Kentucky last year spent $130 million in Medicaid funds on addiction treatment, with most of the money coming from the federal government.
Fatal overdoses in the state have declined for two years. (Getty Images)
An Eastern Kentucky provider of addiction services has filed a lawsuit challenging cuts in Medicaid payments that it says threaten its business.
The lawsuit, filed Tuesday in Jefferson Circuit Court by Frontier Behavioral Health Center, is against Wellcare of Kentucky Inc. — one of six private insurance companies that handle most of the state’s Medicaid claims and establish rates for health providers.
The lawsuit is the latest development as providers and some insurance companies spar over cuts in payment. A week ago, Addiction Recovery Care, or ARC, the state’s largest provider of substance use disorder treatment, said it is laying off staff and reorganizing programs because of the reductions.
In July, ARC executives testified before a legislative committee in Frankfort to protest the cuts it said affected it and a handful of other providers.
Lawmakers join KY’s largest addiction treatment provider to oppose Medicaid payment cuts
Frontier, a for-profit company based in Prestonsburg, said in its lawsuit that cuts of 20% in payment for addiction treatment that took effect last month threaten its ability to care for patients and pay its 94 employees.
An additional, new requirement that Wellcare review services before agreeing to pay for them will further hinder operations, the lawsuit said.
“Frontier must pay its employees for their work,” it said. “Frontier does not have the luxury of delaying payroll and operational expenses until Wellcare decides whether it will pay Frontier for the medically necessary services Frontier provides to Eastern Kentucky’s vulnerable health behavioral health patients.”
Frontier sees about 50 patients a day, according to the lawsuit.
Frontier CEO Randy Hunter declined to comment on the case. Officials with Wellcare, based in Louisville, did not immediately respond to a request for comment.
Expanded Medicaid funds for addiction services that became available in 2014 have fueled rapid growth in treatment programs amid decades of growing addiction to opioids, methamphetamine and other substances in Kentucky.
Last year, Kentucky spent $130 million in Medicaid funds on addiction treatment, with most of the money from the federal government.
Kentucky Gov. Andy Beshear has cited the growth as important in battling addiction.
As an indicator of success, the Beshear administration points to the decline, for the second year in a row, of overdose deaths in Kentucky.
The state’s latest overdose report, released in June, shows a decrease in deaths to 1,984 from 2,200 the year before, a decline of 9.8%.
But the business of addiction treatment has brought complaints about high costs from the six private managed care organizations, or MCOs, that handle most of the state’s $1.6 billion a year Medicaid business. The companies contract with the state and receive a fixed amount per member to cover health costs.
And it has invited federal scrutiny.
In July, the FBI announced it was investigating ARC for possible health care fraud and asked anyone with information to contact them through the agency’s website. ARC, in a statement, has said it is confident in its services and is cooperating with the investigation.
Frontier provides services in Prestonsburg, Salyersville, Paintsville and Harlan, according to its website.
It said in the lawsuit the company first learned in August of a 20% rate cut being imposed by Wellcare.
Wellcare is the largest of the MCOs that oversee health care for most of the 1.5 million Kentuckians covered by Medicaid, with around 418,000 members enrolled in its plan. The other members are divided among the other five MCOs.
The lawsuit alleges when Frontier sought to question Wellcare about the cuts, the MCO claimed it sent Frontier a letter in March 2024 notifying it of the new rates.
“Frontier did not receive any letter from Wellcare notifying it of a rate cut in March 2024,” the lawsuit said.
It said that in August, Wellcare also began sending letters notifying Frontier it was placing its services on “prepayment review,” meaning it would have to review services before deciding whether to pay for them.
The lawsuit said the letters provide a telephone number to call Wellcare with any questions or concerns.
“The phone number has been disconnected,” the lawsuit said.
Frontier asks the court to find Wellcare in breach of its contract. It also asked for a temporary order barring the MCO from imposing “prepayment review” on Frontier services.
Claims in a lawsuit provide only one side of a case. Wellcare has not yet responded.
The case has been assigned to Jefferson Circuit Judge Annie O’Connell.