FamilyCare Threatens to Close After Report Supports State's CCO Rates

Portland’s second-largest Medicaid provider says it cannot afford current reimbursement rates, while its larger competitor, HealthShare, said it is prepared to take on new members if necessary.

Responding to a report calling the Oregon Health Authority’s Medicaid reimbursement rates “actuarially sound,” the state’s second-largest coordinated care organization warned this week that it may cease operation by the end of the year.

An official with FamilyCare said proposed  rates could doom the nonprofit’s 300 employees and 120,000 members. Meanwhile, a HealthShare employee told The Lund Report that the Portland area’s other major CCO is prepared to accommodate those Medicaid members if FamilyCare does opt to shut down, and said that there is 80 percent overlap in providers between the two groups.

A Medicaid-funded coordinated care organization and provider of a Medicare Advantage plan operating in Multnomah, Clackamas, Washington, Marion and Clatsop counties, FamilyCare has been engaged in a long-running dispute over the reimbursements it receives from the Oregon Health Authority, and is currently suing the state.

When 2018 reimbursement rates were announced last month, FamilyCare learned it would get $377.57 per member per month – compared to $409.75 at HealthShare.

FamilyCare CEO Jeff Heatherington rejected the Oregon Health Authority’s announcement that its rate decision had been found actuarially sound.

“FamilyCare is losing approximately $75 million based on the 2017 rates and will have an equal or higher loss in 2018,” said Heatherington said. “You cannot have an actuarially sound process that produces a deficit three years in a row.”

A press release by the health authority touted findings from two independent reviewers as drawing exactly that conclusion, that the state’s rates are actuarially sound – but a closer look at the documents themselves shows that the independent assessments were not fully glowing.

"We conclude that the state generally complied with the federal requirements, with the exception of a few minor areas,” wrote Mannatt Phelps & Philllips LLP in its report – noting that the state did not properly consider medical loss ratios when it developed rates, and that Oregon also did not comply with Centers for Medicare and Medicaid Services requirements related to profit margins.

A more detailed actuarial review, by Lewis & Ellis Inc., did explicitly call the health authority’s rates actuarially sound. But this firm also said documentation around reimbursement review is insufficient to allow CCOs and actuaries to objectively offer assessments of rates.

FamilyCare officials call both recent reports biased, and offered The Lund Report a four-page criticism of the documents. The CCO has been calling for a thorough review of actuarial rate setting, and said that both recent reports were too limited in scope, and did not allow enough time for full examination. It also complained that the review of CCO reimbursements only focused on professional service cost reimbursements.

“A surface-level review of OHA’s methodology is not sufficient to address the underlying problems that allowed the agency’s prior leadership to target FamilyCare with the lowest rates in the state for three years. It appears the widely publicized OHA campaign to harm FamilyCare is still in operation,” Heatherington said, echoing claims his organization has also made in its litigation with the state.

For its part, the Oregon Health Authority acknowledged recommendations for improvement made in each report, while also emphasizing that neither independent review recommended changes to 2018 rates.

"We want OHP members, taxpayers and legislators to know if the CCO rate-setting process is sound or flawed,” OHA Director Patrick Allen said. “These objective, third-party experts have given us the confidence to move forward and suggestions to improve the process.”

The agency said it continues to review feedback from CCOs and will announce a final plan for 2018 rates by the end of this month.

Reach Courtney Sherwood at [email protected].


Correction: An earlier version of this story said FamilyCare could decide whether to continue operations by the end of this week. The nonprofit disputes that and says no decision will be made until a Dec. 14 meeting of its board. 

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