In Portland Area Medicaid Market, CareOregon Gains Power Behind The Scenes

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CareOregon is taking a more prominent position as an insurer for the Oregon Health Plan in the Portland metro area, which has a third of the state’s Medicaid population.

The fast-growing but money-losing Portland-based nonprofit has teamed up with Providence Health & Services in a reorganization of Health Share of Oregon, the umbrella nonprofit group that’s officially designated as the coordinated care organization in the metro area. Health Share consists of four insurance plans -- CareOregon is the biggest -- that serve more than 307,000 members in Multnomah, Clackamas and Washington counties. The metro area contract is worth $2 billion this year alone.

CareOregon will be the lead administrator in Health Share, with new responsibility for behavioral health care, nonemergency medical transportation and dental care. It will gain members beyond the 200,000 it serves now in the metro area, including from Providence, and it will take more financial risk with the potential to make -- or lose -- more money.

“For CareOregon on the acute care side, we might have 10,000 more people than we have now,” Eric Hunter, CEO of CareOregon, told The Lund Report. “That’s not a significant increase for us. (But) on the behavioral health side and for nonmedical transportation, (it) will be significant for us.”

In addition to its metro-area Medicaid business, CareOregon also owns coordinated care organizations that serve Jackson, Columbia, Clatsop and Tillamook counties, plus it runs a Medicare insurance arm. CareOregon projects revenues of $1.4 billion this year, with a $10 million loss.

The reorganization for the next Medicaid round, dubbed CCO 2.0, will leave Health Share with four main groups -- Kaiser Permanente; Legacy Health; Oregon Health & Science University which has banded together with Tuality Healthcare and Adventist; and CareOregon with Providence. Clients will be divvied up based on their primary care physicians.

The reorganization was unanimously approved by Health Share’s board in April, Stephanie Vandehey, the company’s spokeswoman, said in a statement. “In response to CCO 2.0, Health Share and all our partners saw an opportunity to build on our partnerships to improve care, as well as improve administrative capacity and minimize redundancies. As part of this, our partners collaboratively decided to build on existing administrative capacity we already share with CareOregon.”

The move comes at a critical time: Next month, the state will award Medicaid contracts for 2020 through 2024. This will be the biggest contract award in Oregon history, which the Oregon Health Authority estimates will be worth $6 billion next year alone.

Though there is only one coordinated care organization in the metro area this year, CareOregon and its partners may face competition in 2020. Trillium Community Health Plan, the Medicaid insurer in Lane County, has asked for a contract in the tri-county metro area. With nearly 87,000 Medicaid clients, Trillium is smaller than Health Share but the former nonprofit is now owned by for-profit Centene Corp., a nationally a financial heavyweight. Centene is the country’s largest Medicaid insurer, with more than 8.5 million Medicaid clients and is worth about $20 billion in capitalization on the New York Stock Exchange.

The Oregon Health Authority said it will award contracts to any coordinated care organization that qualifies. In the past, there were two Medicaid insurers in the Portland area, but nonprofit FamilyCare Inc. went out of business in 2019 amid a rate dispute with the state.

Months Of Uncertainty

CareOregon’s new standing in Health Share follows months of uncertainty at Health Share, Hunter said. In an interview with The Lund Report, he said that Health Share was on the verge of disintegration last fall. When the current “letters of intent” for a Medicaid contract under CCO 2.0 were submitted by coordinated care organizations this spring, CareOregon, Providence and Kaiser all submitted letters in competition with Health Share.

The Portland-area coordinated care organization had become bloated, adding unnecessary tasks and creating inefficiencies, Hunter said. To position itself for the next five-year round of Medicaid contracts, something had to give.

In September, Health Share’s CEO Janet Meyer stepped down. At the time, Hunter told The Lund Report that change was needed to prepare the organization for CCO 2.0.

CareOregon could have gone it alone but decided against that.

“We had to think of what’s in the best interest of CareOregon and our members,” Hunter said.  “We figured it was better for us, our members and the community to stay in Health Share.”

CareOregon, Providence and Kaiser did not pursue a contract, allowing Health Share to remain the umbrella organization. The company has yet to replace Meyer. The board formed a search committee, which wrote a job description but they’ve yet to name a final list of candidates, Vandehey said.

Coordinated care organizations will be expected to up their game in the next Medicaid round, taking on responsibility for gradually moving toward a so-called value-based system. Essentially, this involves payment for health outcomes -- not for procedures and services. The fee-for-service model, which encourages providers to order tests and procedures to pad their bottom lines, has helped drive up health care costs in the United States, which has the most expensive medical care in the industrialized world but often subpar outcomes.

Another reform in CCO 2.0 will involve making so-called social determinants of health, such as food, employment and housing, a bigger part of the health care equation. It’s widely recognized that social factors play a major role in how healthy people are.

Medicaid insurers will also be expected to do a better job of providing behavioral health care to the nearly 1 million Medicaid clients in the state. Oregon has often failed to address the mental health concerns of its Medicaid clients. The nonprofit Mental Health America ranked Oregon near the bottom in its latest report on the state of mental illness and access to treatment, saying that the state has the highest prevalence of mental illness nationwide.

Under Health Care’s current organization, the three county governments are primarily responsible for mental health care insurance. With the next contract, CareOregon will take that risk. CareOregon officials expect the change to improve integration of physical and mental health care.

“We’ll still be working closely with our partners in the counties to make sure the money is spent in the right place,” said Jeremiah Rigsby, CareOregon’s chief of staff. “It’s mostly that we are taking downside risk because we think the risk is worth it for better integration.”

Effort To Stabilize

The new agreement represents another step in CareOregon’s growth and its effort to financially stabilize. The agency has hemorrhaged money in recent years, but is now edging toward breakeven.

It lost $10 million in 2016, $55 million in 2017 and $9 million last year, its financial reports show.

Hunter said losses have slowed, with stabilization in sight.

“In 2018 for Medicaid, it was damn near break even,” Hunter said. “We’re very conservative in our budgeting. We budgeted to break even this year.”

Those estimates are panning out, he said: “We’ve got favorable rates for 2019 that match better to what our members look like, so we’re having a good year so far.”

About $1 billion of CareOregon’s annual revenues are for Medicaid, with about $200 million for Medicare.

CareOregon has substantial reserves that it dips into in down years. As of the end of 2017, it had about $350 million in investments. More recent numbers were not immediately available.

The company’s finances could be hurt if Centene’s Trillium secures a contract in the Portland area. Hunter acknowledged he’s worried about that after months of  “such great efforts to keep a single CCO in the Portland metro area and to keep everybody at the table and cut these deals that organize Health Share in a way that works for everyone.”

If the state approves multiple CCOs for the metro area, “we’ll start competing with our network and providers,” Hunter said. “We will be forced and they will be forced to spend money on marketing and advertising where we don’t have to do that now.”

With multiple CCOs during open enrollment, clients would pick their insurer. Those do not choose would be assigned.

“There is going to be mass confusion potentially, and it’s just disruption that I don’t think the community needs,” Hunter said.

Competition Elsewhere

Besides its involvement with Health Share, CareOregon owns Jackson Care Connect, the biggest CCO in Jackson County with about 30,000 members, and Columbia Pacific CCO, the coordinated care organization that serves Columbia, Clatsop and Tillamook counties. The latter enjoys a monopoly now but could face competition from Moda, which filed for a contract.

Hunter said the region, with nearly 24,000 Medicaid members, is too small for competition. Clients in the area, which includes rural timber country, have a lot of health issues, like opioid use disorder, Hunter said, that CareOregon has been working on with its network of providers.

Nevertheless, he said Moda is trying to build a foundation for a contract.

“They’ve signed up a couple of our provider partners to be equity owners,” Hunter said. “That’s causing a little bit of havoc already in those communities because a good number of people on our board for Columbia Pacific have had to recuse themselves or leave that board because they work for entities that are now competing for that business. It’s a lot messier than it needs to be for anyone.”

He said CareOregon will survive but acknowledged that the company’s finances could go south if it loses too many members in the next Medicaid round.

“We’ve got a solid base,” Hunter said. “We’ve built an infrastructure that’s on par with anybody else in the business as least in Oregon, so we feel good about the future but, yeah, it will be different if we’re serving, with all of our CCO relationships,  250,000 lives or 150,000 lives.”

Christian Wihtol contributed to this report.

You can reach Lynne Terry at [email protected].


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