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Critics assail Corvallis Clinic bid to sidestep state review

Owners of clinic group say the locally owned business is in a financial emergency that warrants immediate purchase by the global health care giant UnitedHealth Group
Pictured: the North Albany building of The Corvallis Clinic, P.C. | COURTESY OF THE CORVALLIS CLINIC, P.C.
March 12, 2024

Critics are protesting an effort to shortcut the state’s review of the controversial sale of locally-owned The Corvallis Clinic to one of the largest conglomerates in the world.

The clinic group is in such dire financial shape that it should be exempted from the state’s health care mergers review process and be bought immediately by giant UnitedHealth Group, the clinic system and UnitedHealth told the state in a joint filing late last week.

It’s the first time a health care entity has invoked a financial emergency to try to sidestep the merger review system created by the Oregon Legislature and launched by the Oregon Health Authority two years ago.

In comments to the state earlier this year, hundreds of clinic patients, Oregon physicians and others protested the proposed sale of the 600-employee, 11-facility clinic system, a dominant primary and specialty health care provider in the mid-Willamette Valley.

Some health care advocates on Monday were quick to criticize the clinic group’s request for an emergency exemption, which came on the heels of the withdrawal of another controversial merger that had provoked state concerns

The advocates suggested the new request is a ploy to foil a state proposal to place stringent conditions on the sale.

Under the state program, a deal can bypass review if the state finds that emergency circumstances immediately threaten the provision of health care services and “the transaction is urgently needed to protect the interest of consumers.” Absent such an emergency, the program is mandated to ensure that deals don’t reduce health care services, drive up prices excessively or otherwise hurt the public interest.

In its emergency exemption application, which the state received Friday, the for-profit physician-owned clinic said its finances are so weak that it “doesn’t have time to undergo continuing regulatory review” and that if there are further delays “the clinic would potentially be forced to close its doors.”

The state has put its review on hold and will now determine whether the deal is exempt, OHA spokesperson Erica Heartquist said. The agency doesn’t have a timeline for when they will announce the decision, and it will disclose only non-confidential information, she told The Lund Report. That means the public will likely not get details of the clinic group’s finances. Thus far, citing Oregon public records laws, the agency has withheld from disclosure almost all the financial details the group has given the state as evidence of its problems.

Disclosure needed, critics say

Tom Sincic, a retired nurse practitioner in Portland, told the Oregon Health Authority in a letter on Sunday that all the financial details should be disclosed, to establish for the public whether a true emergency exists.

The clinic submitted its bid to skip the review after weeks of negotiations with the state’s Health Care Market Oversight program officials.

In mid-February, the state, in a draft order it gave the clinic, proposed letting UnitedHealth’s Optum arm buy the clinic group, but only with many exacting conditions that would be in place for years and give the state considerable control over the business.

The proposed terms included requiring Optum to keep in place all the clinic group’s facilities and services for at least 10 years after completing the purchase. The draft said Optum could reduce its services or facilities during that time only with state review and approval. The draft also proposed restrictions on how the clinic could negotiate payments from health insurance companies; required establishment of a community advisory board to monitor the clinic’s practices and make recommendations; sought to ensure Optum keep the clinic’s current staff levels in place for up to two years; and restricted non-compete agreements Optum could impose on employees.

The clinic group’s owners and Optum apparently balked at the terms, and three weeks later they sought the emergency exemption.

The clinic group’s CEO has not responded to emails from The Lund Report.Optum declined to comment.

In its filings, the clinic group said it began negotiating with Optum in early 2023. The proposed deal first became widely known in December, when the clinic group, which is owned by an unspecified number of doctors who have not been publicly named, applied to the health care market program for approval.

In that application, the clinic said it was in bad financial shape and needed a bailout, and that Optum would revitalize the business. The clinic group provided the state with details of its finances, but the state has removed all of that information from the public file under rules allowing applicants to keep some information confidential.

 During the public comment period earlier this year, hundreds of patients and others criticized UnitedHealth’s and Optum’s national record and predicted the new corporate owner would cut services.

Fears of shutdown

Some commenters also speculated the chain’s current owners would shut the business if the state prevented the purchase – although the owners didn’t say that in their initial application.

Now, however, the owners say that’s a possibility.

The emergency exemption document says the clinic is “unaware of any public or private source of capital” to help it. Purchase by Optum “is likely the only way (the clinic) can maintain solvency and continue to provide care to the community,” the application said.

The document appears to contain financial data about when the clinic group expects to become “insolvent,” but that information has been blacked out on the state website as confidential.

The document says the clinic’s finances have worsened since it began talks with Optum, but did not provide details.

The exemption application stated, without providing financial specifics, that, once it took ownership, Optum would provide capital to “allow The Corvallis Clinic to continue to pay rent, payroll and other expenses in a timely manner and avoid a more severe liquidity crisis.”

The application doesn’t commit to keeping facilities and services intact for a set period. Rather, it states that “the transaction is expected to maintain essential services at or above current levels.”

Effects of Blackcat attack

UnitedHealth has been under intense fire nationwide in recent weeks because its Change Healthcare subsidiary on Feb. 21 was attacked and partially disabled by a computer ransomware operation named Blackcat. 

Change Healthcare is a health care payments service that processes up to half of all health care payments in the nation from health care insurers to health care providers such as clinic groups and hospitals. The ransomware attack has delayed payments to many providers nationwide, according to news reports. The federal government has asked UnitedHealth to make sure providers with poor cash flow are not “compromised” by the delayed payments.

It’s unclear whether The Corvallis Clinic’s finances have been hurt by Blackcat-related delays. The clinic’s CEO has not responded to emails from The Lund Report, and the company’s filings with the state review program don’t explain the exact cause of the clinic group’s financial woes.

One recent news report quoted an unnamed Corvallis Clinic employee as saying the delays had caused a financial crisis at the clinic group.

 The public is having a hard time understanding the urgency for the deal, said Dr. John Santa, an Oregon physician and health care advocate who has filed comments opposing the sale.

“It is unfortunate that neither Optum nor the clinic have provided financial information demonstrating their immediate need, to the Corvallis community,” he wrote to the review program.

The state should delay its decision until UnitedHealth can commit to resolving all problems caused by the Blackcat attack, Santa wrote. “If financial losses at Corvallis Clinic are truly as precarious as stated, (UnitedHealth) should prioritize the clinic and resolve any connections or breach issues first,” he wrote.

Bad weeks for Optum

Health Care For All Oregon, a statewide nonprofit group advocating for a universal health insurance system, on Monday said it questioned the validity of the request for an emergency exemption.

“It’s been a bad few weeks for Optum. First a Change Healthcare ransomware outage rendered claims payments inactive for health providers, including The Corvallis Clinic. Then a potential decision from regulators that Optum/UnitedHealth did not want,” said the group’s president, Valdez Bravo, in a news release.

“Selling to the largest healthcare corporation in America isn’t the only solution to the challenges facing The Corvallis Clinic. There are other options,” said group member Dr. Mike Huntington, a retired Corvallis radiologist. That’s why the group wants the state to launch a “community review process,” as allowed by the review program, he said.

The draft sale conditions the state set out last month for the deal appear to be the most restrictive among the terms it has set in the 17 mergers or other deals it has reviewed so far.

The terms included that after the purchase, Optum give the state a detailed report on the clinic group’s problems and how Optum was going to fix them; that the clinic file audited semi-annual financial reports with the state for 10 years; and that the state could appoint an “independent monitor” at Optum’s expense to evaluate whether Optum was complying with terms of the agreement. Optum would be barred from shifting the cost of the monitor onto Corvallis Clinic patients.

You can reach Christian Wihtol at [email protected].