Fairview says it’s owed $100M by UCare as court orders consumer protections for patients

Fairview Health Services has $100 million at stake in the state’s eventual liquidation of UCare, the Minneapolis-based health system asserted in court filings this week.

The legal papers and a judge’s order offer more details into how far UCare has fallen in just a few short years, from a health plan with record annual profits of more than $300 million in 2022 to a company where the court is now barring officers and directors from running the business.

For nearly 20 years, Fairview hospitals and clinics have provided services to thousands of UCare-insured patients. In April, the health insurer began reopening and denying claims that had already been paid to the health system, according to a Dec. 18 filing in Ramsey County District Court.

UCare did so without requesting medical records to inform those decisions, Fairview said, in what was “an apparent cost-saving measure”. The insurer also withheld payments for medical and pharmacy services, according to the filing, often with no identified basis for the decision or option for appeal.

“These claims practices — which violated Fairview’s written agreement with UCare — threaten a significant revenue impact on Fairview,“ the filing states. “UCare’s unstable financial condition and impending liquidation make it likely that UCare will never be able to catch up on these obligations.”

State officials, while not commenting on pending litigation, said creditor claims will be addressed according to a process outlined in state law.

“The state is evaluating UCare’s existing claims obligations and other debts,” the Minnesota Department of Health said in a statement.

The filings also highlight the potential financial risk for hospital and clinic operators, who won’t be allowed to try collecting from patients if any of the insurer’s bills go unpaid.

“All providers of health care goods or services ... are prohibited from attempting to collect ... from any enrollee of UCare for goods or services to the extent UCare is obligated to cover the goods or services,” judge Stephen Smith wrote in his order this week.

The state has retained a company to serve as special deputy commissioner and develop what’s being called a rehabilitation plan, although UCare ultimately will be liquidated, the Health Department said in a petition filed with the court earlier this month.

UCare is not expected to be able to meet its debts as they come due, according to the Dec. 1 petition. Further transaction of business at UCare, it said, would be hazardous to policyholders, creditors and the public.

The judge’s order blocks UCare leaders from transferring the insurance company’s property without written permission from the Health Department, which the court has now formally designated as rehabilitator.

In addition to the continued viability of UCare, the state should consider the interests of health care providers and other contracting groups, the court order asserts.

“The rehabilitator must seek court approval of any contract amendment that diminishes compensation of a provider or a participating entity and the amendment may not be effective for more than 60 days,” the order says.

The Health Department will have authority to amend the terms or health care provider contracts, including reimbursement. Fairview’s filing says that as of Dec. 12 it was owed about $80 million for unpaid medical services and $23.7 million for unpaid pharmacy-related services.

Not only is Fairview worried it may not recoup the $100 million it says it is owed, but there’s also concern over future reimbursement provided for treating UCare/Medica enrollees.

Minnetonka-based Medica said last month it would acquire UCare’s remaining Medicaid and MNsure business in a deal meant to minimize disruption for about 300,000 enrollees.

For now, two clinic operators this month told the Minnesota Star Tribune that UCare has continued to pay claims.

Claims are being paid at Hennepin Healthcare, the Minneapolis-based nonprofit that runs HCMC, although the health system says payments have been arriving somewhat less reliably, said Pat Belland, the vice president of revenue cycle.

Hennepin Healthcare will continue treating patients with UCare coverage, Belland said, despite the financial questions.

For patients being treated in late December, he said, UCare wouldn’t normally pay Hennepin Healthcare until late February.

“And, so, I’m hoping they have enough cash to be able to make those payments,” Belland said.

“What we’re concerned about is: Are they gonna run out of money?” he said. “That’s our biggest concern right now, and we really don’t have any answers from UCare, from the state, from Medica.

“So, if you ask if we have heartburn — yeah, the answer is: Yes.”

The health insurer first announced in September it would stop offering Medicare Advantage plans next year due to the financial woes, forcing more than 150,000 enrollees to shop for new insurance coverage in 2026.