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Portland area nonprofit serving Oregon Health Plan members says state making it bleed red ink.

After years of conflict with state health care officials, the Portland-based health care nonprofit FamilyCare says it plans to lay off 250 employees and pull out of the Oregon Health Plan by Jan. 1, 2018.

The move would force its 120,000 low-income members to find care through other means, but state officials say a compromise is still possible.

If not reversed, the sudden year-end move could disrupt care for patients including planned treatments, tests and prescription refills, according to the nonprofit's CEO, Jeff Heatherington. He said his board had no choice but to alert staff to imminent layoffs given the state's recent rate announcement and financial projections that FamilyCare would lose about $100 million next year.

Headquartered in Portland's Lloyd District, the nonprofit plans to keep a small group of employees to pay out on pending claims and answer members' questions. But despite making the announcement internally on Friday morning, the FamilyCare site, as of Monday morning, featured no information on its home page alerting members.

According to Heatherington, starting Jan. 1, "We will continue to help clients as best we can, but it will mostly be guiding people to care."

Oregon Health Authority officials, however, say the announcement may be premature.

Negotiations are "absolutely" still underway, said OHA Director Pat Allen, adding that the rates the state has offered FamilyCare have been certified as fair and objective.

"We're working as fast as we can with them together in partnership" to explore options to keep FamilyCare in the Medicaid business, he said.

"It would be a shame if they shut down and that's why we're working so hard to avert it," he added, but said if there is a transition, OHA wants to ensure it is "as smooth as possible."

The FamilyCare announcement follows years of hostility between the organization's leadership and the state, with Heatherington frequently accusing the state of favoring a competing Medicaid provider in greater Portland, Health Share of Oregon, and of trying to put his organization out of business.

State officials and FamilyCare are currently in litigation over the state's 2017 rates, which FamilyCare claims have led to a loss of roughly $75 million this year.

Earlier this month the state announced that two hired consultants had for the most part vouched for the state's rate-setting process for the coordinated care organizations. The reports say state officials appeared to have generally complied with federal rules, with some exceptions.

But FamilyCare issued its own release calling the reviews too superficial to mean anything.

Heatherington, in an interview on Sunday, accused the state of playing a "game of chicken, and there's no need for it."

The Dec. 15 FamilyCare notice to its employees says: "There is a chance that an agreement could be reached with the state before the beginning of the 2018 plan year. If that happens, we would not move forward with the reduction in staff, and would continue to operate as we are

today. If that occurs, we will

let you know as soon as practicable."

Rates sparked tension

FamilyCare serves members in Multnomah, Washington, Clackamas and Marion counties as one of 16 entities set up around the state to coordinate health care for members of the low-income Oregon Health Plan.

Each of the 16 organizations receives a per-member stipend from the state based on their members' demographics, to coordinate their care. The care groups essentially are insurance companies that, similar to Kaiser Permanente, make decisions about how their providers decide services.

But FamilyCare traditionally has received less than the other 15 coordinated care organizations that serve the Oregon Health Plan. The state has argued that FamilyCare's members are less medically needy, but FamilyCare officials say the difference has been exaggerated by the state.

Despite Medicaid reforms touted as giving flexibility to organizations such as FamilyCare, the state has targeted the organization's practice of paying providers more than Medicaid requires — which FamilyCare claims has led to better care, lower hospital costs and other savings. Rep. Mitch Greenlick, D-Portland, has called the FamilyCare initiative a "great idea" and the state's criticism of it unfair.

In August, the Portland Tribune disclosed a confidential OHA plan to plant negative media stories about FamilyCare to keep lawmakers from entering the rate dispute.

OHA administrators claimed the most controversial aspects of the media plan were not put into play. But news of the plan led to the ouster of OHA Director Lynne Saxton, followed by the departure of several of her top managers.

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