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State may pull plug on health provider

In a move that could force tens of thousands of low-income people to find new doctors, the state has threatened to terminate a major Oregon Health Plan provider that serves poor people in greater Portland.

The nonprofit targeted by a state ultimatum, FamilyCare, says health officials are using misleading calculations and refusing to engage in good-faith negotiations. The Oregon Health Authority is “acting like the neighborhood bully,” says FamilyCare CEO Jeff Heatherington.

Welcome to what may be the most complicated game of chicken happening publicly in Oregon politics today. It’s over money, and it may affect access to health care for the poor in Multnomah, Clackamas and Washington counties. The standoff comes at a crucial time for the state’s oft-touted Medicaid reforms, and suggests that Gov. Kate Brown may strike a different tone on health care than her compromise-oriented predecessor, John Kitzhaber.

“We have a responsibility to protect the health and well-being of Oregon’s most vulnerable citizens — Oregon Health Plan members,” Oregon Health Authority Director Lynne Saxton said in a prepared statement.

While FamilyCare has made a last-ditch bid for settlement, at press time a resolution seemed questionable. “They’ve shown absolutely no wilingness to negotiate anything,” Heatherington contends.

Three years ago, the state turned over administration of the Oregon Health Plan to 16 organizations scattered around the state. They are essentially regional insurers that manage physicians to administer health care to low-income Oregonians under Medicaid. FamilyCare is one of two such groups in greater Portland.

The state pays each organization a different per-member rate that is used for services that the groups deem most important to their members’ health.

It’s those rates that are the sticking point today.

Last week, Saxton said FamilyCare is in breach of contract for failing to fork over money that she says the state previously overpaid the company, when it set 2015 reimbursement rates too high.

If the company doesn’t repay what the state says it owes, FamilyCare won’t be allowed to be part of the Oregon Health Plan, according to the state. Saxton said the state is willing to concede a little more than a quarter of its original demand for repayment of $55 million.

“This is a reasonable solution that allows FamilyCare and OHA to move forward and focus on serving Oregon Health Plan members,” Saxton said in a prepared statement.

But FamilyCare CEO Heatherington claims the state is punishing his company for criticizing the state’s rate-setting process, the same one that is at issue today. “OHA has been punitive in its treatment of FamilyCare, owing to FamilyCare’s whistleblowing,” according to the nonprofit’s press release.

The state was forced to recalculate its rates last year after a federal review ripped them to shreds, saying Oregon was employing “high-risk practices” and flawed projections.

The federal critique came even as, embarrassingly, Oregon’s Medicaid insurers were reporting record-setting profits amassed under reforms that former Gov. Kitzhaber had touted as reining in spending.

Heatherington says FamilyCare’s profits looked larger than other Medicaid provider groups because of a relatively straightforward corporate structure.

He says the money is being used to beef up its mandatory reserves to meet new state rules.

In any event, the hard line now being taken by Saxton, a Kitzhaber appointee, marks a different approach than the cooperative spirit that the former governor had stressed while negotiating the reforms with the Medicaid insurers. Kitzhaber typically sought to avoid public disputes, especially in court or at the ballot box.

And the dispute comes at a time when Saxton and lawmakers such as Rep. Mitch Greenlick, D-Portland, are openly taking stock of the reforms’ progress, or lack thereof.

Heatherington complains that when the state recalculated the rates FamilyCare had complained about, the new rates hurt his group more than any other provider — amounting to about a 20 percent cut.

The new, recalculated rates led the state try to retroactively force the repayment of what amounts to $55 million from FamilyCare — a move called a “claw back.”

FamilyCare last May sued to try and block the move, causing Saxton to warn recently that the feds may refuse to reimburse the state a half-billion dollars as a result.

Oregon Health Authority officials had previously pooh-poohed the notion that the federal rate review could jeopardize funding.

The state’s most recent offer to FamilyCare essentially discounted its repayment demand by about $12 million, according to Heatherington. He says the most disturbing thing is that Saxton is demanding FamilyCare sign away its right to sue over any future rate disputes, causing him to fear the worst.

“OHA’s actions demonstrate an abuse of power. In choosing to go public with this threat of termination, OHA has intentionally disrupted and undermined FamilyCare’s business relationships, causing concerns among providers, members and employees,” FamilyCare said in a press release.

The state’s proposed settlement demands FamilyCare promptly agree to its terms, at which point the company would have until December 2018 to reimburse the state. Otherwise, it will be terminated in June. FamilyCare’s response would require a long-term rate hike — potentially a tall order given federal caps on overall Medicaid spending increases in Oregon.

“OHA’s (stance) is in line with the expectations of Oregon’s federal partners, as well as the long-term financial sustainability of our health care system,” Saxton said. “Now it’s time to move forward and prevent any further worry or disruption for OHP members.”