State Official Sues FamilyCare in Federal Court

Although FamilyCare stopped operating as a coordinated care organization on Jan. 31, it is still suing the Oregon Health Authority in state court over rate-setting for Medicaid. Now the Oregon Health Authority’s director has filed a federal lawsuit challenging the nonprofit.

The Oregon Health Authority has sued FamilyCare in federal court, out of apparent concern that the former coordinated care organization’s continuing dispute with the state could jeopardize 2018 Medicaid agreements with Oregon’s 15 surviving CCOs.

In response, Jeff Heatherington, president and CEO of FamilyCare, told The Lund Report, "We are surprised that the state went to federal court considering we have an active case in Marion County. We hope that this is not another attempt to avoid discovery in the state case."

FamilyCare ceased operation as a CCO this week, after arguing that the reimbursements it would receive from OHA were too low to make ends meet. It has sued OHA three times over rate disputes, and currently is set to go to trial in state court in Salem on May 15.

As of Feb. 1, 102,000 former FamilyCare members are now part of the state’s largest CCO, Health Share, and are enrolled in plans managed by CareOregon, Providence Health & Services, Kaiser Permanente, and Tuality Healthcare. The remaining FamilyCare members are now covered by Yamhill CCO and Willamette Valley Community Health.

In a suit filed Jan. 31 by OHA Director Patrick Allen, on behalf of the agency he serves, the state asked a federal judge to declare that FamilyCare cannot use state administrative codes to challenge whether 2018 CCO capitation rates comply with federal regulations.

FamilyCare has not yet responded; it has 120 days to do so.

In 2012 and 2017, the U.S. Centers for Medicare and Medicaid Services approved waivers to the Oregon Health Plan, the OHA program through which Medicaid funds are awarded to CCOs.

"Because, and only because, CMS funds a portion of the capitation payments OHA makes to CCOs under the OHP, the contracts between OHA and CCOs must comply with federal law and regulations. Among other requiremetns, federal law provides that no payment shall be made to a state unless such payments are provided in accordance with a contract that CMS has approved," the complaint filed by Allen states. "CMS will not approve a CCO contract unless CMS determines that the rates contained therein are 'actuarially sound.'"

Though FamilyCare and the Oregon Health Authority have settled the CCO’s first two lawsuits about its payment rates, the suit still pending alleges that 2017 rates were too low, and were in violation of federal Medicaid laws.

"The FamilyCare lawsuits have disrupted OHA's rate setting process for several years, and have caused diversion of significant resources that OHA needs to meet the health care needs of Oregon's most vulnerable citizens," the state argues in its new federal lawsuit. "Each challenge to the rates not only affects FamilyCare's rates, but all CCO rates. OHA uses the same methodology to set rates for all CCOs, and thus the operations of all 15 other Oregon CCOs."

The state also notes that rate-setting requires each CCO to submit data about its claims and members, with this data then being used to determine rates. They are required to sign a document when they submit their data that includes the language "I, the undersigned, hereby attest that I have authority to certify the data and information and I, the undersigned, herby certify based on best knowledge, information, and belief that the data and information is accurate, complete and truthful."

FamilyCare officials refused to sign the document when they submitted 2016 data to help set 2017 rates, and instead responded with a statement:

“The certification of this Data Template is provided subject to the statements set forth in this CCO Scratch Sheet. Specifically, by signing the certification, FamilyCare, Inc. only certified that, to the best of FamilyCare’s understanding and given the limitations of the data template and instructions provided by OHA, the data summaries included in this template have been completed as instructed, and all data and information provided in this report are accurate, appropriate, and only include services for FamilyCare, Inc. experienced during the incurred time period of January 1, 2016 - December 31, 2016. Given the limitations of the template, OHA’s current methodology for setting rates, and the issues identified by FamilyCare on this CCO Scratch Sheet, FamilyCare expressly does not certify that the data provided are adequate for purposes of rate-setting consistent with actuarial standards.”

Likewise, FamilyCare refused to sign off on 2018 data – which was used to set rates for its members for January, its final month operating as a CCO – unless a paragraph granting it the right to challenge rate-setting in court remained intact.

“In addition, FamilyCare bargained for a provision in its January 2018 contract that it will get the benefit of any subsequent adjustment to 2018 rates, but only if the adjustment increases its rates,” according to the OHA lawsuit.

Court documents quote this language as coming from FamilyCare:

“OHA will retroactively increase Capitation Rates to reflect any material changes to Contractor’s Capitation Rates arising from the combined impact of the following analyses to be completed in early 2018: updated redetermination analysis, changes to the Substance Abuse Disorder Fee-Schedule, the change in continuous glucose monitoring on the prioritized line list, and analysis of the impact of enrollment categorization due to age or category of eligibility determination. OHA will document any such retroactive increases in an amendment to the Actuarial Report. OHA will not decrease Contractor’s Capitation Rates.”

According to the U.S. Supreme Court, if a state fails to follow Medicaid’s requirements, the only legal remedy is for the federal government to withhold Medicaid funds.

The lawsuit argues that without a judge’s order, FamilyCare’s continued litigation, and its challenges to 2018 CCO rates, could affect its ability to get federal funds to cover Medicaid members across all CCOs in Oregon.

Reach Courtney Sherwood at [email protected].


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