FamilyCare Calls Federal Court Order a Win

The judge ordered the Oregon Health Authority to release documents related to coordinated care organization rate setting, though the legal dispute is far from over.

FamilyCare inched one step forward last Friday in its years-long series of legal disputes with the Oregon Health Authority. Federal Judge Michael Mosman ordered the state agency to hand over documentation on the methodology it used to determine the CCO’s reimbursement rates in 2017.

FamilyCare, which shut down its CCO at the end of January, earlier filed a $110 million lawsuit in Marion County against the state alleging inequitable and actuarially unsound rate-setting process. That lawsuit was later moved to federal court, as agreed to by the OHA and FamilyCare.

The Oregon Health Authority separately sued FamilyCare in federal court, arguing that the former coordinated care organization’s continuing dispute with the state could jeopardize 2018 Medicaid agreements with Oregon’s 15 surviving CCOs.

Both lawsuits have since been combined into a single federal case.

The state has asked the court to dismiss FamilyCare’s claims, and a hearing on that request is expected to take place on May 6.

On Friday, Judge Mosman granted OHA's request for some lobbying materials from FamilyCare, while denying other OHA requests. He also granted and denied a mix of requests by FamliyCare.

“I hope the state finally obeys the court ruling and hands over the data instead of continually hiding what they’ve done for the past three years,” Jeff Heatherington, president and CEO of FamilyCare, told The Lund Report. “We intend to show that the state arbitrarily and deliberately put us out of business.”

When asked for the Oregon Health Authority’s response to this latest court ruling, Mary Sawyers, strategic communications manager for health policy and analytics at the agency, said the state does not comment on pending litigation.

“We were pleased by the judge’s immediate ruling, which will allow FamilyCare to move forward with discovery and shed light on the non-transparent rate development process that’s given us the lowest rates of any of the CCOs for three straight years,” Heatherington said.   

Heatherington contends that FamilyCare received as much as 17 percent less than HealthShare in the tri-county Portland metro area, and says that forced him to shut down the nonprofit’s Medicaid operations. FamilyCare had been the second largest CCO in Oregon, serving nearly 120,000 members, the majority of whom are now enrolled in HealthShare plans.

The key arguments FamilyCare makes in its complaint against the state are:

  • For three consecutive years, OHA targeted FamilyCare through actuarially unsound rate development that left it with the lowest reimbursement rates among Oregon’s CCOs, and resulted in operating losses for FamilyCare.

  • OHA has lacked consistency in the rate development process. OHA and its actuaries have changed rate-setting methodologies each year for three years in a row.

  • There has been a lack of OHA transparency, such as refusal to provide access to the underlying data that supports the 2017 rates, as well as OHA assertions that this data is proprietary -- despite the fact that OHA is a government agency responsible for taxpayer dollars.

  • FamilyCare’s payments were reduced by $34 million based on what FamilyCare says is an OHA claim that the CCO pays primary care providers too much. FamilyCare alleges that this contradicts OHA’s own research indicating that increased investment in primary care lowers costs and improves health.

  • OHA has not delivered on its commitment to establish a rate-verification process.

  • OHA has not participated in a meaningful way in a formal dispute resolution agreement.

OHA Defends Itself

Although OHA declined to comment for this story, saying it does not discuss pending litigation in the press, the agency has disputed those accusations in past statements and in court filings.

Earlier, it said that each CCO was free to set its own reimbursement rates to providers, and that it was FamilyCare’s decision to pay higher rates than its competitor, HealthShare.  

Announcing its 2018 rates, the OHA said it would pay FamilyCare $377.57 per member per month -- compared to $409.85 for Health Share.

OHA has repeatedly disputed FamilyCare’s claims that its rates are actuarially unsound and that it has not shared its rate-setting methodology. It published a 305-page document outlining the reasoning behind Oregon CCO reimbursements. As previously reported by The Lund Report, that document claims that FamilyCare received less because its members were generally healthier and had less complex medical conditions than HealthShare’s.

However, FamilyCare has continually maintained that these publicly available documents do not tell the whole story.

Legislature Rejects Transparency Legislation   

During the 2017 legislative session, House Speaker Tina Kotek, D-Portland, spiked legislation backed by FamilyCare that would have forced the Oregon Health Authority to be more transparent with its rate-setting process.Senate Bill 233 would have cast more daylight on the Oregon Health Authority’s rate-setting process and required the agency to make public any documentation that it submits to Centers for Medicare & Medicaid Services, as well as any documents, financial data and utilization data it uses to set its rates.

Under SB 233, the health authority would also have had to set a single risk score statewide, take into account flexible spending and upstream investments into social determinants of health, and then have its actuaries sign off on the actuarial soundness of each CCO’s rates.

SB 233 would have also set up a rate appeal process through a neutral, third-party -- the Department of Consumer & Business Services.

“After further consideration and consultation with various stakeholders, the speaker determined the issue needed more work,” Kotek spokeswoman Lindsey O’Brien said following the vote. “She supports greater transparency, but ran out of time to craft the right language this session.”

Heatherington countered that the other CCOs in the Coalition of a Healthy Oregon supported SB 233, and he said he even brokered a compromise with his competitor, Health Share of Oregon. He said he had the support of a majority of legislators in both chambers but lacked one that counted more than 88 of the others -- Kotek, who, as speaker, controls all legislation coming out of the House of Representatives.

Diane can be reached at [email protected]. Courtney can be reached at [email protected].

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