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Deal sets up insurer for stakes in 2 managed-care firms in Arkansas

by Andy Davis | September 15, 2019 at 9:27 a.m.

An Indiana company would hold a stake in two of the three managed-care companies serving Arkansas Medicaid recipients with costly health needs under an acquisition awaiting approval by the Arkansas Insurance Department.

Anthem Inc. announced June 6 that it had reached an agreement to buy Beacon Health Options of Boston.

Through a subsidiary, Amerigroup, Anthem owns 49% of Summit Community Care, one of three companies that on March 1 began providing health benefits to about 45,000 Medicaid recipients with significant mental illness or developmental disabilities.

Anthem, an insurance company based in Indianapolis, also provides administrative services for Summit, which is known as a Provider-led Arkansas Shared Savings Entity, or PASSE.

Beacon owns 16.67% of Empower Healthcare Solutions, one of the other provider-led entities, and provides administrative services to that company.

Together, Summit and Empower were serving more than three-fourths of the 44,698 Medicaid recipients in the managed-care program as of April 29.

Arkansas Total Care, which is partly owned by St. Louis-based Centene, was covering the remaining 10,897 recipients.

The provider-led entities receive monthly payments from the state Medicaid program for each recipient assigned to their plans. In exchange, the companies pay for all of the recipients' health care needs.

From March through June 30, the payments from the Medicaid program to the three companies totaled $540 million, or an average of about $135 million a month, according to a state Department of Human Services report.

The 2017 state law authorizing the managed-care program requires each company to be at least 51% owned by health care providers.

At a public hearing Wednesday in Little Rock on the proposed acquisition, Jay Wagner, an Anthem vice president and counsel, said his company would have "limited ability" to control Empower's operations after the merger and has no plans to make any changes to the company, including in the services offered.

He said Anthem also doesn't plan any changes to Summit.

To his knowledge, he said, officials with the Human Services Department, which runs the Medicaid program, "have expressed no issues with the transaction."

Anthem spokesman Leslie Porras said in an email that Summit and Empower will "continue to operate independently" after the merger.

Human Services Department spokeswoman Amy Webb said the acquisition won't require any changes to the contracts of the provider-led entities or how new Medicaid recipients are assigned to them.

The recipients are assigned to the three companies evenly in "round robin" fashion, she said.

No one spoke against the merger at Wednesday's hearing.

Insurance Department Deputy Commissioner Suzanne Tipton, who presided over the hearing, said the department "will approve this" based on the testimony and documents that had been provided and Commissioner Allen Kerr's review.

She said she expected the department to issue a formal order of approval "within the next week."

The hearing came less than a week after Catherine Silva left her job as deputy director of the Human Services Department's Medical Services Division to become director of intergovernmental relations for Anthem.

Just over two weeks after the proposed acquisition was announced in June, Silva met with the Medical Services Division's director, Janet Mann, and Jim Brader, the department's chief deputy counsel, to discuss Silva's "prospective employment opportunity" with Anthem, according to a memo from Brader to Mann.

Brader said in the memo that Silva hadn't been involved in the managed-care program in a way that would present a conflict of interest with her state job.

It was "somewhat uncertain" whether she would be subject to a "cooling off period" after leaving to work for Anthem, he said.

He referred to Arkansas Code 19-11-709, which bars former state employees for one year from acting as a principal or agent for any entity other than the state in any proceeding, application, ruling, determination, contract, claim, charge or controversy that was within the person's official responsibility with the state.

"More details would be needed to better understand the nature of the responsibilities of the new position," Brader said in the memo.

Webb has said Silva "is aware of her obligation under the statute to avoid acting as a principal or agent for Anthem in any matters that were within her official duties with DHS for one year and intends to comply with that obligation."

Asked on Friday whether Silva would be restricted from working for Anthem on the Provider-led Arkansas Shared Savings Entity program, Webb said, "I refer you to the statute and her previous job duties."

Silva didn't return a call seeking comment on Friday.

"Anthem works to ensure we have appropriate staffing, including for government relations, to meet the needs of our businesses in states where we operate," Porras said.

Matt Salo, director of the National Association of Medicaid Directors in Washington, D.C., said federal regulations generally require Medicaid recipients to have a choice of at least two plans.

Many states, however, contract with three or more plans to give themselves some "wiggle room," in case one plan buys another or the state needs to stop doing business with one of them.

He said he didn't know the details of Arkansas' program and whether federal officials would consider Summit and Empower to be separate entities, after Anthem's acquisition, for the purpose of meeting the requirement for recipients to have a choice of plans.

Webb said the department still will consider Summit and Empower to be separate plans but hasn't heard from the federal Centers for Medicare and Medicaid Services on the issue.

The federal agency didn't respond to a request for comment on Friday afternoon. None of the companies in the program responded to requests for comment.

Tom Masseau, director of Disability Rights Arkansas, a federally funded nonprofit, said his group will be watching to see what impact the acquisition has on Medicaid recipients and providers.

On the one hand, having a large company like Anthem involved could help both Summit and Empower weather any reductions the Human Services Department might make in what it pays program participants.

But the involvement of Anthem with two of the provider-led entities could also reduce competition, giving those companies more leverage in cutting rates to providers or services to recipients, he said.

Anthem also could have incentive to favor Summit over Empower, since it has a larger stake in Summit, he said.

"I'm just hopeful that the other 84% of shareholders [at Empower], or however that works, sees that and will try to not allow Anthem to flex their muscle and make decisions that would impact Anthem as opposed to the individual," he said.

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