Molina Healthcare to Acquire Passport Health Plan Medicaid Plans

Molina Healthcare (Molina) will acquire the Passport Health Plan (Passport) Medicaid and dual special needs plan, Molina announced.

The healthcare companies have agreed to a price of around $20 million for the purchase. In addition to the initial cash transaction, Molina may make an additional payment in 2021 based on Molina’s Kentucky health plan performance during 2020 open enrollment.

“Acquiring the operations as well as transferring over employees of Passport Health Plan provide us with a well-known brand in Kentucky and position us well to compete even more effectively in the market,” Joe Zubretsky, president and chief executive officer of Molina, said in Molina’s press release on the acquisition.

“We look forward to being able to achieve a major objective of this transaction, which is the continuity of care for Passport’s members.”

By mentioning continuity of care, Zubretsky alluded to the major upset of the Kentucky Medicaid managed care contracts which were awarded earlier this year.

Passport lost its Medicaid managed care contract for 2021 after offering Medicaid plans in Kentucky for 20 years. According to a press release from late May 2020, Passport planned to protest the contract decision.

The payer is also headquartered in Kentucky along with its owners—Evolent Health, the University of Louisville, Norton Healthcare, and other Kentucky providers.

Molina Healthcare, based in California, was one of the new awardees for Kentucky’s Medicaid contract. Assuming the acquisition gets approval, Molina will now take on Passport’s 300,000 Medicaid members.

"While we are disappointed that Passport was not awarded a new MCO contract, we firmly believe that this agreement provides the best path forward for Passport members, providers, employees and our community," Scott Bowers, chief executive officer of Passport, said in the company’s press release announcing the acquisition..

“The trusted Passport name and brand will live on and, more importantly, this agreement provides continuity of care and coverage for our members during these challenging times for our community.”

The brief press release also noted that Molina would be purchasing Passport’s Louisville real estate through a separate contract. As Bowers mentioned, the Passport name will remain under the new Molina leadership.

“We believe this agreement is a testament to Passport's unique legacy of service to its community, as well as the plan's ability to innovate and drive strong operational and clinical performance," Frank Williams, chief executive officer at Evolent Health, said in Evolent’s press release on the subject.

"We are heartened that this agreement provides continuity of care and coverage for Passport members during the ongoing public health crisis. We also feel that this outcome is very positive for Passport's members, the city of Louisville and the hundreds of employees who support the plan, as well as the current owners.”

Although the transaction still needs to undergo regulatory approval, the companies are confident that the acquisition will be finalized before 2020 ends. Passport has agreed to assist in the transition period through the end of the calendar year.

Molina has already agreed to extend employment opportunities to current Passport and Evolent Health employees.

Kentucky’s Medicaid program has been the source of a lot of contention in the past year.

Rate cuts nearly drove Passport out of business, leading to a lawsuit, local news outlets reported. The lawsuit also alleged that the state was undercutting Passport in order to bring in larger payers like Centene-WellCare.

Ultimately a greater percentage of ownership going to Evolent kept the payer afloat, the state announced.

“I believe this purchase will help ensure our most vulnerable citizens continue to receive the care they need and deserve," then Attorney General Andy Beshear said at the time.

Anthem, which also saw its contract get cut, alleged that the contract awarding process was biased by an individual within Governor Andy Beshear’s office, local news outlets shared.

Many in the industry have voiced concerns about the Centene-WellCare merger, which they see as threatening to overturn the Medicaid managed care markets in several states. The American Hospital Association included Kentucky in its list of states that could see major consolidation as a result of this deal when it wrote to the attorney general in the spring of 2019.

Meanwhile, the state’s section 1115 Medicaid demonstration that would have instituted work requirements also came under fire. Commonwealth Fund warned that the state might see confusion and uninsurance much like Arkansas.