State approves sale of Trillium Community Health Plan to Centene Corp.

June 26--The state Insurance Division has approved the sale of the private local company that manages Medicaid services in Lane County to an out-of-state Fortune 500 company.

Insurance Commissioner Laura Cali on Thursday signed an order approving the sale of Trillium Community Health Plan to Centene Corp. for $80 million, plus other payments. The total purchase price could be as high as $130 million, depending on the size of the dividend paid to the 217 shareholders of Trillium's parent company, Agate Resources, before the sale to Centene, said Jake Sunderland, an Insurance Division spokesman.

Centene plans to keep the Trillium name, and all Trillium officers and directors will remain in place immediately after the sale closes, according to Cali's order.

Trillium manages more than $400 million in taxpayer money a year to provide medical services to about 100,000 Lane County members of the Oregon Health Plan -- Oregon's version of Medicaid.

Cali's decision comes two weeks after the public comment period on the sale ended.

"The division considered over 50 public comments received, both in support and opposition of this transaction over a period of 36 days," the order said. "After considering all comments, the division finds that there are no material or reasonable objections to this transaction."

Cali also found the sale met all requirements outlined in the Oregon Insurance Code.

During the public comment period, people opposed to the sale outnumbered those in favor of it by more than two to one.

Many of the 51 comments -- some by prominent government and community officials -- expressed concern that the sale would lessen local control of Trillium, erode service levels and redirect money intended to provide medical care for the county's poorest and most vulnerable citizens into Centene's coffers.

Centene will now be the first out-of-state for-profit corporation to own an Oregon Coordinated Care Organization (CCO) -- Oregon's attempt to see if locally controlled nongovernment groups can provide better health care with better outcomes, and at lower cost, to Oregon Health Plan members.

Managing Medicaid services has become increasingly profitable for Trillium. Trillium reported a profit of $22 million last year, up from $3.9 million in 2013 and $1.15 million in 2012.

Dr. Thomas Wuest, president of Slocum Orthopedics & Sports Medicine in Eugene, as well as president of Trillium and its parent company Agate Resources, said in the public comments that last year's profit was a "one off anomalous occurrence."

He said it was the result of Trillium membership nearly tripling in recent years, and a lag before those members start using their health coverage.

But demand for services is ramping up this year, "and we are dedicating more money to provider and hospital payments and reserve requirements to satisfy those needs," Wuest said.

Trillium CEO Terry Coplin recently projected that the company must put $32 million to $33 million in reserves to meet Insurance Division requirements.

Wuest said in public comment that Trillium had grown to the point where it likely can't generate enough profit to meet the reserve requirements without selling or getting outside funding.

Many of the public comments vehemently opposed a sale that commenters said would siphon medical care dollars away from needy Oregonians and into the hands of Centene's executives and shareholders.

"A company like Centene is only willing to make such an offer based on the projection of future profits, which will mean more reductions in payments to healthcare providers, and more reductions in authorized services to patients," said Evalyn Cole, a medical/surgical manager in Lane County.

Centene is "fundamentally buying an income stream from those contracted lives within Trillium for as long as they have those lives, and they will want to see a return on that investment," said Dr. Charles Zachem, who said he is on the board of Eugene nonprofit insurance company PacificSource.

"Oregon's CCOs should not be seen as lucrative enterprises that can be bought to pad the pockets of corporate shareholders," said Jennifer Carloni, a Roseburg resident who said she served on the citizen's advisory council of her local CCO.

Dick Leshley said his main concern is that services provided to the sickest and poorest Oregonians could be chosen based on cost, with an eye on the bottom line, instead of what is best for the patient: "These Medicaid members do not have a choice ... If there is going to (be) for-profit CCOs at least keep them Oregon corporations where they can be better controlled."

Ten of Oregon's 16 CCOs are for-profit and six are nonprofit, according to the Oregon Health Authority.

In an interview with The Register-Guard, Katherine Hempstead, who directs the Robert Wood Johnson Foundation's work on health insurance coverage, said an increasing number of states have contracted Medicaid management to nongovernment organizations, including for-profits, over the past decade.

States did this with the hope of reducing costs; she said, however, studies have not shown dramatic cost savings from the shift.

The angst in Oregon about a large out-of-state publicly traded company managing public health services isn't a feeling shared by residents of other states, Hempstead said.

"What's unique about Oregon is this sense that things are local and different ... I don't think that expectation of a local approach to Medicaid is part of what other states are doing," she said.

Hempstead said if any CCO failed to do an acceptable job, "your state could choose not to contract with them again."

Roughly a quarter (12 of 51) of the public comments supported the sale of Trillium to Centene, saying the national company would bring much-needed resources and expertise, and that it showed a track record of staying connected locally in the 22 states where it does business.

"Centene has a record of maintaining both local control and impressively low profit margins," Kelly Terwilliger said. "With the increasing complexity of health care, local plans struggle to keep up, and partnering with another organization brings in valuable expertise and tools. Agate needs a partner. Centene looks like a good one."

Dr. Scott Williams, medical director of emergency medicine at Sacred Heart Medical Center in Eugene-Springfield, said that Trillium's community connection would continue after a sale to Centene because Trillium's community structure and committees are mandated by state law, Centene's corporate culture is to support independence among its various state plans, and medical providers, as well as community members involved in Trillium's board, executive committee and various advisory councils, will continue to be involved.

Dr. Leo Cytrynbaum, a member of Agate's board of directors, said, "we visited (Centene's) plans in other states to assess their operations and met with the Centene leadership and operations -- all of them are committed in both word and deed to running local health care plans and recognize the value this brings."

Wuest said, "OHP patients will be the true beneficiaries of this transaction." He said Centene can provide services and programs that would take years and millions of dollars for Trillium to build on its own.

Another top concern, according to the public comment, is that access to and quality of medical services under Trillium is inadequate now and would further erode under Centene's ownership.

In CCO performance measures for 2014 released this week by the Oregon Health Authority, Trillium mostly fell in the middle of the pack for dozens of measures, from adolescent well-care visits to postpartum care. But it was dead last among the state's 16 CCOs for providing patient-centered primary care.

However, Trillium's overall performance on 17 incentive measures was good enough to receive a performance bonus, according to the report.

In public comment, Wuest said Trillium members increased three-fold within 12 months and Trillium and Agate did an "exceptional job" coping with the increased workload, reporting requirements and audits.

Public comment and other documents related to this sale is available at rgne.ws/1TQdgDh .

Follow Sherri on Twitter @sburimcdonald . Email [email protected] .

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