FamilyCare Health files lawsuit against the Oregon Health Authority

PORTLAND, Ore. (February 27, 2017) – Portland-based Coordinated Care Organization (CCO) FamilyCare Health has filed a lawsuit in Marion County against the Oregon Health Authority (OHA) for its inequitable and actuarially unsound rate-setting process. The lawsuit comes as a last resort following a series of OHA delay tactics and an ongoing lack of transparency around the process that led OHA to set FamilyCare’s rates lower than any other CCO in Oregon for the third consecutive year.

“It is with deep reluctance that we move forward with this new lawsuit against OHA,” said Jeff Heatherington, President and CEO, FamilyCare Health. “We have been strong supporters of the Oregon Health Plan (OHP) since its creation and we continue to believe in the program. We have worked diligently to engage the OHA in a productive dialogue around rate development, only to be met with delay tactics, fuzzy accounting, and outright refusals to provide the data used to calculate our rates. Today we are compelled to act in order to protect our organization and the Oregon Medicaid recipients who rely on us.”

Although FamilyCare is the second largest CCO in Oregon, serving nearly 120,000 members, it has received the lowest rates of any of the state’s 16 CCOs for three consecutive years. In the Portland-metro area, where two CCOs serve local members, FamilyCare receives as much as 17 percent less than the other CCO serving the tri-county region. OHA has refused to provide data necessary to demonstrate how it calculated the unfavorable rates.

Under federal law and regulations, OHA’s payments to CCOs must be “actuarially sound.” To meet this criteria they must provide for all reasonable, appropriate, and attainable costs under the terms of the contract. However, the 2017 rates will result in a $55 million operating deficit for FamilyCare, according to an independent analysis by one of the world’s largest actuarial firms. FamilyCare asserts that the state is aware they are creating a deficit, as they have been in the previous two years, and that this knowledge and action is a clear violation of federal regulations and Oregon’s laws regarding CCO global budgeting.

OHA’s refusal to participate in a transparent and meaningful dialogue continued during a recent Dispute Resolution process. In December of 2016, OHA signed a formal agreement with FamilyCare in which both parties agreed to exchange information necessary to determine how

the 2017 rates were calculated. Nearly three months into that process, OHA has neglected its obligations to provide data or participate in the dispute resolution process in a meaningful way.

Key points in the lawsuit include:

  • Three consecutive years of actuarially unsound rate development by OHA targeting FamilyCare with the lowest rates among Oregon’s CCOs and creating operating losses for FamilyCare.
  • Lack of consistency in the rate development process. OHA and its actuaries have changed rate-setting methodologies each year for three years in a row.
  • 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.
  • $34 million reduction in FamilyCare’s payments based on an OHA claim that FamilyCare pays primary care providers too much. This contradicts OHA’s own research indicating that increased investment in primary care lowers costs and improves health.
  • Lack of delivery on OHA’s commitment to establish a rate-verification process.
  • Lack of meaningful participation by OHA in a formal dispute resolution agreement.

Heatherington added, “This is an unfortunate continuation of the issues that led to our previous claims and subsequent settlement with OHA. We are deeply disappointed to see this irresponsible behavior continue. Oregonians and those of us who work to coordinate care for our state’s most vulnerable residents deserve a process that is transparent, fair, and inclusive of public input. We remain hopeful that the state will act fairly and swiftly to remedy this situation.”


About FamilyCare Health

For more than 30 years, FamilyCare Health has been providing patient-centered health care to Oregonians. FamilyCare Health is an Oregon Health Plan Coordinated Care Organization (CCO) and a Medicare Advantage plan serving approximately 120,000 members in Multnomah, Clackamas, Washington, Marion, and Clatsop counties. FamilyCare Health was the first health plan in Oregon to integrate models of physical and mental health and the first CCO in the

tri‐county area certified by the Oregon Health Authority. More information at

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