Rep. Mitch Greenlick, D-Portland, refuted one of the central claims in Portland-area coordinated care organization FamilyCare’s lawsuit with the state of Oregon -- that the CCO was promised a 3.4 percent increase in revenue, year-in and year-out for delivering care to Medicaid clients.
“I have never heard the promise that each organization was given the promise of a 3.4 percent increase,” Greenlick told FamilyCare CEO Jeff Heatherington as the CCO leader gave a report about his organization to the House Health Committee on Wednesday. “The total population was to have an increase of 3.4 percent. The individual plans were to be risk-adjusted within that 3.4 percent.”
“That may have been what you heard, but that is not what the governor himself was telling the plans,” Heatherington replied, referring to former Gov. John Kitzhaber.
“I don’t agree that was ever the deal,” responded Greenlick.
Heatherington told the committee that he brought legal action against the Oregon Health Authority for setting rates that were arbitrary and capricious and without any legitimate relationship to actuarial claims. FamilyCare saw its rates cut 9.2 percent while its competitor in the Portland area, Health Share of Oregon, was given a rate increase.
He said that he was surprised that the 3.4 percent increase did not apply to his organization and was not applied to the Medicaid expansion population.
The rate cuts were likely related to FamilyCare’s eye-popping profit margin for Medicaid management, with net income of $70 million last year -- nearly three times as high as the second-place CCO, Trillium Community Health Plan in Eugene, which had a $22 million profit that includes revenue from non-Medicaid insurance plans.
Heatherington attempted to explain his company’s high profit figures to The Lund Report last month, arguing that all CCOs don’t follow the same accounting methodology for delineating profits, and some are able to hide profits better than others, making it impossible to do an apples-to-apples comparison.
For example, FamilyCare’s rival CCO, Health Share of Oregon, was created by Portland’s major hospital systems, including Legacy Health, Providence Health & Services, Kaiser Permanente, Tuality Healthcare and Oregon Health & Science University.
Since it’s controlled by the hospitals, Health Share has the opposite profit incentive to FamilyCare. Heatherington said that services charged to hospitals, hospital clinics and hospital-employed physicians are all costs paid out to the entities that control the organization, giving Health Share a financial incentive to spend more on these services while FamilyCare has an incentive to hold down these costs.
Accordingly, the per-capita spending by Health Share went in the opposite direction of FamilyCare, which spent the least per member per month of any CCO in 2014 -- just $245. Health Share was toward the high end of per-capita spending at $328 during the same time period.
OHA Allows CCOs to Hide Hospital Profits
Beyond that, Heatherington said that while FamilyCare is a stand-alone company, the other 15 CCOs, including Health Share, all have some partnering entity taking a cut of the profits -- a number that does not get included in the financial reports the state makes public.
“I would hope that this thing going around, particularly about FamilyCare being the most profitable, you take a real jaundiced look at that,” he told legislators.
His actuaries learned that other CCOs weren’t including all of their profits while reviewing their financial records, which have footnotes indicating that CCO partner organizations were taking their cut of the profits before the numbers were reported to the health authority.
CCOs have been able to do this because the Oregon Health Authority has not bothered to ask them to report on profits paid out to partner organizations, and so the windfall paid to hospital systems and other investors doesn’t show up in the financial reports disclosed to The Lund Report as well as to legislators and other public officials.
There's nothing illegal or necessarily unethical about the way hospital-partnered CCOs are filing their reports -- if the state doesn't ask for relevant profit information, they have no incentive to come forward with it. But the health authority's decision to handle the reports in this manner does obscure how much tax money is generating a profit for these organizations. The CCOs disclosed $180 million in profit in the first nine months of 2014, but the number is actually much higher.
“It’s to the advantage of some plans that [state supervisors] do not,” ask for the information and make it public, Heatherington told The Lund Report on Thursday, suggesting his foes at the health authority may have political motivations for not requiring more transparent reporting.
Heatherington told the House Health Committee that FamilyCare was putting $40 million of its profits into reserves to meet insurance requirements. Another $20 million will be re-invested in grants for community health programs. He said the company has plans to spend $2.5 million on behavioral health and $1.75 million on early childhood learning.
Comments
Article in Question
Cindy,
This article was written by our legislative reporter, Chris Gray, following an interview he had after the hearing yesterday, and I believe Chris reported very accurately that conversation. He is a very well respected journalist and has won high praise from lobbyists and legislators alike for his coverage. We are proud to have him as a member of our staff!
Diane Lund-Muzikant
Executive Editor
Accuracy
Dear Diane,
I think the critisism that he didn't use the words "secret" or "hide" in his statement is something you should acknowledge.
At least FamilyCare is a real CCO as apposed to HealthShare which isn't using a business model consistent with CCO's in the first place. They are actually doing nothing different than the status quo but are getting paid more than ever.
Phillip Broyles
Transparency
It is beyond obvious that insurance companies have the biggest and finest buildings in the world because they are all engaging in the most flagrant, opaque, obstructionist, deceitful activities to accumulate and hide money.
Thomas Duncan
I attended the hearing that is the basis for this article, and to say this article is a misrepresentation of what was presented is an understatement. Mr. Heatherington did not state nor infer that other CCOs were keeping their profits secret, rather he explained that the differences reflected the structures of each of the organizations - all of which are legal and ethical. His point was that comparing the CCO's profits with the information provided to and by the state was a futile effort due to the different corporate structures. Mr. Heatherington also reviewed FamilyCare's profits and how the funds were invested.
In terms of Mr. Heatherington's reference to the 3.4% increase, this statement was in relation to all CCOs, not just FamilyCare. And her inference that the rate cuts were likely related to FamilyCare's "eye-popping" profit margin has no basis in fact. Additional mis-statements by Ms. Lund include the paragraph about Health Share being controlled by the hospitals and entities that control the organization and that partner organizations were skimming off the top.
Each of the CCOs were invited to give a 30 minute presentation about what they have accomplished and how they are transforming health. Mr. Heatherington's presentation, like the other CCOs, was intended to inform and respond to questions given to them by the Committee. Why Ms. Lund chose to take information out of context, write inflammatory statements, and inaccurately report the proceeding is suspect at best.
For the record, even though I am FamilyCare's VP of Communications and Government Relations, I'm writing this comment as someone who is tired of the subjective reporting from the Lund Report. This article crosses the line of ethical reporting and should be retracted.
Cindy Becker