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FamilyCare at Odds with Health Authority Over Rates

OHA Director Lynne Saxton wouldn’t say definitively whether FamilyCare will lose any members over this latest dispute.
November 4, 2015

FamilyCare stands alone as the only coordinated care organization unwilling to sign a contract amendment with the Oregon Health Authority over the revised 2015 rates, insisting those rates are not actuarially sound. The next step – mediation. Under a new emergency rule, contract disputes must be taken up with the agency before a CCO can take legal action.

Now it remains to be seen whether FamilyCare will lose any of its 130,000 members or be allowed to enroll anyone new who qualifies for the Oregon Health Plan.

Without a contract next year, OHA Director Lynne Saxton indicated she might try to pull the plug on FamilyCare. When asked about such a possibility at yesterday’s Oregon Health Policy Board meeting, she told The Lund Report, “Our goal is to make sure our members have access to services,” saying that other CCOs are interested in having more members but didn’t mention anyone by name.

Health Share, the only competitor to FamilyCare in the Portland metropolitan area could wind up as the victor, or a new player could enter the CCO market. Another emergency rule allows the Health Authority to bring in a new CCO “for the benefit of members who need access.”

But, Jeff Heatherington, CEO and president of FamilyCare, is unlikely to give in. He told The Lund Report, “We are still hopeful that the Health Authority will decide to be transparent in how they have calculated both the 2015 and 2016 rates. To date, we have not received any substantive information despite the fact that our requests go back to January. It makes you wonder.”

There’s absolutely no way FamilyCare can lose its status as a CCO, Heathington insisted because it's signed a five-year contract with the agency. That opinion, he said, has been backed up by the Centers for Medicare and Medicaid Services, according to a legal opinion rendered by the Oregon Department of Justice on behalf of the Health Authority.

FamilyCare’s attorney has also informed legislators about the status, and Heatherington expects lawmakers to take up this issue when their respective healthcare committees meet later this month.

Had FamilyCare signed the proposed amendment, it would have been forced to write a check for $55 million to the Health Authority, Heatherington said. The Health Authority has insisted FamuilyCare was overpaid as a result of its 2015 mid-year recalculation of its rates – which represented 9 percent of its total revenue for 2015.

In an earlier story that appeared in The Lund Report, legislators took issue with the overpayment, saying they had been sold a Medicaid transformation plan that gave Oregon a global budget that increased by 3.4 percent a year. Instead, they learned that the Oregon Health Authority has pitched revised 2015 rates that not only do not include a 3.4 percent increase, the overall rates are 0.8 percent lower than 2014. Rather than having more money to reinvest on intangible services that can transform the system, the Medicaid program is being cut.

At the same time, within that reduced state Medicaid budget, the health authority had limited claims data for the new Medicaid expansion members, and arbitrarily assigned some of the rates not on risk but on self-reported costs, raising the possibility that they are rewarding the inefficient CCOs that have not done as good of job of controlling costs and have overpaid hospitals and other providers.

News of the “clawback” and details of the new rate calculation went over like a lead balloon at legislative hearings in Salem before committees that oversee the state health budget and state health policy.

“We [the state] not only corrected the new rates prospectively, we corrected it retrospectively, which is both unprecedented and un-businesslike and frankly, untenable,” said Rep. Bill Kennemer, R-Canby.

“You expect [FamilyCare] to write you a check of $55 million because you didn’t give them the right rates at the beginning of the year?” Rep. Mitch Greenlick, D-Portland, the chairman of the House Health Committee, asked OHA Director Lynne Saxton.

Legislators from both parties and two separate leadership posts criticized the Oregon Health Authority’s demands that newly released rates be retroactive to January, that CCOs return millions of dollars for “overpayment,” and that some of the new rates be based on a controversial accounting method that may jeopardize the Medicaid transformation.

To make matters worse, in Greenlick’s opinion, was that the Health Authority was asking six CCOs to pay the state back based on rate calculations for that portion of the Medicaid population where the state used less actuarially sound methods -- the Medicaid expansion population, who came into the system from the Affordable Care Act..

The Health Authority and Optumas used a risk-based payment model for the traditional Medicaid population, but Optumas consultant Zach Aters said they abandoned such a model for the new population because of a shortage of claims data. At the same time, the federal government made clear that Oregon must take into account emerging data from the new members. But without an accurate read on the chronic health diagnoses of individuals in the new population, the state and Optumas fell back on reported costs.

“I was satisfied with your risk tool then found out you’re not using it for a third of the population,” Greenlick said. “I do not believe that what you’re using now is going where we can have system transformation. … I don’t think it’s a fair game at all.”

For the rates to be legitimate, Greenlick said the state would need to start mixing in the actual risk data it has with the reported costs.

Essentially, FamilyCare is being ordered to repay the state because it reported per-member costs that were much lower than its rival CCO, Health Share of Oregon, which does not have to return any money, according to our earlier story.

Health Share’s rates for providing care to the Affordable Care Act expansion population have still been trimmed from $495 to $436 per member per month. FamilyCare’s rate cuts were more drastic -- lowered from an average of $516 to $362 per member per month.

Because the Authority is basing its rates for the expansion population not on risk but on the simple, self-reported costs of the CCOs, the agency has removed much of the incentive to transform care away from a traditional payment-for-procedure model or invest in primary care. If a CCO has high costs because of high emergency room utilization or excessive hospital fees, than it will be paid more than CCOs who have successfully steered members into primary care, particularly for patients with chronic conditions.

This isn’t the first time FamilyCare has sparred with the Health Authority. Earlier, Heatherington filed a lawsuit against the Health Authority alleging breach of faith and tort claims, contending that its 2015 rates were not made on an “actuarially sound basis” as required by the federal Medicaid act and the Health SAuthority used outdated encounter data. Unlike other coordinated care organizations whose reimbursement rates decreased by 2.1 percent this year, FamilyCare’s rates fell by 9.2 percent, which has left a $4.7 million monthly hole in its operating budget, amounting to $57 million for the entire year. This lawsuit was filed prior to the emergency rule requiring CCOs to settle disputes with the agency before taking legal action.

That lawsuit could have been avoided, he told The Lund Report, had the state agency not “stonewalled us the entire way. They just refused to come to the table with any information at all, and now we’re left with a considerable financial loss.”

Diane can be reached at [email protected].

Correction: FamilyCare is the lone CCO not to accept the amended 2015 rates -- not the 2016 rates, the contracts for which have not yet been released.

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