Medicaid managed care company sues outgoing corporate co-owner, alleging ‘sabotage’

Medicaid managed care company sues outgoing corporate co-owner, alleging ‘sabotage’

Empower Healthcare Solutions, a managed care company that serves almost 20,000 Arkansas Medicaid beneficiaries with complex health needs, filed a lawsuit in federal court on Tuesday against a company that owns a portion of Empower but is planning to leave by the end of the year.

The suit accuses Beacon Health Options of “seeking to destroy Empower … from within” to benefit one of Empower’s competitors.


Meanwhile, a letter obtained by the Arkansas Nonprofit News Network shows state Medicaid officials have concerns about Empower’s ability to operate after Beacon’s departure is finalized. The Arkansas Department of Human Services (DHS) said in the Nov. 2 letter that Empower has until November 24 to complete a “readiness review” ordered by the agency, which administers the state’s Medicaid program.

Beacon, a Boston-based behavioral health organization with national reach, has owned a 16.66% stake in Empower since it was formed in 2017. (The rest of Empower is owned by several health care companies based in Arkansas.) Beacon has also contracted 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 owns a stake in another Arkansas Medicaid managed care company, Summit Community Care. A state law passed earlier this year prohibited ownership in more than one such company, and Beacon began separating itself from Empower.

Now, Empower’s lawsuit says Beacon has been “intentionally attempting to sabotage Empower” on its way out the door.


“Since the merger, Beacon has engaged in conduct that suggests that it is functioning as a Trojan-horse for Anthem,” the complaint says. Empower claims Beacon has refused to turn over phone numbers, email accounts and critical databases and business documents as the two companies separate. It also says Beacon has made “false claims” to DHS regarding the breakup of the two companies.

A representative for Beacon did not respond to a request for comment on the lawsuit. But a letter Beacon sent to DHS  August 26 show the company has had its own complaints about its separation from Empower. The letter, obtained from DHS with a records request, asked the agency to disregard the Empower board’s adoption of policies for credentialing health care providers, over Beacon’s objections.

“The proposed Credentialing policy could have the effect of invalidating the credentialing decisions of our existing network,” it said. “Beacon obviously cannot agree to any policy that will have this result. Empower has been combative and non-cooperative in addressing these concerns.”

Empower is one of four managed care companies that contract with Arkansas to pay for and coordinate care for Medicaid beneficiaries with severe behavioral health disorders, intellectual or developmental disabilities, or both. Known as Provider-led Arkansas Shared Savings Entities, or PASSEs, they were created by a 2017 state law that promised to both control spending and provide better services to this high-need, high-cost group of patients. (In 2020, the cost to Medicaid for the roughly 50,000 PASSE beneficiaries in Arkansas was almost $1.3 billion, according to documents provided to a legislative committee in June.)


The Department of Human Services, which administers Medicaid, pays each PASSE a fixed monthly amount per beneficiary enrolled in the PASSE. In return, PASSEs must cover the cost of care for those patients, which can include costly services such as at-home help for disabled people. PASSEs play a role similar to insurance companies — they are regulated by the state Insurance Department — but must be partly owned by health care providers.

The same day Empower filed its lawsuit,  it received a letter from DHS warning the company that it had yet to complete a necessary “readiness review” in the wake of Beacon’s exit. DHS gave Empower until November 24 to address a list of outstanding requirements. If the company misses that deadline, the letter suggested, it could be in danger of losing its contract with the state — its sole source of business.

DHS is obligated “to ensure a smooth transition and continuation of services for any Medicaid enrollee of a managed care entity whose contract is terminated or dissolved for any reason,” wrote DHS Division of Medical Services Director Elizabeth Pitman. 

The agency “must be able to make a final decision” by Dec. 1, she added, so that beneficiaries “and their receiving PASSEs have adequate notice to ensure continued services and as smooth a transition as possible.”

A DHS spokeswoman did not respond to questions about steps DHS might take if the Nov. 24 deadline is not met or whether Empower’s members would be assigned to one of the other PASSEs.

Empower CEO Mitch Morris said in an email that the company was “prepared to demonstrate compliance to DHS and remain very confident that it will provide formal approval for Empower to continue operating as an Arkansas PASSE for calendar year 2022 and beyond.” Morris declined to comment on the lawsuit.

When provided with the letter, Thomas Nichols, a lawyer with the advocacy organization Disability Rights Arkansas, said DHS was likely “covering their bases to make sure there’s not a gap in services” for beneficiaries. PASSE members often require intensive services and can’t afford any disruption in coverage, he said.

“Folks aren’t relying on this just for primary care appointments,” he said. “You have people who require 24/7 staff because they need that in order to live safely in a community setting.”

Nichols said the uncertainty around Empower’s future illustrated the pitfalls of transferring responsibility for Medicaid to managed care companies. 

“It is predictable that privatizing Medicaid services and feeding it to a for-profit world would result in the types of potential harms we now have,” he said. “It is inexcusable that individuals with significant developmental disabilities and mental illness are suddenly on the brink due to mergers and acquisitions.”

This story is courtesy of the Arkansas Nonprofit News Network, an independent, nonpartisan news project dedicated to producing journalism that matters to Arkansans.


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