Rejected Medicaid Company Threatens To Sue Oregon Health Authority

A Marion County nonprofit group, which the Oregon Health Authority rejected as a Medicaid insurer this summer, warns it may sue in court to overturn the state’s decision.

Marion Polk Coordinated Care notified the state last month in that it may file legal action. The warning, filed 10 days after the state issued a final rejection of Marion Polk Coordinated Care’s bid for the two-county 100,000-member Medicaid contract, is legally required before Marion Polk can sue in circuit court.

The executive director of Marion Polk Coordinated Care, Dean Andretta, said his agency has not decided whether to sue.

But he cautioned that unless the OHA reverses its denial, about 180 workers who now administer Medicaid insurance in Marion and Polk counties will be laid off.

Meanwhile, a southern Oregon Medicaid insurer that was also rejected by the OHA for a Medicaid contract for 2020 onwards said it won’t sue and instead is disbanding, with about 50 people losing their jobs. The for-profit group, PrimaryHealth, said it has been a state-approved Medicaid insurer for more than two decades and that it disagrees sharply with the state’s rejection.

A lawsuit over the Marion and Polk Medicaid market could tarnish the state’s much-touted CCO 2.0 effort, the major revamping of the state’s coordinated care organization system of running the Oregon Health Plan, the state’s version of Medicaid. The state this summer designated insurers to run the plan in various regions of the state. Most applicants were allowed to hold on to their existing Medicaid territories for either five years or a single year, and a few were allowed to expand.

Only two appealed the state’s rejection decision to OHA Director Patrick Allen: Marion Polk Coordinated Care and PrimaryHealth.

Poor Finances Were Key Issue

The allegedly low financial reserves of Marion Polk and PrimaryHealth were key elements in OHA’s rejection. Both insurers said they tried to prove to OHA they could call on substantial financial backing from large hospital systems. The OHA said the promises were either vague or came too late in the process.

Marion Polk Coordinated Care was formed this January. The previous 11-agency consortium that handled Medicaid in the two counties, Willamette Valley Community Health LLC, voted in January to disband at the end of this year. Entities in that group formed Marion Polk Coordinated Care and submitted an application to the state.

But instead of approving the new agency, the state awarded the Marion/Polk market to Springfield-based PacificSource, a multi-state, multi-insurance-line company that already handles Medicaid in other parts of Oregon and is seeking to expand its Medicaid work in the state.

The OHA deemed Marion Polk Coordinated Care’s bid deeply deficient. In an 11-page appeal to Allen, Andretta, hammered OHA, alleging the state was overly critical of his nonprofit while turning a blind eye to problems with PacificSource’s application. For example, OHA faulted Marion Polk Coordinated Care’s financial condition, yet approved PacificSource’s finances, even though state staff found problems there too, Andretta wrote.

On Aug. 2, Allen rejected Marion Polk’s appeal. In its subsequent lawsuit-warning letter, Marion Polk said OHA applied “uneven and differing standards” to Marion Polk and PacificSource.

Oregon rules appear to give Marion Polk 60 days from Aug. 2 to sue.

“OHA went through a rigorous and objective evaluation process to select the organizations who will partner with us to meet the higher expectations for transforming health care and serving Oregon Health Plan members in 2020,” OHA spokeswoman Allyson Hagen said.

In his rejection of the Marion Polk appeal, Allen said the state found PacificSource to be financially sound. He also wrote that in a “blind” review of the applications of Marion Polk and PacificSource, in which staff did not know the identities of the agencies, Marion Polk flunked in all six evaluation categories, and PacificSource passed in all six. Marion Polk contested how the OHA picked and applied all six categories.

Salem Hospital System Was Financial Backer

Marion Polk Coordinated Care was formed by three groups: Salem Health Hospitals & Clinics, the largest hospital system in Marion/Polk; the Salem Clinic, a large physician practice; and WVP Health, which represents hundreds of doctors and other health providers in the area.

In its lawsuit warning, Marion Polk said it had previously alerted OHA that Salem Health “will support MPCC with needed additional capital in the event additional capital is needed or required by MPCC to meet solvency … or to otherwise meet financial targets."

But OHA said that “vague information did not alter the financial evaluation” of Marion Polk. 

Meanwhile in Josephine County, PrimaryHealth, owned by a group of doctors, is preparing to lay off its staff of about 50, said Jennifer Johnstun, the agency’s health strategy director.

The roughly 10,000 Medicaid members it insures will be transferred to other Josephine-area Medicaid insurers who were approved by OHA.

Asante Willing To Help

PrimaryHealth has been financially shaky. It’s dwindling reserves stood at just $1.7 million as of the end of 2018. The OHA projected the insurer would be out of business by 2022. But in its application, PrimaryHealth said it was working with an unnamed investor that would provide more capital. After OHA rejected PrimaryHealth’s application, the company revealed the investor: the three-hospital Asante chain in Southern Oregon. In July, Asante wrote to the OHA saying it wanted to keep PrimaryHealth in business and was ready to become a financial co-parent of the insurer by September.

PrimaryHealth tried to begin talks with OHA on this, Johnstun said. “But OHA didn’t have the appetite for that,” she said.

In its appeal letter to Allen, PrimaryHealth noted that the OHA had flunked another Josephine County-area Medicaid insurer, AllCare, in five of the six assessment categories, and flunked PrimaryHealth in only two of the six, yet OHA awarded AllCare a one-year Medicaid contract.

“We’re really disappointed with OHA because we feel it was unfair,” she said.

But OHA said it had little choice but to reject PrimaryHealth’s application.

“OHA rejected (PrimaryHealth’s) application because of the company’s precarious financial position,” Allen wrote. The bailout pitch from Asante was too late, he wrote. PrimaryHealth “has long known about its financial position, but it did not secure additional financing” before applying this year for a new Medicaid contract, he wrote.

Over the years, PrimaryHealth has spent almost all its Medicaid revenues on care for patients and on operating costs, and has paid virtually no dividends to its shareholder doctors, financial reports show. Johnstun said the remaining reserves will probably be used keeping the basics of the business going for a required 18-month “runout period” required by OHA, and on severance for employees.

You can reach Christian Wihtol at [email protected].