FamilyCare Executive Forges Bad Actor Compromise Over Salem Health Lawsuit

Rep. Brian Clem said Jeff Heatherington’s proposal to scale back the punitive repercussions of a CCO dispute makes it more likely the Legislature will be able to move the bill along.


May 14, 2013 — The chief executive officer of the Family Care coordinated care organization has stepped into the growing turmoil over healthcare delivery in the Salem area with a compromise to the so-called “Bad Actor Bill,” which was drafted to put pressure on Salem Health to end its lawsuit against Willamette Valley Community Health.
Jeff Heatherington’s proposal would restrict House Bill 3309 — the Bad Actor Bill — to cover “essential healthcare entities,” which are providers that serve 25 percent of the community or are the sole provider of certain services, and whose withdrawal from the CCO would jeopardize the entire organization. 
Heatherington defined “essential healthcare entities” as the healthcare providers needed to provide care to the Medicaid population — either large entities like Salem Health or small but crucial ones such as neurosurgeons who offer a unique niche no one else can provide.
Essential healthcare entities must provide healthcare services within coordinated care organizations and would not be allowed to file a lawsuit asking for more money than allowed by state law or do anything to risk the certification of a CCO.
Under Heatherington's proposal, the attorney general rather than the director of the Oregon Health Authority would have enforcement authority. And, the low reimbursement sanctions – cutting reimbursement rates from 68 percent of Medicare to 58 percent of Medicare — would be limited to one year. The bad actor or disruptive member would still be prohibited from creating or joining a different CCO for five years.
Heatherington told the House Rules Committee on Monday that he was asked to testify in support of House Bill 3309, but had reservations with the measure. Although he thinks legislation may be needed to address the problem that arose in the Salem health community, he could not approve of certain provisions, particularly the ability of the CCO board and the Oregon Health Authority director to kick off members.
“There is a public problem when any central provider goes way off the railroad tracks,” Heatherington told The Lund Report. “This will address that but would not get into the sticky process of removing board members.”
Patti O’Sullivan, the lobbyist for Oregon Association of Hospitals & Health Systems, argued that removing a board member like Salem Health from the CCO went counter to the founding essence of these organizations, which have been created to integrate care from all the major healthcare providers in a local community and have those providers share in the financial risk and decision-making for the Medicaid population.
“It flies in the face to what you have already developed,” O’Sullivan said.
Heatherington’s proposed amendment to HB 3309 would keep this basic structure intact while punishing a disruptive member.
Designed to End Dispute
HB 3309 had been drafted on behalf of the Willamette Valley Physician Health Authority, which along with the rest of  the coordinated care organization — Willamette Valley Community Health — has been locked in a legal dispute with Salem Health, the dominant hospital system in Marion and Polk counties.
Dr. Bud Pierce, a Salem oncologist and the past president of the Oregon Medical Association, testified in support of HB 3309 as written. He said that providing care for the Medicaid population cannot be sustained by traditional payment models, and it was crucial to transform the delivery system.  
He said a monopolistic hospital system like the one in Salem could have the power to derail the entire transformation if it chooses not to cooperate. 
The legal wrangling began when Salem Health refused to accept the unorthodox payment structure offered by Willamette Valley and filed a lawsuit in October in Marion County District Court. 
As written, HB 3309 allows a super majority of a CCO board to ask the Oregon Health Authority director to remove a member of a CCO, if it refuses to provide services or puts the organization’s certification at risk. That member would also be punished with five 
years of low reimbursement rates and could not participate or create a new CCO.
The bill has sharply divided the Oregon healthcare community, with Salem physicians and several powerful lawmakers on one side and the Oregon Association of Hospitals & Health Systems, several CCOs and safety-net providers on the other.
Several legislators — Rep. Brian Clem, Rep. Kevin Cameron and Sen. Jackie Winters — said HB 3309 was written to force CCO members to settle their disputes, but its opponents believe it would have the opposite effect.
“I think this is going to poison relationships between hospitals and CCOs and other entities,” said Doug Barber, the lobbyist for PeaceHealth Medical Group, a network of four hospitals in the Eugene area.
Legislature’s Role
“We don’t believe that the Legislature is the right venue for resolving private contract disputes,” said Janet Meyer, the chief executive officer of HealthShare of Oregon, a CCO in the Portland area.
Former Rep. Lane Shetterley, who now serves on the Salem Health board, said that legislators should just let the dispute play out in the courts. “It’s a statewide issue that’s not needed,” Shetterley said. “There will be a public airing of both sides of this issue [in court.]”
But House Rules Committee Chairman Rep. Chris Garrett, D-Lake Oswego, disputed the idea that with billions of public dollars invested in CCOs, the public and its representatives — the Legislature — should stay out of a dispute that could undermine the entire healthcare delivery transformation.  
“It’s a mistake to think the public doesn’t have a role in this,” said Rep. Chris Garrett, DLake Oswego, the chairman of the House Rules Committee. “We can’t really wait to let the court system play out.”
The Republican vice-chairman, Rep. Wally Hicks of Grants Pass agreed, “Like it or not, the public is into healthcare up to our hairline.”
Rep. Bill Kennemer, R-Oregon City, told Heatherington that his suggestions seem a lot cleaner and clearer than the original proposal, and asked opponents if they had seen the draft amendment. Many had not as the Family Care executive drew up his guidelines Monday right before the hearing.
Nevertheless, the proponents of the Bad Actor legislation seemed willing to accept the compromise. Clem told The Lund Report after the hearing that the amendment would make it much more likely that HB 3309 could get a vote on the House floor.
“I hope that this has the effect of starting mediation and negotiation within the CCO,” Clem said. “That’s kind of the point for me.”
Clem disagreed that the courts should be left to divine the Legislature’s intent, preferring that the Legislature more clearly articulate its policies rather than waste the judicial system’s resources on the CCO lawsuit.
If Salem Health still insists on suing Willamette Valley Community Health, he said the Legislature would continue to push forward on HB 3309, first in the House, then the Senate.
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