State's 'game of chicken' leads to FamilyCare shutdown
The head of a care organization serving 120,000 Oregon Health Plan members in greater Portland says FamilyCare really is going to close its doors after the state failed to make significant concessions in their ongoing rate dispute.
While a shut-down had been threatened, the nonprofit's Chief Executive Officer Jeff Heatherington says he held out hope until he met with Gov. Kate Brown in a conference room in the Capitol on Wednesday afternoon. But Brown and other state officials seemed intransigent.
"They basically said either you sign this contract, or you go to hell," Heatherington said. "I have never been more disappointed in government in my life."
He said his board felt they had no choice considering the state's proposed 2018 reimbursement rates for FamilyCare that would mean a roughly $100 million loss next year.
State officials, who've defended their rates as legally sound, said they had to act fast to end the uncertainty over FamilyCare's future in light of reports of disruptions in patient care in recent days, as news of FamilyCare's threatened shutdown spread.
"While the governor appreciates FamilyCare's history of care and the hard work of its employees and providers, the Governor finds reports that patients are already receiving denials of care unacceptable and asks CEO Jeff Heatherington to begin working with the Oregon Health Authority towards an orderly transition that ensures Oregonians are able to continue receiving the care they need," according to a statement issued by Brown Pres Secretary Kate Kondayen.
FamilyCare says it intends to lay off 250 employees by Jan. 5 and pull out of the Oregon Health Plan by Jan. 1. The remaining employees, roughly 70, will stick around to help shut down the company during the next six months and find a home for the patients it serves under the Medicare program.
The sudden demise of FamilyCare could disrupt care for patients including planned treatments, tests and prescription refills.
Already, Oregon Health Authority Director Pat Allen had issued a deadline of Thursday for FamilyCare to say whether it intended to stay in the Medicaid-funded Oregon Health Plan. Allen said that his agency had received several complaints of disrupted care. In one case, a skilled nursing facility was unwilling to take a FamilyCare member released from the hospital. In others, a provider would not see a patient and a transport company would not transport a FamilyCare member to an appointment.
"Those combined to me mean we need to start implementing the transition right away," Allen said.
Previously, Allen had held out hope to FamilyCare and its supporters that a recalibration of rates expected to be finished on Dec. 29 could assist FamilyCare in securing higher reimbursements.
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.
Heatherington has said that starting Jan. 1, "We will continue to help clients as best we can, but it will mostly be guiding people to care."
The state had asked FamilyCare to consider extending its contract 90 days to make for a smoother transition. But Heatherington said that the nonprofit was unwilling to spend down its reserves for that purpose.
"We have been responsible in taking care of these patients for years," he said. "It is the state that has created this problem. Is the state that can fix it."
Instead, he said, the nonprofit will use its reserves to donate to other charitable causes in the Portland area. "We'll make sure the money gets to the same clientele over the years," he said.
Heatherington had sought a boost in rates worth $96 million next year.
FamilyCare serves low-income 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 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.
FamilyCare's demise 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.
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.
FamilyCare's members are likely to be shifted to Health Share of Oregon, a collaborative between local heath sytems including Legacy Health and Kaiser.
Because Health Share will receive a higher rate of pay for those members, the move will increase costs for the state by an estimated $12.4 million, Allen has said.
State officials and FamilyCare are in litigation over the state's 2017 rates, which FamilyCare claims have led to a loss of roughly $75 million this year.
That lawsuit will continue even after FamilyCare leaves the business. Heatherington says the state has intentionally underpaid his organization, and owes it damages.
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.
Despite Medicaid reforms touted as giving flexibility to organizations such as FamilyCare, the state has penalized the organization over a 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 Oregon Health Authority plan to plant negative media stories about FamilyCare to keep lawmakers from entering the rate dispute. OHA administrators said the most controversial aspects of the media plan were not put into play.
Heatherington, on Sunday, had accused the state of playing a "game of chicken, and there's no need for it."
In the end, nobody blinked.