Case Study: FamilyCare v. Oregon Health Authority

Issue:

The State of Oregon hired our firm in 2017 to evaluate potential damage claims made by FamilyCare, Inc., a nonprofit Medicaid insurer, against Oregon Health Authority (OHA). The plaintiff alleged that the state used defective data and underpaid it with insufficient premiums/rates, which then forced the insurer to shut down in early 2018. FamilyCare once had 120,000 Medicaid members and operated as one of 16 coordinated care organizations that serve members of the Oregon Health Plan.

FamilyCare brought the lawsuit in federal court, seeking $125 million in damages for OHA’s alleged breaches of contract. However, the state argued that OHA’s payment calculations were legal and appropriate.

This case presented unique challenges and questions because it involved the potential valuation of a nonprofit and novel damage questions given that FamilyCare had made the decision to close its own doors. Also, the plaintiffs did not provide much disclosure about their damage theories but initially claimed $50 million in lost business value.

Assignment:

Our team strategized about how the plaintiff may have perceived damage claims and did an extensive investigation into FamilyCare’s finances. We then prepared an expert report of our opinion on the financial drivers of FamilyCare’s shutdown. Our valuation experts also researched valuation issues and theories and made arguments about why FamilyCare couldn’t claim lost business value.

The case went on a three-year stay and came back in 2021. Our team dug right back in. After receiving a rebuttal report from FamilyCare, within two weeks we dissected it and submitted a thorough rebuttal to their report.  

Resolution:

We believe that the Morones Analytics team of experts presented a formidable rebuttal to FamilyCare’s damage claims, and we were prepared to testify in a May 2022 trial. The case settled in March of 2022, and we viewed the outcome as positive for our clients. The state agreed to pay $22.5 million to settle the dispute where FamilyCare had claimed various amounts exceeding several hundreds of millions in damage. FamilyCare agreed to donate the settlement money to a medical school in Lebanon, Oregon. No party admits any liability based on the settlement.

“I am glad we could resolve these proceedings with an agreement that invests in the future of Oregon’s health care workforce and strengthens our health care system.”
— Patrick Allen, Oregon Health Authority Director