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FamilyCare, Oregon Health Authority Reach Settlement Agreement

The lawsuit, filed by FamilyCare, arose from the rate-setting process that began in 2014.
June 1, 2016

The Oregon Health Authority and FamilyCare are pleased to announce they have reached a settlement agreement that resolves the financial issues in dispute between the parties for the 2015 and 2016 rate years, which initially arose from the rate-setting process started in 2014 in response to the Center for Medicare & Medicaid Services' objections to the state's previous rate-setting process.

Under the settlement agreement, FamilyCare has agreeed to dismiss all pending litigation against the OHA, and the OHA has agreed to withdraw its notice of termination of FamilyCare's CCO contract.

According to the press release, both parties appreciate the efforts that were made to reach an agreement that will allow them to move forward and focus their full efforts and attention on providing quality care to Oregon Health Plan enrollees and transforming healthcare for Oregonians in the future. 

"I'm pleased to have arrived at mutual agreement that allows us to work together in the future,” Jeff Heatherington, CEO and President of FamilyCare, told The Lund Report.

The Oregon Health Authority did not respond to a request for comment by press time.

FamilyCare had been in the midst of a dispute with the Oregon Health Authority over its Medicaid disbursements from the state, which says it has over-paid the CCO. In April, a judge ordered the Oregon Health Authority to continue paying the CCO until the dispute was resolved.

Both sides had been in mediation for several months without success.   

Though FamilyCare’s operations were profitable in 2015, investment losses left the Portland-area CCO in the red last year. Including non-operating expenses, it had a net loss of $495,111.

The CCO’s net operating income was actually a positive $11.7 million. But investment losses totaling $12.2 million dragged it into the red.

Earlier, Heatherington told The Lund Report that the lawsuit could have been avoided 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.”

FamilyCare’s lawsuit alleged breach of faith and tort claims, contending its 2015 rates were not made on an “actuarially sound basis” as required by the federal Medicaid act. 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. The CCO has more than 132,000 members, and derives approximately 92 percent of its revenue from Medicaid.

In setting the 2015 rates, the OHA used outdated encounter data, said Heatherington, who said he had insufficient time to review the proposed contract rate changes after not receiving the document until December 12, when no one from the state agency was available to respond to his questions until he had to sign the contract, which was done under duress.

Meanwhile, the Oregon Health Authority had asked FamilyCare to reimburse the state for the remaining overpayments, drop its lawsuit challenging the agency to revise the rates set for the CCO and agree to accept its rates for 2016, 2017 and 2018.

The OHA insisted that federal funding from the Centers for Medicare & Medicaid Services was at stake unless FamilyCare agreed with its rate restructuring, while Heatherington maintained CMS only approves the actuarial soundness of those rates, by region, not the actual figures.

To review the settlement agreement, click here

Diane can be reached at [email protected].