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Partnership between OHSU, Moda Health Could Have Statewide Impact

Be on the lookout for a potential merger between Providence Health & Services and PeaceHealth in the months ahead.
November 18, 2015

The partnership announced by Oregon Health & Science University to acquire a 25 percent interest in Moda Health could have implications for the state’s largest coordinated care organization, Health Share.

OHSU could eventually pull away from Health Share and create its own CCO with Moda and ready itself when the Oregon Health Authority opens new applications. 

As a founding member of Health Share, OHSU is dedicated to having a robust CCO in the Portland metropolitan area, acknowledged Lawrence Furnstahl, chief financial officer.

But with Moda and OHSU eager to expand their market share, Furnstahl couldn’t predict what might happen.

“Some of our other colleagues, Kaiser and Providence, are both a health system and have a health plan component,” he said.

The strategic alignment gives Moda the opportunity to compete vigorously with the likes of Kaiser, Providence and the new joint venture announced by Legacy Health and PacificSource Health Plans. With a cadre of hospitals and physicians from across the state, the partners have a distinct advantage over non-integrated health insurers such as Regence BlueCross BlueShield and Health Net, soon to be acquired by Centene Corp.

Their alignment could also lead to a coordinated care model, designed after the CCOs familiar to Medicaid, that pool together physical, mental health and dental care. Lynne Saxton, director of the Oregon Health Authority, is leading those efforts and will share details at a Dec. 3 breakfast forum.

Last year Moda and OHSU cemented a deal bringing together six other hospital systems across the state, calling themselves the Population Health Alliance --Asante Health, Bay Area Hospital, Mid-Columbia Medical Center, Salem Health, Sky Lakes Medical Center and St Charles Medical Center. Together they have 52,000 employees and represent 3.5 million patient visits, including inpatient admissions, and outpatient and emergency room visits, all of which will become part of this new approach

Earlier this month, OHSU created a new management company called OHSU Partners bringing Salem Health as its partner with Tuality Healthcare waiting in the wings with a letter of intent. An announcement is expected by year's end. 

Other developments on the horizon

Before OHSU teamed up with Moda, Legacy and PacificSource executives had held high-level talks with Robert Gootee, CEO and president of Moda, trying to form a close knit relationship. But Gootee turned down their offer, according to confidential sources.

Now the next big announcement on the forefront is a potential merger between Providence Health & Services and PeaceHealth, which has witnessed a tumultuous turnover in its executive ranks the last few months. This summer Alan Yordy stepped down as president of PeaceHealth, and some insiders have suggested he was forced out, while PeaceHealth has lost top-level executives including Dr. Michael Murphy, senior vice president and chief medical officer, who left after only two and a half months on the job and Gordon Edwards, vice president of finance.

Speculation heated up after Providence and PeaceHealth signed a letter of intent to collaborate on health initiatives with a new health and wellness center in Vancouver. Officials denied a merger was imminent but confidential sources indicate the parties are engaged in backroom conversations.

Implications of OHSU Partnership

Calling the partnership a strategic alignment, Furnstahl said OHSU isn’t interested in micromanaging Moda, but will ultimately have representation on its governing board – up to 2-3 members – equivalent to its 25 percent financial share.

OHSU has a long history with Moda, which became the third party administrator for its self-insured plan three years ago, responsible for its 15,000 employees and their families.

"We want to make sure a health plan sees the world like we do, that covering more Oregonians is a good thing, that has a strategic alignment and has the capital that Moda needs to grow,” Furnstahl told The Lund Report. “For the past three years we’ve been talking about how to increase our strategic alignment.”

Of OHSU’s $1.4 billion in patient revenue, $339 million is derived from Medicaid dollars with the majority of that money coming from the federal government. OHSU’s share is between 10-37 percent and includes provider tax dollars that are matched with federal dollars. In return, OHSU receives what’s known as cost-based reimbursement when caring for Medicaid patients.

OHSU’s funding from the legislature isn’t in jeopardy with the Moda alignment, Furnstahl said. Those state dollars -- $77 million this biennium – are devoted toward education, with Oregon students paying lower tuition to attend its medical, nursing and dental schools. That general fund appropriation also supports the Children Development and Rehabilitation Center, the Oregon Poison Center, the Office of Rural Health, and the Area Health Education Center, among other projects.

Out of its $2.5 billion annual budget, those dollars represent less than 1 percent of OHSU’s total budget.

In 1995, OHSU became a public corporation separating itself from the Oregon State System of Higher Education.

“At that time, legislators clearly recognized that we’re going to be competing in the marketplace, and have to make investments and form partnerships because that’s the modern world,”Furnstahl said.

Diane can be reached at [email protected].