A judge issued a significant ruling Wednesday in the ongoing dispute between Northside Hospital and Anthem Blue Cross Blue Shield insurance. Most importantly for the 400,000 Northside patients with Anthem insurance who are hoping to remain in-network with the hospital, Fulton County Superior Court Judge Rachelle L. Carnesale extended an injunction that has maintained the status quo for those patients “until further order.”

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Facing the looming closure of a hospital in East Point, Fulton County officials and Grady Health System representatives are discussing ways to continue providing for emergency and hospitalization needs in the underserved south county area.

Among the options: Raising the amount of money Fulton County taxpayers provide to the nonprofit Grady Health System. County Commission Chairman Robb Pitts said he hopes to learn whether raising more money could enable Grady to run a scaled-down version of the current hospital, keeping the emergency room and a couple dozen hospital beds open, or even offer the same services in a nearby location.

“I know there’s a need,” said Pitts. “So what do we do?”

Wellstar announced its plans April 6 to close the emergency department and inpatient beds at Wellstar Atlanta Medical Center South in order to convert it into a 24-hour walk-in clinic and outpatient rehabilitation center. The East Point facility is the only acute care hospital that exists south of I-20 within Fulton County.

The Atlanta Journal-Constitution was the only media inside a Tuesday afternoon meeting called by Pitts to discuss a response to Wellstar’s plans.

The conversion of the East Point location into an outpatient facility will occur early next month, Wellstar’s CEO said. People with emergencies or other hospital-level cases will be served by other nearby hospitals, said Candice Saunders, the CEO.  Those include Southern Regional Medical Center in Clayton County, or Wellstar Atlanta Medical Center’s main campus in Atlanta, or Grady.

Some members of the county’s commission and hospital authority said they would like Grady to take over the East Point hospital and continue running it. But Grady CEO John Haupert, also present at the meeting, said that was not possible with his organization’s current financial status and the state of the East Point hospital building.

Grady looked into the possibility previously when Wellstar put out a request for proposals to sell that hospital and another, AMC in Atlanta. Ultimately it was deemed too costly, Haupert said. The East Point building required significant modernization of its utilities that would cost $130 million, even before tackling other outdated structures like patient rooms without bathrooms.

The pandemic has so damaged Grady’s own finances that what would have been a 2% margin of profit in the current fiscal year is instead currently projected to be a 5% loss, Haupert said.

Pitts raised the possibility of a county tax increase for Grady and having Grady run the south Fulton facility.

Haupert said Grady couldn’t commit to any of the proposals without learning more.

Pitts said he would discuss the issue with other county commissioners at their regular meeting Wednesday. Two commissioners, Marvin Arrington and Natalie Hall, attended part of Pitts’ Tuesday meeting with Grady.

Pitts also said he would ask Wellstar if it would delay the changes to give the county more time to develop a plan.

Fulton and DeKalb counties jointly own Grady Health System, whose main hospital in downtown Atlanta and network of clinics serve medically needy and indigent residents.

Local funding is generally split between Fulton and DeKalb on a ratio to reflect the patient mix at Grady. The two counties are already hoping to meet soon with the city of Atlanta and the governor’s office to discuss Grady’s finances.

Each county commission must vote to approve their county’s portion of Grady’s funding. Fulton currently pays $42.5 million per year and DeKalb pays $12.9 million per year.

Grady’s main hospital nearly closed in 2007 because of massive debts, but its finances have been restructured and strengthened in recent years.

When Wellstar announced the closure, it said too few of the patients who walk in the door of the East Point hospital ended up getting admitted for full hospital care. Wellstar could not provide statistics on those who needed emergency department-level care and then left without staying overnight. But officials said that only 7 in 140 emergency room patients a day on average ended up getting admitted to the hospital.

Most importantly, the hospital is not a destination for lucrative medical services. When Wellstar bought the troubled East Point facility in 2016 along with other hospitals, it was the North Fulton Hospital in Roswell that was the prize. The East Point hospital would have required investment to make it a draw for specialists and operations.

Wellstar Health System in recent years has been exploring options – including a sale or partnership — for its Atlanta Medical Center and the affiliate hospital in East Point.

Last year, a Wellstar advisory board said Wellstar had not invested sufficiently into the East Point hospital and called for the nonprofit system to inject more resources and more effort into invigorating it.

A letter to the chairman of the Wellstar Health System board of trustees from Lisa Medellin, chairman of the volunteer board, obtained by Georgia Health News, stated, “The evidence of an authentic plan and appropriate strategy appears non-existent for revitalizing the AMC Downtown and East Point hospitals.’’

Both of the Atlanta Medical Center hospitals have been struggling financially. American Hospital Directory, in data reported earlier this year, listed the two combined with a slight $850,000 profit on $2 billion in revenues. The two hospitals had long suffered problems with aging infrastructure.

Wellstar told the AJC that in 2021 alone, the Wellstar Health System overall provided $915 million worth of care that it never got paid for, or got underpaid for, “reflecting its promise to serve all people in our communities.”

Wellstar Health System has 11 hospitals, including the East Point facility at the moment, as well as more than 300 medical office locations, cancer centers, rehabilitation centers, and a retirement village. It listed its 2020 net assets at $1.8 billion.

Grady Health System is metro Atlanta’s main safety-net hospital, seeing more than 700,000 patient visits a year in both the main hospital and other clinics and offices. It hosts the state’s premier trauma center.

Ariel Hart is a health care reporter for the Atlanta Journal-Constitution

AJC Reporter Ben Brasch contributed to this article

EDITOR’S NOTE: This article has been changed to note that Fulton County Commission Chairman Robb Pitts did not add the hospital issue to the agenda for the Wednesday county commission meeting after all.

Prescription drug costs for California’s massive Medicaid program were draining the state budget, so in 2019 Gov. Gavin Newsom asked the private sector for help.

The new Medicaid drug program debuted this January, with a private company in charge. But it was woefully unprepared, and thousands of low-income Californians were left without critical medications for weeks, some waiting on hold for hours when they called to get help.

What happened in the two years between the contract award and the start of the program is a case study in what can go wrong when government outsources core functions to the private sector.

California awarded the Medi-Cal Rx program to a unit of Magellan Health, a company with expertise in pharmacy benefits and mental health. But Magellan was then gobbled up by industry giant Centene, worth roughly $50 billion, which was looking to expand its mental health portfolio.

Centene was already a big player in state Medicaid drug programs — but one with a questionable record. The company was accused by six states of overbilling their Medicaid programs for prescription drugs and pharmacy services and settled to the tune of $264.4 million. Three other states made similar allegations and have settled with the company, but the amounts have not been disclosed. Centene, in resolving the civil actions, denied any wrongdoing.

KHN has learned California health officials also are investigating Centene.

Georgia is expected to announce a settlement with Centene in a pharmacy overbilling case. State officials have declined to comment on the issue with Georgia Health News. The company could not be reached for comment in the matter.

Lawrence Deas, an attorney in Jackson, Miss., told GHN last year that his firm of Liston & Deas, along with Cohen Milstein Sellers & Toll, is representing Georgia.

Centene is the parent company of Peach State Health Plan, one of the three managed care companies overseeing benefits for hundreds of thousands of Georgians covered by Medicaid.

Handing over control

In his 2019 inauguration speech, Newsom vowed to use California’s “market power and our moral power to demand fairer prices” from the “drug companies that gouge Californians with sky-high prices.”

Drug spending by the state for its Medicaid, prison, state hospital, and other programs had been climbing 20% a year since 2012, so the first-term Democrat issued an executive order requiring California to make its own generic drugs and forge partnerships with counties and other states to buy drugs in bulk. He also directed the state to buy prescription drugs for Californians enrolled in Medi-Cal, the state’s Medicaid program, which covers roughly 14 million people.

Newsom no longer wanted to allow the state’s two dozen Medi-Cal managed-care health plans to provide prescription drug coverage to their enrollees, arguing the state would get a better deal from drug companies by harnessing its purchasing power.

That December, California awarded a competitive $302 million contract to Magellan Medicaid Administration, a subsidiary of Magellan Health, to make sure Medi-Cal enrollees get the medications that California would buy in bulk. Magellan provides pharmacy services to public health plans in 28 states and the District of Columbia.

Even though Magellan’s biggest money maker is mental health insurance, it met a key requirement of the state’s call for bids: It didn’t provide health insurance to any Medicaid enrollees in California.

Magellan was supposed to take over the drug program in April 2021. But on Jan. 4 of that year, Centene — which was seeking a greater role in the lucrative behavioral health market — announced plans to buy Magellan.

St. Louis-based Centene, however, is one of the largest Medi-Cal insurers in the state, a factor that normally would have disqualified it from bidding for the original contract. Centene provides health coverage for about 1.7 million low-income Californians in 26 counties through its subsidiaries Health Net and California Health & Wellness. It earned 11% of its revenue from California businesses in 2019, according to its 2021 annual report to the U.S. Securities and Exchange Commission.

But the state bent over backward to make it work, delaying implementation of the program while Magellan set up firewalls, sectioned off its business operations from Centene, and paid for a third-party monitor.

State regulators reviewed the merger in a 30-minute public hearing in October 2021. They didn’t mention Centene’s legal settlements with other states.

The state Department of Managed Health Care approved the merger Dec. 30. Two days later, the state launched its new prescription drug program with Magellan at the controls.

Georgia lawmakers recently discussed a similar Medicaid prescription drug benefit change. A proposed bill would have stripped those benefits from Peach State and two other managed care companies and placed that function within a state agency. The legislation passed the Georgia House unanimously, but it never gained traction in the state Senate. The General Assembly session ended last Monday.

Centene’s legal troubles

In the past 10 months, Centene has settled with nine states over accusations that it and its pharmacy business, Envolve, overbilled their Medicaid programs for prescription drugs and services: It settled with Arkansas, Illinois, Kansas, Mississippi, New Hampshire, and Ohio, according to news releases from attorneys general in those states. The three other states have not been identified by Centene or the states themselves.

The company has set aside $1.25 billion for those settlements and future lawsuits, according to its 2021 report to the SEC.

Centene, which has denied wrongdoing in public statements, did not respond to multiple requests by KHN for interviews, nor did it respond to emailed questions. Magellan also did not respond to interview requests.

From the start, other California health insurers opposed the state takeover of the Medi-Cal drug program, partly because it took away a line of business. They were even more furious when the state allowed one of their biggest competitors to seize the reins — especially given its legal entanglements.

The state Department of Health Care Services, which administers Medi-Cal, acknowledged to KHN in March that it’s investigating the company but declined to provide specifics. The state is investigating Centene’s role in providing pharmacy benefits before the state took the job from managed-care insurers.

“DHCS takes all allegations of fraud, waste, and abuse seriously and investigates allegations when warranted,” department spokesperson Anthony Cava said in a statement.

A sale in the offing?

When Medi-Cal Rx debuted Jan. 1, thousands of Californians couldn’t refill critical — sometimes lifesaving — medications for days or weeks. Doctors, pharmacists, and patients calling for help often languished on hold for as many as eight hours.

Magellan blamed the problems on staff shortages during the covid-19 omicron surge and missing patient data from insurance plans. State health officials went to great lengths to fix the problems and appeared before legislative committees to provide lawmakers with assurances that the contractor wouldn’t be paid in full.

But Medi-Cal patients still face uncertainty.

Not long after Magellan took over California’s Medi-Cal drug program, reports surfaced in Axios and other publications that Centene might sell Magellan’s pharmacy business.

Centene officials have not confirmed a sale. But it would align with the company’s recent moves to restructure its pharmacy operations in the face of state investigations — such as seeking an outside company to begin managing its drug spending.

“Once you tell a PBM they actually have to behave, that’s when there’s no more money in it. It’s time to go,” said Antonio Ciaccia, president of drug-pricing watchdog 3 Axis Advisors, referring to businesses known as pharmacy benefit managers.

Yet another ownership change in California’s drug program could bring more disruption to the state’s most vulnerable residents, some of whom are still having trouble getting their drugs and specialty medical supplies after Magellan’s rocky takeover.

“I don’t know what kind of instability that creates internally when there’s a change of this magnitude,” said Linnea Koopmans, CEO of Local Health Plans of California, which represents the state’s publicly run Medicaid insurers that compete against Centene. “It’s just an open question.”

Koopmans and other Centene critics acknowledge that California has long relied on private insurance plans to offer medical and prescription drug coverage to Medi-Cal enrollees and that the state shouldn’t be surprised by ownership changes that come with consolidation in the health care industry. For example, Centene has a history of taking over California contracts after an acquisition — it did so when it purchased Health Net in 2016.

But consumer advocates say the Centene fiasco makes it clear that the state must improve oversight of corporate mergers if it chooses to hand over responsibility for public programs.

“In an ideal world, this is all backroom machinations that people don’t notice — until they do, until there is a problem,” said Anthony Wright, executive director of Health Access California, a consumer advocacy group. “It just increases the need to make sure that that oversight is there, that accountability is there.”

Andy Miller contributed to this article.

Samantha Young is a California-based reporter for Kaiser Health News.

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Under the state’s regulatory certificate-of-need (CON) system, other hospitals can contest CHI Memorial Hospital Georgia’s bid to get state approval for the replacement hospital, which would be located in Ringgold. No Georgia hospital system has objected.

But the road to construction has an unusual obstacle.

The CON for the $130 million project is being opposed by a health system based not in Georgia, but just across the state line in Tennessee. Parkridge Health System, with four hospitals in Chattanooga, is part of HCA Healthcare, a hospital chain.

CHI Memorial also has a hospital in Chattanooga and one in nearby Hixson.

Memorial is part of Chicago-based CommonSpirit Health, created in 2019 when Catholic Health Initiatives and Dignity Health merged.

CHI officials say they believe this is the first time an out-of-state health provider organization has led an opposition effort to a Georgia certificate-of-need application.

“Citizens want this hospital,” said Angie Stiggins, administrator of the nonprofit CHI Memorial Hospital Georgia, currently located in Fort Oglethorpe. “We’re trying to bring citizens a cutting-edge medical facility.’’

It would feature a 24-bed emergency department, expanded surgical services and a new intensive care unit.

The current CHI hospital, built in 1953, has 179 licensed beds. The new hospital would downsize to 64. “We don’t need 179 beds in our community,” Stiggins said.

A spokeswoman for Parkridge told GHN on Wednesday that the health system opposes the move to Ringgold, not the existing Fort Oglethorpe location.

“Parkridge Health System has served the residents of southeastern Chattanooga and North Georgia, including Catoosa County, for decades and is committed to providing high quality health care,” Michelle Hindmon said in a statement. “The proposed relocation will duplicate services in a region that is already well-served while reducing access to care for the patient base historically served by CHI Memorial Hospital Georgia, particularly Walker County residents.

“Parkridge Health supports equitable and sustainable access to health care; however, we do not feel CHI Memorial Hospital Georgia’s relocation supports that position.”

Tennessee also has CON regulations.

Georgia regulators’ decision, pending this month, will come shortly after tensions over the CON program surfaced again in the Georgia Legislature.

CON is a controversial system that governs the construction and expansion of health care facilities and regulates what kinds of services they can offer. A provider must obtain a state certificate of need, or CON, for any major project.

Such laws were adopted by states decades ago to control health care spending. But more than a dozen states have repealed these regulatory set-ups, Florida being one of the recent ones.

Like others before it, the recently concluded session of the Georgia General Assembly included major legislative proposals targeting CON – including one proposal to repeal the entire apparatus. As in past years, the hospital industry successfully lobbied against any changes.

Stan Jones, a longtime health care attorney and CON expert at the Nelson Mullins law firm, said Wednesday that it’s unusual for an out-of-state health system to oppose a hospital project in Georgia. “I don’t recall a situation where it has affected the outcome’’ of a CON decision, Jones added.

The powerful chairman of the Georgia Senate Rules Committee, Jeff Mullis (R-Chickamauga), said in a statement last year that community hospitals “are the lifeblood of the regions they serve, generating jobs and economic impact for local businesses, schools, local government, and residents.”

He added that “companies looking to locate in a new region put health care at the top of their list of requirements for their employees. This new hospital will be a significant boost to our regional economic development.”

Mullis, who is retiring from the Legislature this year, is also CEO and president of the Northwest Georgia Joint Development Authority.

Stiggins noted that U.S. Sen. Jon Ossoff (D-Ga.) has urged the state’s Department of Community Health to approve the replacement hospital.

She said she feels confident that CHI Memorial’s application for a CON will be approved by Georgia regulators.

But she pointed out that Parkridge could appeal that decision. Such appeal battles can take years to resolve.

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A different option unfolded Wednesday: Wellstar announced that it’s converting the 200-bed East Point hospital into a primary care, outpatient and rehabilitation center.

The ER and hospital beds will close May 6. The AMC South facility now runs the closest emergency department to Hartsfield Jackson Atlanta International Airport.

Wellstar, though, said the majority of patient visits to AMC South emergency room are for lower levels of care that can be better met through primary care,  medication management and other services. ER visits to the AMC South have averaged 140 a day, but just seven led to hospital admissions.

Wellstar’s president and CEO, Candice Saunders, said in a statement to GHN that “we are providing the care that our patients are using and providing it in a way that will help prevent health issues from escalating. We are not closing Atlanta Medical Center South or leaving the community. We are simply enhancing the care that is being used – including primary care, medication care, and rehabilitative care.”

Both of the AMC hospitals have been struggling financially. American Hospital Directory, in data reported earlier this year, listed the two combined with a slight $850,000 profit on $2 billion in revenues. The two hospitals had long suffered problems with aging infrastructure.

Last year, a Wellstar advisory board called for the nonprofit system to inject more resources and more effort into invigorating the two hospitals.

“The evidence of an authentic plan and appropriate strategy appears non-existent for revitalizing the AMC Downtown and East Point hospitals,’’ said a letter from the chairman of the advisory board for the two hospitals, sent to the chairman of the Wellstar Health System board of trustees.

The letter, from Lisa Medellin, chairman of the volunteer board, was obtained by Georgia Health News.

The group’s goal is to ensure that “the underserved and disenfranchised patients/residents are given a voice that results in them having access to the same quality of health care services offered in many of the suburban hospitals that comprise the Wellstar umbrella,’’ the letter said.

Saunders said in a statement Wednesday that “as Georgia’s largest safety net caregiver, we are committed to serve everyone in our community and will continue to do so.”

The Marietta-based system is still looking for a financial partner for the two facilities, industry officials said.

Many of AMC South’s patients were on Medicaid or Medicare, which pay less than private insurance, or were uninsured.

“I know they do have a large percentage of uninsured or underinsured patients that they serve at that facility,” East Point Mayor Deana Ingraham told the AJC.

The area will still have EMS coverage, but ambulances will take emergency patients to hospitals such as Southern Regional Medical Center, Grady Memorial Hospital and the main campus of Atlanta Medical Center.

No employees will lose jobs in the transition.

“We can confirm that of those team members moving, all will continue in the Wellstar Health System, should they choose, with the majority, potentially, serving at Atlanta Medical Center Main,” said David Jones, chief human resources officer for Wellstar.

Wellstar is currently also dealing with a protracted contract dispute with UnitedHealthcare.

The main campus of Atlanta Medical Center has a distinguished history. Originally an infirmary founded in 1901 by a local Baptist pastor who was also a physician, it grew rapidly and was known for years as Georgia Baptist Hospital. Later it became Georgia Baptist Medical Center.

For decades it was one of the state’s most prominent health care facilities, but its fortunes waned after the middle of the 20th century as competition increased and the area where it is located declined economically.

That area is the equally historic Old Fourth Ward of Atlanta, which in the last few years has seen a wave of real estate development and attracted an influx of new residents. Unfortunately, the hospital’s patient mix still doesn’t reflect the economic gentrification of the community, the advisory board’s letter said last year.

Meanwhile, Wellstar AMC South sits in a high-poverty community that, without a hospital, would be a “health care desert,’’ the letter said.

“Both hospitals serve a predominately low-income African-American population that carry the burden of health disparities on almost every chronic disease indicator that is a marker for being at higher risk relative to COVID-19, lower life expectancy and higher health care costs for treatment,’’ Medellin wrote.

Josh Berlin, CEO of the consulting firm rule of 3, said the East Point move to primary care “advances Wellstar’s competitive positioning with Piedmont and Emory, among the advancing independent primary care clinics now around Atlanta, as well as around the Georgia market.”

He added, “The question longer term will be is this a way for Wellstar to amplify its business within Atlanta’s Perimeter, where their core focus is still outside the Perimeter.”