Neighborhood sues Rhode Island over $100M claim in overdue Medicaid reimbursements

Rhode Island’s largest Medicaid insurer is suing the state, alleging $100 million in unpaid insurance reimbursements, some of which are more than a decade overdue.

The 20-page complaint was filed by Neighborhood Health Plan of Rhode Island in Providence County Superior Court on Oct. 30, and first reported by The Providence Journal. The Rhode Island Executive Office of Health and Human Services and its interim director, Kristen Sousa, are named as defendants.

Neighborhood contends that the state failed to recalculate and reimburse the nonprofit health insurer for higher costs associated with covering more medically needy residents — primarily those in long-term care and nursing home facilities — breaching its obligations under two pairs of contracts which together spanned 2013 to 2025.

“Neighborhood relied on the State’s promises,” the complaint states. “It continued to cover and pay for these members’ care without waiting for the State’s systems to catch up, executed amendments to the Contracts, and continued to work with [the health and human services office] to reconcile and resolve the amounts owed rather than pursue other remedies. The State has not kept its promises.”

Kerri White, a spokesperson for the state’s umbrella health and human services agency, declined to comment.

As a managed care organization, Neighborhood contracts with the state to oversee services for roughly 60% of the 250,000 Rhode Islanders who qualify for the government-subsidized healthcare program for low-income residents, children and people with disabilities. 

The state pays Neighborhood an upfront, fixed rate for every person who qualifies for Medicaid services. Recognizing that some people require more medical attention — correlating to a higher cost — and that medical needs can change over time, the state is responsible for keeping track of the actual cost associated with each Medicaid-eligible member, any increases to that cost based on changes in health, and reimbursing the managed care organization for the difference in expenses from the upfront payment. 

The complaint lays out a 13-year history of underpayment to Neighborhood, starting with a five-year, long-term care contract that began in 2013, and continuing with a second agreement for dual Medicare-Medicaid eligible members that began in 2016 and ended in 2025.

Gail Leach Carvelli, a spokesperson for Neighborhood, declined to comment when asked about the timing of the complaint — 10 months after the second contract ended and more than a decade after the payment problems began. 

The complaint points to the botched rollout of the state’s online public benefits system — originally called UHIP but renamed RIBridges — as the root of the reimbursement problem.

From its 2016 launch, the system was riddled with problems: trouble verifying eligibility, a backlog of applications and payment delays, all of which affected the state’s ability to keep accurate records, and in turn, reimburse Neighborhood for Medicaid members’ care.

Before the system debuted, the state took an average of 90 days to process applications for long-term care. After, it took 12 to 18 months on average, a delay which continued through at least 2019, according to the complaint.

State officials openly acknowledged the initial failures, and continued mistakes, plaguing the online public benefits program, evidenced by multiple reports by the state auditor general and in a 2018 amendment to one of its contracts with Neighborhood. 

“In 2018, in the actuarial certification it wrote into Amendment No. 9 to the Unity Contract, the State acknowledged that it ‘has identified and is working to resolve reconciliation issues between its eligibility and enrollment systems,’” the complaint states. “Eight years later, the State still has not reconciled the payments.”

In addition to the $100 million in reimbursements owed, the insurer also claims additional financial losses from its repeated attempts to correct medical records on the state’s behalf. 

“Year after year, Neighborhood has had to dedicate staff to tracking members, building memberlevel files, trying to identify underpayments, and urging the State to correct its errors,” the complaint states. “Neighborhood has incurred millions in costs trying to address the State’s mistakes, errors, and delays.”

Neighborhood has asked a judge to order the state to repay the amount owed, plus damages, or to appoint a special master or independent auditor to determine the reimbursements, giving both sides an opportunity to review and challenge the calculations.