N.C. Gov. Roy Cooper was in Charlotte Monday to welcome the Centene Corporation, a provider of managed care services for Medicaid, public, and private health plans. It claims to be the largest provider of Medicaid services in the nation. The company announced last year that it selected Charlotte for its East Coast regional headquarters after North Carolina offered $338 million in tax incentives through a “transformative” Job Development and Investment Grant.
Last week, the company also announced that it is paying more than $140 million to settle lawsuits for breach of Medicaid contracts. The suits were brought by Ohio and Mississippi, whose state attorneys general alleged Centene misled their state Medicaid programs, causing overpayment by the state health programs. The allegations stem from Centene’s business practices in Medicaid’s pharmacy benefits reimbursements from 2017 and 2018. The states accuse Centene of using contractors to drive up pharmacy reimbursements. Ohio’s Department of Justice called it an “elaborate scheme” born of “corporate greed.”
“Centene took advantage of all of us who pay taxes to care for the most vulnerable Ohioans,” Ohio Attorney General Dave Yost said in a news release last week.
“Centene used sophisticated moves to bill unearned dollars — moves known only at the top levels of health care companies,” Yost said. “It has taken a huge effort by my team to untangle this scheme — and now that we know how it works, the alarm bells should be ringing for anyone using similar tactics.”
Yost agreed to drop the suit after Centene settled, paying Ohio $88.3 million and Mississippi $55 million dollars. The company has also reportedly reserved $1.1 billion for any future settlements with other states. The company denies any liability and says the settlement does not indicate an admission of fault in the accusations.
In Monday’s dedication, Centene CEO Michael Neidorff said that Centene is going to be a part of North Carolina’s Medicaid transformation to managed care planned for launch next month.
“We are honored to be part of North Carolina’s Medicaid transformation rollout starting July 1,” said Neidorff.
North Carolina’s Department of Commerce struck the deal last year to bring the company to Charlotte, offering $388 million in tax incentives through the JDIG program. The enormity of the grant stems from an add-on to a state program that was originally designed to bring companies to poorer areas of the state. Centene was awarded the first “transformational” JDIG grant to build its hub in Charlotte. Apple received the most recent one.
“We are excited to have a company like Centene here with this innovation and foresight,” said Cooper. “We need to come up strong for them, too. We need to make sure that Michael gets the well-trained, skilled workforce that he needs to do the job.”
Centene is a Fortune 500 company, and its billion-dollar hub project drew incentive offers from states across the country. After weighing the offered packages, Centene selected North Carolina for the hub, promising more than 6,000 high-paying jobs for Charlotte over the next 12 years. Comments by Neidorff at the dedication ceremony with Cooper on Monday emphasized Centene’s corporate commitment to cultural diversity, highlighting that more than 50% of its workforce are people of color and 75% of employees are women.
“Charlotte has all the elements of a great city: successful schools, impressive infrastructure, great diversity, and tremendous opportunity for upward economic mobility,” Neidorff said.
“Centene continues to evolve into a technology company that does health care,” he added. “Our new campus is designed to meet the modern expectations of today’s professionals while serving as a technology hub to help shape the future of health care.”
The company says that the lawsuits and subsequent settlements with Ohio and Mississippi stem from services provided by Envolve Pharmacy Solutions Inc., its pharmacy benefits manager subsidiary. Envolve was accused of a practice called “spread pricing” in which the PBM charges the Medicaid program more than they pay the pharmacy for the patient’s drug, and keep the difference as profit. Centene says that they have improved transparency to eliminate spread pricing.
“We respect the deep and critically important relationships we have with our state partners,” said Brent Layton, Centene’s president of health plans, markets, and products in a press release announcing the settlements. “These agreements reflect the significance we place on addressing their concerns and our ongoing commitment to making the delivery of health care local, simple, and transparent. Importantly, putting these issues behind us allows us to continue our relentless focus on delivering high-quality outcomes to our members.”
The Centene dedication ceremony happened the same day the N.C. Senate released its state budget proposal with tax cuts in it. It limits spending to a 3.45% increase in 2021-22, and 3.65% in 2022-23, far less than Cooper’s proposal of a 12% increase in state spending over two years.
“The same governor who is sharply critical of tax relief for the state’s small businesses and Mom and Pop shops, which comprise 99.6% of businesses here in North Carolina, is going to celebrate this massive pledge of taxpayer money to a company that’s notorious for taking advantage of taxpayers? It staggers one’s capacity to countenance political hypocrisy,” Jon Sanders, senior fellow in regulatory studies at the John Locke Foundation.
The Senate’s budget also does not provide funding for Medicaid expansion, an issue that has sharply divided the governor and the legislature when it comes to the budget. Back in May, Centene and its CEO were publicly critical, even threatening to leave the company’s home state of Missouri when it also decided not to expand Medicaid.
“As the largest provider of Medicaid in the United States and a Fortune 42 company, I have to ask myself, ‘Why am I in this state?’” Neidorff said at the time to Health Payer Specialist, a health industry trade publication. “This is a state that frowns on this business; what am I doing here?… It’s an embarrassment.”
That corporate pressure to expand North Carolina’s Medicaid federal entitlement program, Centene’s primary business, is likely to intensify with such a large presence now in Charlotte. Cooper reinforced his and Centene’s position in his comments Monday. “Another thing Michael would tell you: We need to expand Medicaid. We need to make sure that this works,” Cooper said. “It’s a lay-up, folks. We need everyone out there talking to legislators about this critical moment in time. It’s really a moral issue for a person to be able to afford to see a doctor, and it’s time for that to happen.”
Centene is worth an estimated $35 billion. Its billion-dollar Charlotte facility broke ground in August and is on 80 acres in University Research Park along Governor Hunt Road. It includes everything from office space to a child care center and an amphitheater.
“Looking around here, it’s amazing what a billion dollars can do,” Cooper told the audience gathered at the dedication.