FamilyCare Health suing OHA over rates, again

FamilyCare Health, a Portland based CCO, filed a lawsuit on Monday against the Oregon Health Authority over disagreements about rate setting.

This is not the first time FamilyCare and the OHA have disagreed over rate setting. The two organizations struggled to reach a consensus on the 2015 and 2016 rates. In 2015, the OHA sent out a letter inviting other CCOs to submit a binding letter of intent if interested in taking over the area served by FamilyCare out of concerns over ensuring continuity of coverage. At that time, FamilyCare had not yet signed its 2016 contact. The OHA almost terminated the CCO’s contract in 2016 over the dispute and FamilyCare had to repay almost $30 million in the settlement agreement.

The lawsuit comes after Oregon’s budget committee chairs submitted a budget that includes a 27 percent cut to the OHA. The cut was made to help close a $1.8 billion budget deceit. The budget has not yet been passed.


Below is the press release from FamilyCare Health.

FamilyCare Health files lawsuit against OHA

Portland-based Coordinated Care Organization (CCO) FamilyCare Health has filed a lawsuit in Marion County against the Oregon Health Authority (OHA) for its inequitable and actuarially unsound rate-setting process. The lawsuit comes as a last resort following a series of OHA delay tactics and an ongoing lack of transparency around the process that led OHA to set FamilyCare’s rates lower than any other CCO in Oregon for the third consecutive year.

“It is with deep reluctance that we move forward with this new lawsuit against OHA,” said Jeff Heatherington, President and CEO, FamilyCare Health. “We have been strong supporters of the Oregon Health Plan (OHP) since its creation and we continue to believe in the program. We have worked diligently to engage the OHA in a productive dialogue around rate development, only to be met with delay tactics, fuzzy accounting, and outright refusals to provide the data used to calculate our rates. Today we are compelled to act in order to protect our organization and the Oregon Medicaid recipients who rely on us.”

Although FamilyCare is the second largest CCO in Oregon, serving nearly 120,000 members, it has received the lowest rates of any of the state’s 16 CCOs for three consecutive years. In the Portland-metro area, where two CCOs serve local members, FamilyCare receives as much as 17 percent less than the other CCO serving the tri-county region. OHA has refused to provide data necessary to demonstrate how it calculated the unfavorable rates.

Under federal law and regulations, OHA’s payments to CCOs must be “actuarially sound.” To meet this criteria they must provide for all reasonable, appropriate, and attainable costs under the terms of the contract. However, the 2017 rates will result in a $55 million operating deficit for FamilyCare, according to an independent analysis by one of the world’s largest actuarial firms. FamilyCare asserts that the state is aware they are creating a deficit, as they have been in the previous two years, and that this knowledge and action is a clear violation of federal regulations and Oregon’s laws regarding CCO global budgeting.

OHA’s refusal to participate in a transparent and meaningful dialogue continued during a recent Dispute Resolution process. In December of 2016, OHA signed a formal agreement with FamilyCare in which both parties agreed to exchange information necessary to determine how the 2017 rates were calculated. Nearly three months into that process, OHA has neglected its obligations to provide data or participate in the dispute resolution process in a meaningful way.

Key points in the lawsuit include:

Three consecutive years of actuarially unsound rate development by OHA targeting FamilyCare with the lowest rates among Oregon’s CCOs and creating operating losses for FamilyCare.

Lack of consistency in the rate development process. OHA and its actuaries have changed rate-setting methodologies each year for three years in a row.

Lack of OHA transparency, such as refusal to provide access to the underlying data that supports the 2017 rates, as well as OHA assertions that this data is proprietary — despite the fact that OHA is a government agency responsible for taxpayer dollars.

$34 million reduction in FamilyCare’s payments based on an OHA claim that FamilyCare pays primary care providers too much. This contradicts OHA’s own research indicating that increased investment in primary care lowers costs and improves health.

Lack of delivery on OHA’s commitment to establish a rate-verification process.

Lack of meaningful participation by OHA in a formal dispute resolution agreement.

Heatherington added, “This is an unfortunate continuation of the issues that led to our previous claims and subsequent settlement with OHA. We are deeply disappointed to see this irresponsible behavior continue. Oregonians and those of us who work to coordinate care for our state’s most vulnerable residents deserve a process that is transparent, fair, and inclusive of public input. We remain hopeful that the state will act fairly and swiftly to remedy this situation.”

Jack Coleman:






The OHA released a statement the day after the lawsuit was filed.

Oregon Health Authority Response to FamilyCare Legal Action

Yesterday, the Oregon Health Authority (OHA) was notified that FamilyCare has filed their third lawsuit against the state — all of which were targeted at increasing their compensation.

“Although we are never pleased to see an issue move to litigation, we are pleased to have a definitive forum for resolving this matter with FamilyCare,” said Lynne Saxton, Director, Oregon Health Authority. “From the beginning, this disagreement has been driven by FamilyCare’s goal to be paid more Medicaid dollars.  OHA has been transparent about the rate development process for all 16 coordinated care organizations (CCOs) in Oregon. OHA’s rates paid to CCOs must be reviewed and approved by the Centers for Medicare and Medicaid Services (CMS). Changes to the rate for one CCO, will impact the other 15 CCOs. Rates are based on a variety of factors including the demographics of the population served. The 2015 rate development process was revised to meet FamilyCare’s specific request and concerns.  It is unfortunate that since they didn’t get the rate they wanted for 2017, based on that same revised methodology, they are again moving to legal action.”

OHA is committed to the health and well-being of the nearly 1 million Oregonians who are served by the Oregon Health Plan, and that depends on the financial strength and stability of the CCOs that serve them. OHA works hard to ensure that all 16 regional CCOs – including FamilyCare– thrive in Oregon’s coordinated model of care.

OHA has been pleased with the performance of Oregon’s CCOs as they continue to provide better health outcomes to more Oregonians, while keeping Oregon’s 3.4% cost containment commitment to the federal government. In fact, as Congress continues to debate health care at the national level and Oregon is seen as a promising model for other states to provide innovative care while containing costs, this commitment to 3.4% growth – and keeping Oregon’s CCOs within this 3.4% growth — will only become more important.

“This is a simple case of fairness. The rates OHA pays to CCOs are matched to the risk of the population served,” said Saxton. “The state is committed to cost containment measures and it would not be fair to give FamilyCare a preferential rate because of their business decisions.”

Oregon and its actuaries are not responsible for business decisions CCOs make that affect their operating margin and thus the rates assigned by the state. The CCO model in Oregon is based on giving the CCOs a global budget and the responsibility for making their own business decisions to serve their members within that budget, which is based on Oregon’s commitment to limit our annual rate of growth to 3.4%. This commitment is also reflected in recent renewal of Oregon’s Medicaid waiver in effect for the next five years.

Robb Cowie:

Featured: Oregon Health Authority (OHA)