Analysis: Billion-dollar whitewash?

By: - June 16, 2021 2:29 pm

The Centene Corporation headquarters. Photo from Google Maps.

In the wake of a blockbuster settlement of fraud claims, the top executive at the nation’s biggest Medicaid contractor was eager Wednesday to put the matter behind the company, which derives most of its revenue from taxpayers.

But even though executives repeatedly used some form of the word “transparency,” they seem to be trying to get past the scandal without explaining to taxpayers and shareholders what, exactly, they did. 

That’s kind of a big deal as the company asks states and the federal government to continue to trust it to handle taxpayers’ billions. It’s also a big deal in a health care arena where huge corporations have been accused of exploiting a lack of transparency to overcharge taxpayers vast sums of money.

Michael F. Neidorff, chairman, president and CEO of Centene Corp., on Wednesday told investors that the $153 million the company is paying two states and the $1.1 billion it plans to pay 20 others settles a matter that was cleared up years ago. 

“The agreement addresses a situation from 2017 to 2018,” he said. “The policies and practices that created the situation were changed in 2019, making the matter very much a thing of the past. With this agreement, Centene will be able to put the situation behind us in a timely manner.”

To make sure none of the investment analysts viewing the presentation missed it, Neidorff hammered the point again.

“I would like to reiterate that the matter in the agreement is very much a thing of the past and we are looking forward to bringing this to resolution as we move ahead and focus on delivering the highest quality of care to our members,” he said.

The problem is, many states seem poised to accept settlement money and continue paying billions to Centene with only the vaguest idea of what the company did in 2017 and 2018, and what it might have cost taxpayers.

On Monday, Ohio Attorney General Dave Yost announced that Centene initiated settlement talks and just four months after Ohio sued the company, Centene had agreed to pay $88.3 million. 

Because it’s the first — and so far only — state to sue in the matter, Ohio’s getting special treatment. If any state gets more, Centene will have to plus up its settlement with Ohio to match it, Yost said.

On Wednesday, Neidorff claimed that the state governments on which his company depended for much of its $120 billion in annual business deserved transparency.

“We have a deep respect for our state partners, and have addressed their concerns expeditiously, increasing the transparency of our pharmacy network,” he said.

But that transparency has been hard to spot in the company’s recent actions.

Centene on Monday stressed that it admitted no wrongdoing as it shelled out all that money. The press release announcing the settlement was titled “Centene announces no-fault agreements with Ohio and Mississippi to resolve pharmacy subsidiary claims.”

Centene’s press operation on Tuesday didn’t respond to a question asking for an explanation of the conduct over which the company was prepared to pay out $1.243 billion. 

And on Wednesday, Centene’s six top executives answered a multitude of windy, jargon-laden questions from stock analysts. But they ignored another, seemingly simple one: Don’t taxpayers and shareholders deserve to know what Centene did to necessitate such a massive payout?

The company is presumably anxious to keep other states from suspending their enormous contracts the way the Ohio Department of Medicaid has. And the company clearly wants to stop attorneys general in other states from following Yost’s lead by filing lawsuits alleging that Centene bilked taxpayers out of tens of millions of dollars.

“Pursuing the matter in court could have involved litigation in 22 jurisdictions over the next three to five years,” Neidorff said. “And we all know what legal reserves and expenses that could have generated.”

Unless other states do sue, the Ohio suit and earlier investigations there might be the fullest picture the public gets of Centene’s alleged misconduct.

Yost’s team accused Centene of creating a non-transparent chain of pharmacy middlemen to overbill taxpayers through a few stratagems.

“One was double billing,” Yost said Monday. “A process by which they used more than one entity to process a claim and added costs to it — overbilling.”

Yost’s team also accused Centene of pocketing $6.7 million a year in funds that were intended to pay pharmacists to dispense drugs. 

“They actually claimed they were paying more to the pharmacists than they actually were,” he said.

The AG also accused the company of marking up drugs by as much as $400,000 in a single week. In court filings, Centene denied the claims.

Mississippi, the other state with which Centene announced a settlement, was much less specific in its claims of wrongdoing.

“Following suspicions that PBMs were inflating their bills, in 2019, the auditor’s office launched an investigation to review invoices produced by a Centene-owned company,” a joint press release by Attorney General Lynn Fitch and state Auditor Shad White said. “Contracts required payments be capped by certain industry-standard prices, and the PBM was charging Medicaid more than the allowed price cap.”

Whether other state attorneys general will go into more detail is unclear. Those in Georgia, Florida, Kansas, New Mexico and Texas didn’t respond when asked whether they’ll seek settlement money from Centene or whether they’ll publicly describe what they believe the Medicaid contractor did wrong.

They should be more forthcoming as the process moves forward, said Greg Reybold, vice president and association counsel of the Georgia Pharmacy Association — a group that says Centene and other healthcare giants have used non-transparent middlemen to drive drug prices up and community pharmacists out of business.

“I think folks should know: What were some of the practices that were being investigated?” he said Tuesday.

Georgia has some distinct similarities to Ohio. For example Centene-owned managed-care organizations in both states saw much higher markups of generic drugs than their peers did.

An Ohio analysis showed that in 2017 all Medicaid managed-care plans were charging taxpayers far, far more for generic drugs than they were paying pharmacists. But Centene’s Buckeye Health Plan was charging almost double what the others were.

Buckeye marked up generics an average of $11.60 each for the 4.57 million generic prescriptions it handled, while the average of the other four Medicaid managed-care organizations under contract with Ohio Medicaid was about $5.95. That means middlemen working for Centene marked up generic drugs $26 million more than if they were charging what the others were — and the the analyst hired by the Ohio Department of Medicaid concluded that together, the plans were charging at least triple the going rate

And it turned out that a Centene-owned pharmacy middleman was paid $20 million for services that had an identical description to services that another middleman, CVS Caremark, said it provided. Be that as it may, the companies later said they weren’t double-dipping.

Altogether, pharmacy middlemen working for Centene’s managed-care organization in Ohio charged $33 million more for the cheapest class of drugs in 2017 than they paid pharmacists. That was the highest rate for any of Ohio’s five managed-care organizations.

Similarly, an audit of fiscal year 2019 commissioned by the Georgia Department of Community Health determined that the difference between what Centene-owned Peach State Health Plan was charging taxpayers for drugs and what pharmacies were getting was far greater than it was for the state’s other three managed-care organizations.

A Myers and Stauffer report obtained by the Capital Journal said that at $12.93 per prescription, the Peach State markup in 2019 was almost quadruple the average of the other three plans. 

Also similar to Ohio was that generic markups under the Centene managed-care organization totaled $30 million that year.

That’s a lot of coincidences, Reybold said.

“It begs the question, what isn’t being fleshed out?” he asked. “What don’t we know?”



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Marty Schladen
Marty Schladen

Marty Schladen has been a reporter for decades, working in Indiana, Texas and other places before returning to his native Ohio to work at The Columbus Dispatch in 2017. He's won state and national journalism awards for investigations into utility regulation, public corruption, the environment, prescription drug spending and other matters.