Staff Report

AUGUSTA – Last week, ModivCare Inc., which provides non-emergency medical transportation services under MaineCare – the state’s Medicaid program – to half of Maine’s 16 counties, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of Texas. The bankruptcy filing comes after the company failed to file a quarterly report with the Securities and Exchange Commission (SEC), citing the need to restate “significantly” lower revenue than the company reported in previous quarterly filings.

In a press release issued subsequent to the court filing, the Denver, Colorado-based company said it is seeking to eliminate more than $1.1 billion in debt, or about 85% of its total debt. The company also stated in a separate SEC filing on Aug. 12 that an impairment of goodwill could cost the company “not less than $250 million” and disclosed an internal investigation was underway for “compliance hotline allegations.”

In Maine, ModivCare has been under recent scrutiny for denying rides or failing to reimburse MaineCare patients without providing required documentation detailing the reasons for denials. Despite patient complaints about service and its shaky financial record, ModivCare was recently awarded a 10-year, $750 million contract from the Department of Health and Human Services (DHHS) that could rise close to a billion dollars over its term.

Penquis Community Action Program (CAP), a nonprofit that also provides MaineCare transportation services, is in the midst of a lawsuit over the state’s award process. Penquis, Waldo Community Action Partners and Kennebec Valley Community Action Program still provide MaineCare transportation services in the eight counties not covered by ModivCare. Waldo CAP is listed as an interested party in the lawsuit.

The awarding of a $750 million contract amid ModivCare’s precarious financial position and numerous patient complaints has raised serious questions about the DHHS award process. With the potential collapse of ModivCare, DHHS should re-evaluate their MaineCare transportation process and work with the CAPs to ensure patients’ transportation needs are met.

“I’ve heard from numerous constituents with complaints that ModivCare is not sending necessary documentation, leaving patients stranded and struggling for reimbursement. MaineCare transportation complaints have increased exponentially since DHHS took these contracts away from local nonprofits,” said Senate Republican Leader Trey Stewart, R-Aroostook. “With ModivCare’s bankruptcy, DHHS needs to reassess this contract and consider returning to the proven model of partnering with our community action programs.”

In announcing the bankruptcy filing, the company also said it has received a $100 million debtor-in-possession loan; and the bankruptcy will allow ModivCare to “transition ownership” to a group of investors as it restructures. The company’s stock, which traded under a delisting warning from Nasdaq earlier this year, tanked in early trading last Thursday as news spread that shareholders would likely be wiped out through the bankruptcy process.

“The patients that rely on MaineCare transportation services are our state’s most vulnerable individuals. They need compassionate and responsive services that ModivCare has proven they cannot provide,” said Sen. Marianne Moore, R-Washington, who is the Senate Republican lead on the Legislature’s Health and Human Services Committee. “The administration needs to ensure these patients are not left stranded amidst this company’s financial crisis. Unfortunately, this is what happens when you put all your eggs in one basket.”

ModivCare won the state’s non-emergency medical transportation services after beating out bids by Penquis and Waldo CAP in 2023. When that decision was appealed to the State, a three-member panel determined the nonprofits had “raised legitimate concerns” over the state’s bidding process. However, the panel did not reverse the award and Penquis subsequently sued DHHS.

“We keep hearing about serious issues with the state’s procurement and contracting process and here’s yet another example of that. It seems due diligence was not performed on this company at all,” Stewart said. “We also won’t have any knowledge about the new owners at the end of the bankruptcy process. At the very least, the Mills Administration should reopen and rebid this contract and do it right this time for a change.”