Trillium sale to Centene raises questions about for-profit CCOs

The board of directors of Centene Corp., an out-of-state Fortune 500 company buying Oregon CCO Trilliam.

The board of directors of Centene Corp., an out-of-state Fortune 500 company buying Oregon CCO Trillium.

Oregon’s 16 coordinated care organizations were set up to provide health care for some of the state’s poorest residents, Medicaid patients.

Yet 10 of the 16 CCOs are for-profit companies, and there are no limits placed on how much profit they can make.

“I’m not aware of any (caps on profit) — not by virtue of regulation or any other type of guideline,” said Mark Fairbanks, chief financial officer of the Oregon Health Authority, which regulates the state’s CCOs.

These two facts have drawn increased attention — and concern — after a Fortune 500 company based in Missouri decided to buy Trillium Community Health Plan, the CCO serving Lane County’s Medicaid patients.

“It does concern me when we have a private business, whose main motive has got to be to make money, running a service that is really critically important to low-income Lane County residents,” said state Rep. Phil Barnhart, a Eugene Democrat. “(There is a) need to make certain that the interests of those low-income Lane County residents (are) put first, ahead of a business’ interests and its shareholder interests.”

There doesn’t seem to be a definitive answer as to why profits aren’t covered by the state’s rules for CCOs. But several sources interviewed for this story said they were surprised to discover that most of Oregon CCOs are for-profit companies.

CCOs manage health services provided to members of the Oregon Health Plan — Oregon’s version of Medicaid, the taxpayer-funded health plan for low-income residents.

The spotlight focused recently on the ownership of CCOs when the state Insurance Division decided to approve the sale of privately held Trillium to Centene Corp., a large health care company based in St. Louis.

In public comments on the sale, dozens of health care providers, Oregon Health Plan members and lawmakers told the state they were worried that taxpayer money intended to pay for health care for needy Oregonians could end up enriching corporate executives and shareholders.

Sen. Floyd Prozanski, D-Eugene, said discussion about putting a cap on CCO profits might come before the Legislature.

“It’s a new area with the CCOs, so I think it’s something we should be looking at to ensure the public is getting (quality) coverage at a reasonable cost,” he said, and that systems are in place to provide accountability — a way to measure whether goals are being achieved.

In theory, the limit on CCOs’ profit was that they had to provide access — services to all eligible Oregonians — at the same time they met a range of performance benchmarks, said Neal Wallace, a public administration professor at Portland State University.

“Usually the idea is there aren’t explicit profit controls, but … if there are controls on quality and access, then they can’t really make a profit,” he said.

But all of Oregon’s CCOs made a profit last year, according to the latest figures from the Oregon Health Authority.

CCOs are a relatively recent creation. They were rolled out in 2012 with hopes of improving services and improving members’ health at lower costs. They aimed to do this by wrapping together physical, mental and dental health services, which previously had been managed separately, and by encouraging innovation, such as hiring community health workers to help patients in their homes.

As the state’s CCOs have enrolled more members, their revenues — and in many cases profits — have increased.

Trillium, which oversees Medicaid services to about 100,000 Lane County residents, had the second-highest profit last year of Oregon’s 16 CCOs.

Trillium reported a profit of $22 million last year, up dramatically from $3.9 million in 2013.

Trillium CEO Terry Coplin said the profit went into cash reserves, which the state requires to ensure that the CCO has enough money to cover future services.

The reason for CCO profits early on is that people have coverage they’re not using yet, said state Rep. John Lively, a Springfield Democrat who serves on the House Health Care Committee.

Most of the CCOs brought on a lot of people, Lively said. “They’re paid per covered life,” he said. “As utili­zation goes up the payment will be the same, but their costs will go up. That’s the point of putting more in reserves, so they have enough to cover increased utilization.”

Enter Centene, which is so bullish on Trillium’s business that it plans to buy the company for $80 million to $130 million.

The final purchase price will depend on the size of the dividend paid to Trillium owners before the sale closes, which is set for Sept. 1, said Jake Sunderland, a state insurance division spokesman.

Trillium has 217 shareholders; 200 of them are retired or practicing doctors and most of the rest are Trillium employees, Trillium spokeswoman Debi Farr said.

Some of those shareholders will get big payouts from this deal, which rankles some OHP patients.

“I don’t think that people’s health care should be big business,” OHP member Lana Junger said. “These are people’s lives. This is a necessity. To me it’s just the one service (that) I think everybody should have access to, and they shouldn’t have to worry about whether they’re going to have to lose their house (and the rest of) their lives because they get sick.

“Then (to) have people making $80 million-­plus off the backs of sick people,” she said. “That just does not sit well with me.”

Peggy, an OHP member who asked that her last name not be used because she said she feared being blacklisted by Trillium, said the scenario of Trillium owners making millions of tax dollars off Trillium patients “just feels wrong; it feels messed up.”

What’s even more messed up, Peggy said, is that the doctors and executives who own Trillium will profit from the Centene deal while she and thousands of other Trillium patients have no primary care doctor and go without needed medical services.

Peggy said she is in fragile health and lives on about $700 a month in Social Security benefits. She said she uses crutches, a wheelchair and requires antibiotics and pain medication for arthritis and a bone disease.

Peggy said Trillium has told her she can visit two different specialists, if needed, and can go to urgent care for any problems that crop up. But she said she hasn’t been able to find a doctor to fill her prescriptions, her OHP dentist performs the lowest cost procedures, such as pulling a tooth instead of doing a root canal, and OHP won’t pay for eyeglasses, specialized crutches or a new wheelchair.

Peggy said she is irked that “my teeth are getting pulled; I can’t get eyeglasses, and I can’t get a new wheelchair, and meanwhile they’re making millions of dollars. What is right about that?”

Two of the more than 30 CCO performance measures tracked by the Oregon Health Authority deal with members’ access to health care and their satisfaction with that care. In the 2014 performance report, 82 percent of Trillium members surveyed said they received appointments and care when needed. That’s down from 84.6 percent in 2013, and below the Health Authority’s benchmark of 88 percent.

Last year, 86 percent of Trillium patients surveyed said they received needed help and were treated with courtesy and respect by customer service staff. That’s up from 84 percent in 2013, but below the OHA benchmark of 88 percent.

Separate from the performance measures, OHA also tracks complaints against CCOs.

In the first three months of this year, Trillium CCO members filed 306 complaints against the company, according to OHA records. A third of them dealt with interactions with health care providers or the plan. The next biggest areas of complaint were access to providers and services, followed by clinical care.

The Health Authority denied The Register-­Guard’s request for access to the individual complaints, saying that doing so would violate patients’ privacy. The Register-Guard has filed a public records request asking for the information, which is pending.

Trillium, with 3.23 complaints per 1,000 members in January through March, had the fifth-highest rate of complaints among the state’s 16 CCOs.

Health Share of Oregon, the state’s largest CCO, with about 250,000 members in the Portland area, had the highest complaint rate: 6.66 per 1,000 members, OHA figures show. Health Share is a nonprofit founded by a consortium of health care and service organizations.

A growing number of states have contracted out management of Medicaid services to non­government entities over the past decade, health care experts say.

“It’s a way of controlling risks,” said John McConnell, a health economist and director for the Center of Health Systems Effectiveness at Oregon Health & Science University in Portland.

“They’re offloading risks to managed care companies,” which agree to take on the financial risk and potentially the financial benefit, he said. “It makes states able to manage their budget more carefully.”

The managed care companies “are betting they can manage that patient population better than the state can,” McConnell said. “But if they can’t, it comes out of their pocket.”

Wallace, the PSU professor, said the tension around the government outsourcing this type of work “has always been there.”

“I think it becomes more prominent when it’s a for-profit because that’s sort of calling out that they have this particular motive,” he said.

Now, with Centene poised to become the first out-of-state owner of an Oregon CCO, “this is a really important question of whether you should go out of the state to have something managed that is and should be local,” Wallace said. “And if you’re going to do that, how do you guarantee that that isn’t problematic?”

It’s one thing if an Oregon CCO wants to partner with a national company to tap into the larger company’s expertise, Wallace said. “It’s another thing if they’re selling the whole thing because … without the public (Medicaid) money it isn’t clear what they’re buying, and the question is how does that $80 million to $130 million (that Centene paid for Trillium) get paid back?”

“Are the contracts strong enough that the person contracted to do the job are doing all the things they’re supposed to do?” Neal asked.

Fairbanks, the OHA’s chief financial officer, said they are.

“We have contracts with each CCO and make sure that all requirements are being met,” he said.

CCOs are measured on more than 30 performance metrics, and they must submit quarterly and annual financial statements, he said.

“At this point it appears Trillium is in compliance with its contract and certainly is satisfactory,” he said.