013. The company operates in 19 states besides Kansas.

Centene did not respond to a request for comment on the lawsuit.

The lawsuit was filed by Jacqueline Leary, a former vice president of network development and contracting at Sunflower. She claims she was fired in January 2014 in retaliation for objections she raised about Sunflower’s actions.

Leary’s lawsuit, which names Centene, Sunflower and two top Centene executives as defendants, alleges that Sunflower officials ordered her to steer Sunflower members away from providers that had contracted to be reimbursed at rates higher than 100 percent of standard Kansas Medicaid rates.

Leary claims that defendant Rob Hitchcock, Centene’s executive vice president of health plans, voiced concern at a February 2013 meeting about the company’s poor financial performance and told Leary not to assign new KanCare members primary care physicians affiliated with the University of Kansas Medical Center. KU Med was one of the providers that had negotiated higher reimbursement rates.

“Hitchcock explained that these measures were necessary in order to dramatically improve (Sunflower’s) financial performance in both the short term and long term and to avoid a negative impact to the financial performance of Centene,” Leary’s lawsuit states. “Hitchcock also explained that he did not like academic centers because the medical students order too many procedures and tests.”

A KU Med Center spokesperson declined to comment on the lawsuit.

Later, Leary says, she was instructed by another defendant, Sunflower CEO Jean Wilms, to move existing members assigned to physicians affiliated with providers receiving higher reimbursement rates to providers that had contracted at lower rates.

Leary contends she balked at these orders, concerned that they were unethical “and perhaps unlawful.” After repeatedly making her concerns known, she alleges, she was terminated.

A footnote in the lawsuit says that, following her termination, Centene conducted its own investigation and confirmed that four major providers had been removed from the process that automatically assigned patients to primary care physicians if they didn’t choose one on their own: KU Med, Stormont-Vail HealthCare, Saint Luke’s Health System and Via Christi Health.

Before filing her lawsuit, Leary filed an administrative complaint with the federal Occupational Safety & Health Administration, which has jurisdiction over cases involving employee retaliation. The agency dismissed the complaint in September, stating that Sunflower had legitimate reasons for firing her, namely poor work performance.

Leary’s attorney, Lewis Galloway, said that the agency’s dismissal should not have any practical effect on Leary’s lawsuit, and the insinuation of poor work performance was merely an excuse concocted to fire her.

“The theory is that while they may arguably believe they have legitimate, non-retaliatory reasons for her termination, we would characterize those as pretexts for the actual reasons that she was terminated,” Galloway said.

“And that’s the fact that she voiced concerns about these seriously improper business practices, probably unlawful business practices, that were being undertaken by Centene at this subsidiary … and perhaps at others of their 14 subsidiaries operating independently in different states.”

Kansas Sen. Michael O'Donnell, a Wichita Republican who serves on the KanCare Oversight Committee, said that he was reserving judgment on the lawsuit. 

“It seems like this is a case of an employee who has a grievance against an employer —in this case, Centene — and who’s made accusations against that employer in court. So I’m going to let Centene and this individual have their day in court because, right now, these are  allegations only,” he said. 

“I think we need to allow this to play out in court. This is the first allegation we’ve heard from an employee of Centene and we haven’t heard anything from the other MCOs. So I think there’s a need for us to allow this to play out in the court system and not declare (Centene) guilty before they’ve gone to trial or at least gone further in the process.

“If the allegations are true, then we have a huge problem, but if this is a case of a disgruntled former employee then we don’t have that problem.” 

This story has been updated to include the comments of Kansas Sen. Michael O'Donnell.

Dan Margolies has been a reporter for the Kansas City Business Journal, The Kansas City Star, and KCUR Public Radio. He retired as a reporter in December 2022 after a 37-year journalism career.
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