CCOs Fight Claw Back Provision in 2016 Contract

A new clause in their 2016 contracts will require CCOs to return any excess payments.

The state’s coordinated care organizations are poised to challenge a provision in their 2016 contracts requiring them to payback any excess revenue when legislators convene on Feb. 1.

Lynne Saxton, director of the Oregon Health Authority, ordered six CCOs to return nearly $100 million in alleged overpayments last year. She crafted the new provision after consulting with the Centers for Medicare & Medicaid Services.

But the CCOs have fire in their bellies and, with Sen. Alan Bates, D-Medford, on their side, are pushing hard to revoke that provision.

Particularly FamilyCare, which was ordered to pay back $55 million last year but has refused and still has not signed its 2015 contract amendment.

Jeff Heatherington, president and CEO, is a close ally of Bates, an osteopathic physician, who is drafting legislation to quell the issue.

Other CCOs are on FamilyCare’s side, but Cindy Becker, vice president of community and government relations, was unwilling to name them, only saying, “Other CCOs are unhappy with it.”

Last year, five other CCOs had to pay back nearly $50 million including AllCare Health Plan, Umpqua Health Alliance and Jackson Care Connect, which is administered by CareOregon.

FamilyCare was able to finesse a legal ruling by Dexter Johnson, legislative counsel, who insisted the OHA did not have the statutory authority to reclaim those dollars, writing, “However, these questions may be at issue in pending litigation between FamilyCare and the OHA, and facts or arguments may be revealed during the course of that litigation that might lead a court to a different conclusion.” Sen. Chip Shields, D-Portland, asked for that legal ruling.

Johnson's opinion leaves open the possibility that the Legislature could require FamilyCare to return those dollars, which is highly doubtful given the CCO’s lobbying power.

There was no doubt in Heatherington’s mind about returning those dollars. In a written statement, he told The Lund Report, “This opinion follows the same legal reasoning our attorneys gave us in the first place. We hope the OHA will do the right thing and give the funds back to the CCOs who did sign the amendment.”

Essentially, FamilyCare is being ordered to repay the state because it reported per-member costs that were much lower than its rival CCO, Health Share of Oregon, which does not have to return any money.

In later developments, Heatherington held out until the last moment before signing his 2016 contract amendment.

Before doing so, Saxton took preemptive action, asking the other 15 CCOs if they were interested in filling the gap left by FamilyCare, which had 128,000 members in Multnomah, Clackamas, Washington and Marion counties. The Health Authority insisted it was only taking a “precautionary step to ensure continuity of coverage.”

FamilyCare Lawsuit

A lawsuit filed by FamilyCare in Marion County Circuit Court last spring alleges breach of faith and tort claims, contending that its 2015 rates were not made on an “actuarially sound basis” as required by the federal Medicaid act. Unlike other CCOs whose reimbursement rates decreased by 2.1 percent this year, FamilyCare’s rates fell by 9.2 percent, which has left a $4.7 million monthly hole in its operating budget, amounting to $57 million for the entire year. At that time, FamilyCare had more than 132,000 members, and derives approximately 92 percent of its revenue from Medicaid.

In setting the 2015 rates, the OHA used outdated encounter data, said Heatherington who contends he had insufficient time to review the proposed contract rate changes after not receiving the document until December 12, when no one from the state agency was available to respond to his questions or requests for information until the contract needed to be signed, which was done under duress.

When asked, Saxton was unwilling to comment on the lawsuit.

Diane can be reached at [email protected].

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