On Wednesday, state regulators ruled that Optum can purchase The Corvallis Clinic without review. A spokesman for the company said he wasn’t sure when the transaction would be completed.
The Oregon Health Authority’s review of the deal had been proceeding when about three weeks ago, the state informed Optum they would be inclined to approve the deal if some conditions were met. The company objected to the conditions, and filed for an emergency exemption from review five days ago, on Friday, Mar. 8.
According to reporting from industry watchdog The Lund Report, “The proposed terms included requiring Optum to keep in place all the clinic group’s facilities and services for at least 10 years after completing the purchase. The draft said Optum could reduce its services or facilities during that time only with state review and approval. The draft also proposed restrictions on how the clinic could negotiate payments from health insurance companies; required establishment of a community advisory board to monitor the clinic’s practices and make recommendations; sought to ensure Optum keep the clinic’s current staff levels in place for up to two years; and restricted non-compete agreements Optum could impose on employees.”
Optum, it should be noted, is a subsidiary of UnitedHealth Group, a major player in the health insurance industry. Some readers will recall the insurance side of the company raised eyebrows locally last year when it was revealed that Samaritan Health had to stop accepting their insurance due to nonpayment and delayed authorizations.
Claims of financial insolvency
The filing for an exemption to state review argued that The Corvallis Clinic’s finances had so deteriorated that the need for an immediate takeover had become, in essence, a financial emergency.
But, the same filing also disclosed that Optum and the clinic had been working on the deal for about a year – even though they waited until December to file for the usual regulatory review.
In the end though, the state accepted the argument. Sarah Bartelmann, OHA’s Health Care Market Oversight Program Manager, wrote in her ruling, “Absent closure of the Transaction as expeditiously as possible, TCC is expected to be insolvent in the immediate term. The information provided to date reflects that the proposed Transaction is necessary to protect the interest of consumers and preserve TCC’s solvency.”
The state’s review permits considerable confidentiality – and neither company has publicly shared any financial information about the deal. Their filings with the state have been heavily redacted.
It is possible to appeal OHA’s decision, a lawsuit would have to be filed within 15 days.
Community reaction
Hundreds of clinic patients and physicians filed objections to the merger during the comment period. A few local healthcare advocates also filed objections to the exemption from review.
However, there wasn’t much political will among local electeds to lobby for alternatives. Initially, only Sen. Sara Gelser Blouin filed an objection with OHA. On March 5, The Advocate issued an editorial that took a deep look at Optum and how officeholders had been quiet on the matter. After the March 8 emergency exemption filing, Benton County Commissioners Nancy Wyse and Xan Augerot filed objections with the state, as well.
In case you missed our editorial on the clinic takeover – it also takes a deeper look at what we believe our area’s elected leaders could have done.
EDITORIAL: STOP THE CORVALLIS CLINIC TAKEOVER, WHERE’S OUR GOVERNMENT?
The comment period on the Corvallis Clinic sale to Optum Health has ended – and now the Oregon Health Authority will determine if the deal should go through. We think they should say no, and then take a further step, and help the clinic back to a solid financial footing.
For instance, state officials can and should secure financing for the clinic, or at least, enough financing to attract a more desirable merger partner.
Moves like these aren’t unprecedented. Just last year, state lawmakers shoveled hundreds of millions of dollars in grants and loans into the state’s tech sector. And Oregon has a rich tradition of forming public/private partnerships to get things done in a wide variety of other sectors, as well.
Also, it’s not just our state, the federal government has at various times loaned dollars into the big three automakers, insurance companies and banks – most of the time, they’ve been repaid with interest.
Surprisingly, even though the clinic sees over 18,000 patients yearly, there has been almost no political will to keep them out of the demonstrably awful clutches of Optum – and by awful, we mean for patients.
The players
We’re about to tell you why this proposed takeover is a dreadfully bad idea, and hence, why the state needs to bail out the clinic, but before we do that, we need to introduce you to Optum Health.
They are a subsidiary of UnitedHealth Group, and their main business is health insurance – which according to analysts means a relatively thin profit margin for the company. So, they’ve been using Optum to rapidly buy up medical practices nationwide because they offer higher margins, and the possibility for what’s called vertical integration. Basically, the physicians and support personnel wind up working for the insurance company.
Fortune Magazine ranks UnitedHealth as the 10th largest company in the world – they brought in $324 billion in revenues in 2022, $20 billion of which was profit. Optum’s contribution to those totals; $71 billion of revenue, $6 billion in profit, which is an 8.5% profit margin. By comparison, the health insurance side only delivered a 5.8% margin. Optum Health says it now employees 90,000 physicians nationwide, which is up from 60,000 in 2022.
Corvallis Clinic, by contrast, only employs 100 doctors and 500 support staffers. The pandemic meant the loss of elective care and surgery revenues, and according to the clinic’s filing with state regulators, they had to reduce physician-owner pay by 15% last year, and they’re still anticipating losses over the next 12 months.
Why the takeover is a bad idea
To be fair, the filing also argues that Optum can leverage its experience and already existing systems to progress Corvallis Clinic, and to keep healthcare affordable for local patients. However, the behavior of Optum’s parent company is troubling, and those affordability claims appear to be premature.
David Blumenthal questions how patient costs will be impacted. He’s the former president of The Commonwealth Fund, a nonprofit healthcare research and advocacy group. In an interview, he said, “We know that horizontal consolidation — that is, hospitals merging with other hospitals or physician practices merging with other practices — increases prices, and it’s hard to find evidence of quality improvement. There’s less data on vertical integration, though it seems to have the same effect.”
A “dangerous company”
Late last year, we reported that Corvallis based Samaritan Health Care was forced to terminate its contract with UnitedHealth. The insurer wasn’t reimbursing Samaritan for seeing their insureds. It’s an experience other providers have also had with UnitedHealth.
United and OptumRX are also being sued for allegedly strong-arming independent pharmacies out of business. Reporting by STAT, a well regarded healthcare industry publication, also showed the parent company uses an algorithm to cutoff rehab care for elderly patients.
When we asked Corvallis’s Sen. Sara Gelser Blouin what she thought of the merger, she said, “I oppose this and have asked OHA to reject the proposal. I am frustrated that our community is put into a position where we are seemingly forced to choose between the fate of a clinic and allowing a private equity backed company with an atrocious track record for patient care, quality, transparency, abuse and Medicaid fraud into our community. UHS is a dangerous company and our community should not be forced to accept its profit driven practices as a substitute for the quality health care we all need and count on.”
We strongly suggest reading Gelser Blouin’s letter to OHA – it’s quite informative. For instance, among the corporate misdeeds she cites in her objections, she cites one that is especially disturbing.
“At UHS operated Provo Canyon School in Utah an Oregon child with a developmental disability was placed in isolation, chemically restrained and beaten so badly that she was left unable to eat in 2019. In 2020, UHS was ordered by federal authorities to pay $122 million to settle claims related to the False Claims Act due to the provision of inappropriate billing and illegal kickbacks. A Mother Jones investigation last fall highlighted the abhorrent practices of UHS that exploit foster children for profit.” Gelser Blouin also included a link to the Mother Jones story.
City Councilor Jan Napack also responded, saying, “Late last year, UHC left thousands of Corvallis subscribers without access to a regional medical center. How that could be ethically justified is beyond me. I have to support Good Sam’s decision to drop UHC’s services rather than see them falter any further.”
Napack also added, “Could it be that a similar situation affected the sale of the Corvallis Clinic? I sincerely hope that UHG / UHC are not playing a devious “long game” to undermine medical facilities, but instead are simply taking advantage of economic opportunity.”
You would think our community’s other local officeholders would be all over this one, looking out for their constituents – but as you’ll see… not so much.
Lacking political will
Other than Sen. Gelser Blouin and City Councilor Napack, none of our other local electeds have expressed much interest in Optum’s prospective takeover of The Corvallis Clinic – even though the clinic serves almost twenty-thousand patients in three counties, and is based right here in Corvallis.
We asked our local city councilors, and county commissioners if they had lobbied state officials about the takeover, like they have with past issues before regulators, and none had. We also asked what they thought of the merger, and what the government’s role should be.
We asked the same questions of Corvallis’ Mayor Maughan and our state rep.
County Commissioner Nancy Wyse said, “I have not contacted anyone about the proposal, and you are the first one to contact me about it. I have not received any requests or comments from community members regarding the situation.”
City Councilor Charlyn Ellis responded, “This is way beyond my wheelhouse.” Councilor Paul Shaffer wrote, “Government has a place in these kinds of decisions, but that should come, probably at the state level. I’m not convinced most of the individuals in local government (e.g., city or county) have the background to review and recommend/decide for good reasons or for the right reasons.” Shaffer said he has not conversed with other electeds about the matter. Councilor Tony Cadena echoed Shaffer’s sentiments.
County Commissioner’s Xan Augerot and Pat Malone declined to comment, as did City Councilors Hyatt Lytle, Laurie Chaplen, Tracey Yee, and Briae Lewis.
City Councilor Gabe Shepherd, currently running for Benton County Commissioner, did not respond by press time. Neither did Rep. Dan Rayfield, who is running to become Oregon’s next Attorney General.
What we’re asking for
We believe it’s the job of government to protect the public from the likes of UnitedHealth Group, and its subsidiaries.
For those of you in local government, we challenge the notion that this is outside your scope. More people in our shared community will be impacted by whatever happens to The Corvallis Clinic than are going to be impacted by a new courthouse or downtown civic campus. We expect you to advocate for us, your constituents – please do that concerning Corvallis Clinic, starting now.
At the state level, there is a clear governmental responsibility to protect Oregon’s patients. And as no small aside, we assume the state’s agencies and electeds understand there’s no way to adequately regulate an arrangement like this takeover, with a company like Optum. Oregon’s history as regulator is too spotty for that.
We do not accept the idea that there’s only one productive path forward for The Corvallis Clinic – there’s rarely ever just one option. We believe the public deserves enough moral imagination from its governmental institutions and leaders to do better than that.
Do you have a story for The Advocate? Email editor@corvallisadvocate.com