TennCare imposes tougher rules in wake of Ford mess

TennCare officials are imposing tougher ethical standards in new contracts the state is now negotiating with managed care groups, director J.D. Hickey said. He hopes to have the new agreements in place by July 1.

Two TennCare contractors paid Ford, who sat on a legislative panel that oversaw the program, hundreds of thousands of dollars in consulting fees, and the fallout from that scandal is helping the state take a tougher stance.

“This is a pretty big step from where we were previously,” Hickey told The Associated Press. “It will put us in a new position to monitor this type of activity and do something about it when it happens.”

TennCare, the state’s expanded Medicaid program for the poor, uninsured and uninsurable, covers about 1.3 million people, or nearly 23 percent of the state’s population.

When it was created in 1994, it was considered a national model. But the state is now struggling with runaway costs. The TennCare budget for the 2005-06 fiscal year is $8.7 billion, or about 34 percent of the overall state budget.

The state’s tougher stance means contractors will received less payments, must disclose lobbying deals, accept stricter rules on consulting arrangements, and face stiffer penalties for violating the contracts. The state also will wield more authority to terminate the deals.

The TennCare Bureau is renewing all its management contracts. In the case of one contractor that was paying Ford — Doral Dental — the state will not renew the contract.

Ford has been charged with bribery and extortion in a case unrelated to TennCare. He resigned from the Senate last week.

The ethics language in the new contracts will forbid contingency fees to lobbyists or subcontractors, or subcontractor payments based on getting the state to funnel more business to a company.

Under the current contracts, the managed care groups are not allowed to pay state officials, but the state has no way to verify they are not making such payments.

Requiring managed care groups to disclose exactly whom they are paying, including lobbyists and subcontractors, will allow regulators to check for conflicts of interest involving state officials.

Payments to managed care organizations will be reduced by about 15 percent, Hickey said. Right now, the state pays about $209 million in administrative fees out of the $8.7 billion TennCare budget. Performance incentives will allow MCOs to earn back some of the lost money.

With less money, Hickey hopes side deals such as those Ford had will be too expensive.

“Any of the bad actors out there will have to get back to focusing on the core business,” he said.

The state will also require the managed care organizations to take on some of the financial risk the program once required.

“At the very least we can get in the position where we can align our interests … and get the MCOs to care about the expenses passing though today,” he said.

TennCare initially required its managed care groups to share full risk, partially protecting the state from dramatic spikes in health care costs. But after mismanaged MCOs started falling apart, the state had to shoulder the full risk of the deals.

Blue Cross-Blue Shield of Tennessee, the biggest TennCare managed care organization with about 700,000 enrollees, said the company supports the new ethics provisions and performance standards.

“We’ve said all along we would support some type of risk,” spokesman Bill Steverson said. “We’re confident we will be able to perform to that level.”

Full financial risk for MCOs could come later if the state gets more freedom in the court system to change the program, Hickey said.

TennCare will bring the new contract language to a legislative oversight committee later this month.

Sen. Jim Bryson, R-Franklin, sits on the legislative panel that will review the contracts this month, and said there’s great interest in what the final deals look like.

“It’s obvious from the problems that we have had with TennCare contractors, that the contracts needs to be strengthened with some severe penalties for unethical and illegal payments,” he said.

The contractors at first balked at the new deals that will mean less money for them and more work — along with tougher oversight, said Hickey, a health care expert brought in last year by Gov. Phil Bredesen to revamp the program.

“I think they realize … the world we operate in now is not going to be here going forward,” he said.

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On The Net:

TennCare: www.state.tn.us/tenncare/