The feud between the Oregon Health Authority and FamilyCare will continue for another week after binding mediation talks over its 2015 reimbursement rates failed to produce a resolution on Tuesday.
FamilyCare spokeswoman Cindy Becker said the two sides plan to meet again soon but have not yet agreed upon a date.
FamilyCare has fought the state over its reimbursement rates for 2015 after not only failing to receive any increase from 2014 but seeing a rate cut. After the coordinated care organization sued the state over those rates, a new actuarial analysis gave the CCO even lower rates, retroactive to Jan. 1.
Oregon Health Authority Director Lynne Saxton said last week that the other 15 CCOs signed off on the amended 2015 contracts which have per-member per-month rates set according to the new analysis, including AllCare Health Plan, which initially complained about its rate cuts to the Legislature this fall.
But in the case of AllCare, which serves Jackson, Josephine and Curry counties in the southwest corner of the state, its primary competitor, Jackson CareConnect, also saw a rate cut.
In the Portland Metro area, however, the Health Authority’s methodology gave the other CCO, Health Share of Oregon, a rate increase while clawing back $50 million from money already paid out to FamilyCare.
FamilyCare CEO Jeff Heatherington has accused the Health Authority of deliberately favoring his competitor in the rate-setting process.
The deep rate cuts the state agency has tried to impose on the CCO could force them out of the market. While FamilyCare received record profits in 2014, Heatherington said earlier it needed those net revenues to build up a reserve. His CCO will barely break even in 2015 with the proposed rates. The new rates the Health Authority has pitched for 2016 are slightly higher, but with increased costs, the CCO may lose money.
The Health Authority has ignored repeated requests for information about when the 2016 rates will be made public for all 16 CCOs.
“We’re seeing a steady increase in costs as these [new members] become engaged,” Becker said. She argued that the health authority was basing its rates on the reported costs in the first months of 2014, when the new members hadn’t understood their new benefits and had yet to really utilize the system. More recent data shows higher reported costs than those early numbers, she said. “We are still predicting a net loss because our expenses are still rising.”
If the state forces FamilyCare out of its Medicaid system, it’s unclear whether Health Share, the other Portland CCO, would be able to absorb all of its members. But the state may be able to call in other healthcare organizations to manage Medicaid benefits through an emergency rule that gives the Health Authority permission to allow new organizations into the system. Legacy Health and PacificSource Health Plans, which have entered into a joint venture,could have their eyes on the Portland area as well as Moda Health, which has partnered with Oregon Health & Science University on a CCO-like venture for public employees.
While the Health Authority demanded a clawback from several CCOs for alleged overpayment, the amount FamilyCare was told to pay back was by far the highest.
The methodology the Health Authority has chosen for setting rates for the Medicaid members who have been enrolled because of the Affordable Care Act have come under particular scrutiny.
The rate-setting process drew fire from state legislators in September but their cries were largely theatrical since the lawmakers have no direct control over the executive branch. The Health Authority has ignored the complaints and ploughed ahead with the course it had set.
Because of a dearth of claims data for these new members, the Health Authority and its handpicked actuarial consultants, Arizona-based Optumas, have relied on reported costs to set the rates for the expansion population -- a move that can reward inefficient CCOs and punish efficient ones. Tying their rates to simple cost, and not actual risk, eliminates most of the incentive for CCOs to save money, since any savings means they are paid less by the state.
It also creates the possibility that hospital-run CCO plans may be able to get paid more by the state simply by charging themselves more for the services they provide to their members.
Because of an absence of transparency in the CCO system, the public has no way to know how much hospitals are paid at some CCOs. At Health Share, the CCO subcontracts its managed care plans to partnering agencies, including hospital systems such as Providence Health & Services and Kaiser Permanente. The CCO reports costs from the overall organization, but does not break down the numbers for these hospital-managed plans.
The Health Authority plans to develop a more actuarially sound methodology for the setting of its 2017 rates, which will eliminate much of the controversy. But time will tell if FamilyCare can survive until then.
Chris can be reached at [email protected].
