Salem medical groups agree to end Medicaid fight

SALEM, Ore. (AP) — Under pressure from the state, Salem Hospital and the organization that administers Medicaid in Marion and Polk counties have agreed to settle their differences out of court. It's a step toward resolving a dispute that officials said threatens efforts to base health care payments on outcomes rather than the number of services performed.

The hospital has agreed to drop its lawsuit against Willamette Valley Community Health, the group of providers known as a coordinated care organization, or CCO. The organization agreed to pay the hospital $457,000, the Salem Statesman Journal (http://stjr.nl/12B24gH ) reported Tuesday.

The two entities also agreed to work on a new contract and to resolve an additional $330,000 in disputed claims as well as the hospital's complaints about the way the organization is governed.

The hospital and the CCO had disagreed on how much the hospital should be compensated for serving people in the Oregon Health Plan, the state's version of Medicaid. Hospital leaders had publicly called for more transparency and said conflicts of interest ran rampant in board decisions.

The coordinated care organizations are key to the health care overhaul Gov. John Kitzhaber has championed. Providers such as doctors, mental health agencies and hospitals are expected to join them and to develop strategies and payment mechanisms that focus on health results rather than payments per visit or per procedure.

The hospital's parent company, Salem Health, which has a minority stake in the coordinated care organization, sued last year over the reimbursement rate paid to its hospitals in Salem and Dallas.

State officials said the Salem suit could create a precedent for other hospitals to avoid changing their practices.

After a February meeting convened by Sen. Jackie Winters, of Salem, failed to resolve the lawsuit, Reps. Brian Clem and Kevin Cameron stepped in with a bill that would have given the Oregon Health Authority the power to oust an uncooperative member of a CCO board.

The legislation was known as the "bad actor bill" and started with statewide impact but was later narrowed to focus on the Salem area. The agreement meant it wasn't needed, Clem said.

"Fortunately, good will prevailed on both sides," Clem said.

Spokeswoman Sherryll Hoar for the hospital's parent company said the parties had one formal mediation session on July 1 and then made their settlement final over the Independence Day weekend.

"With this agreement, we are now engaging in a process to rebuild trust as we move forward," said Ruth Bauman, chairwoman of Willamette Valley Community Health.

"We look forward to fine-tuning the governance processes to help us move forward," said Cheryl Wolfe, Salem Health's chief operating officer.

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Information from: Statesman Journal, http://www.statesmanjournal.com

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