PORTLAND, Ore. — Oregon health officials are preparing to transfer Portland-area Medicaid recipients to a new health care provider after their current carrier announced it would likely close.

Jeff Heatherington, the president and CEO of the current provider, FamilyCare, said Monday the company's chance of survival is "probably about 5 percent at the best." The state's proposed reimbursement rates for next year are too low and estimates medical costs would exceed revenues by $95 million, Heatherington said.

Oregon Health Authority employees met with FamilyCare representatives Monday to map out the transition, The Oregonian/OregonLive reported.

Oregon Health Authority Director Patrick Allen on Monday did not rule out another contract with FamilyCare.

"We continue to work with FamilyCare and hope that they will continue serving the Portland market in 2018," Allen said in a statement. "This is their business decision to make. If they decide that their business model is not financially viable, we look forward to working with them to ensure an orderly transition of their clients."

If FamilyCare closes, its members would be transferred to another coordinated care organization under contract with the state.

FamilyCare's board voted Thursday to decline any state contract that would result in an operating deficit, Heatherington said. An initial round of 250 layoffs will take effect Jan. 5, he said, and 70 employees will be retained to help with the transition.

In August, Oregon Health Authority Director Lynne Saxton resigned at the request of Gov. Kate Brown after a communication plan became public detailing how the agency intended to damage the reputation of FamilyCare.

The complete text of the email FamilyCare sent to providers is below.

Dear Providers,

Thursday evening, the FamilyCare Board of Directors voted to not sign the 2018 contract – as is - with the State of Oregon, due to deficient and actuarially unsound rates. With this decision, FamilyCare's 32-year history serving our state's most vulnerable residents comes to an end, and 120,000 Oregonians will no longer have the access or quality of care they deserve.

For three consecutive years, the Oregon Health Authority (OHA) has developed rates that are the lowest of any coordinated care organization (CCO) in the state and have generated losses of nearly $100 million for FamilyCare. The 2018 rates will generate an additional loss of $96 million, a figure certified by our independent actuary. The 2018 rates will force the company into bankruptcy no later than August.

OHA has changed its rate-setting process every year since 2015. These changes have only hurt FamilyCare, which has seen the lowest rates in the state since 2015 despite serving an increasingly riskier population. For four years, FamilyCare has been seeking transparency in the rate-setting process. The OHA has been consistent in denying transparency, and has enlisted the help of other CCOs and has blocked our efforts. In fact, OHA's actuary – Optumas - is now insisting that the information used to develop rates for Oregon is a trade secret of Optumas. All of this is consistent with OHA's "Communications Plan", which was discovered in July and designed to "hurt" and "isolate" FamilyCare.

We are profoundly saddened that FamilyCare cannot continue its mission of providing care for our members. But the State has left FamilyCare with no choice. The Oregon Health Authority has the ability to remedy this issue with adequate rates for the population we serve. Only then will FamilyCare be able to continue our partnership with the state and, more importantly, continue to care for Oregon's most vulnerable population.

We want to assure you that FamilyCare has sufficient reserves to honor its commitments to you and every other provider.


Jeff Heatherington
Founder and CEO of FamilyCare Health Plans