409-065-0045 Cost Growth Target Financial Penalties (1) Pursuant to ORS 442.386, the Authority may impose a financial penalty on a payer or provider organization when: (a) The cost growth exceeded the target with statistical confidence, as defined by the Authority; and (b) The payer or provider organization’s cost growth is without reasonable cause, or is not indeterminate, as defined in 409-065-0035, in the Medicaid, Medicare Advantage, or commercial insurance market for at least three out of five calendar years. (2) The Authority must not impose financial penalties before January 1, 2026, and the cost growth from 2021 to 2022 must serve as the first year of a payer or provider organization’s first five-year period described in section (1)(b) of this rule. (3) The financial penalty must be paid to consumers or designed to directly benefit consumers. (4) The size of a payer or provider organization’s financial penalty must be based on how much the payer or provider organization exceeded the cost growth target and must be determined as follows: (a) A payer or provider organization’s first instance of a financial penalty within a given market must equal 5 percent of the net total cost above and below the cost growth target collectively in the five-year period. (b) A payer or provider organization’s second instance of a financial penalty within a given market must equal 10 percent of the net total cost above and below the cost growth target in the five-year period. (c) A payer or provider organization’s third instance of a financial penalty within a given market must equal 15 percent of the net total cost above and below the cost growth target in the five-year period. (d) Each instance of a financial penalty within a given market must increase by 5 percentage points of the net total cost above the cost growth target in the five-year period. (e) The total cost above the cost growth target for a given performance period is calculated by the following steps: (A) First, subtract from the payer or provider organization’s per member per month (PMPM) cost in the second year of the two-year performance period the product of the payer or provider organization’s per member per month (PMPM) cost in the first year of the two-year performance period multiplied by the sum of one plus the cost growth target percent. The Authority must use per member per month costs, as defined by the Authority in CGT-1 data submission template as total medical expenses. The mathematical formula is (PMPM year 2 – (PMPM year 1 * (1 + cost growth target percent))) = x. In this OAR 409-070-0045, the value ”x” equals the calculated value of the mathematical formula in this subsection (4)(e)(A). (B) Second, multiply “x” times the number of member months (MM) in the second year of the two-year performance period. The mathematical formula is (x * MM) = z. (C) Repeat the steps in subsection (4)(e)(A) and (4)(e)(B) of this section for all five years of the five-year period. For years in which the payer or provider organization’s cost growth exceeded the cost growth target, the calculated value of “x” and “z” will be a positive number. For years in which the payer or provider organization’s cost growth was less than the cost growth target, the calculated value of “x” and “z” will be a negative number. (D) Sum all values of ”z” calculated in subsections (4)(e)(A) through (C) in this section. The result is the net total cost above the cost growth target. (E) Multiply the value in subsection (4)(e)(D) of this section by the appropriate factor, as determined in subsection (4)(a) through (4)(d) in this section. (F) If the value calculated in subsection (4)(e)(E) in this section is zero or negative, the payer or provider organization will not be penalized for that five-year period. (5) A payer or provider organization’s performance in a given year will be counted only once towards the calculation of a net total cost above the cost growth target in a five-year period. The five-year period will shift forward every year following payers’ submission of data as outlined in OAR 409-065-0010. (6) The Authority may reduce the calculated financial penalty amount if the payer or provider organization is subject to one or more other penalties imposed by the State of Oregon or the federal government for the same measurement period or if the penalties threaten the solvency of the payer or provider organization. The Authority must consult with DCBS on every instance of a penalty applying to a payer. (a) Other penalties imposed by the State of Oregon or the federal government include, but are not limited to, rebates relating to the medical loss ratio. The amount of the other penalty or rebate imposed by the State of Oregon or the federal government must be subtracted from the penalty amount calculated in section (4) of this rule. (b) The Authority must collaborate with DCBS when determining if a penalty imposed by the Authority will threaten the solvency of a payer and may reference information including but not limited to the payer’s risk-based capital amounts. The Authority must handle confidential information received by DCBS in accordance with ORS 705.137 and may share confidential information with DCBS. Such sharing shall not constitute a waiver of the confidential status of such materials. (c) The Authority may request financial information from provider organizations when determining if a penalty amount imposed by the Authority will threaten the solvency of a provider organization and may reference information including, but not limited to, audited financial statements. (7) If the Authority determines a payer or provider is subject to financial penalty under this rule, the Authority must prepare and serve a Notice of Intent to Impose a Financial penalty on the payer or provider organization. A payer or provider organization that has been served a Notice of Intent has 60 calendar days to either provide the Authority with a proposed plan for the financial penalty pursuant to section (8) of this rule or file a written request for a contested case hearing pursuant to the procedures outlined in OAR 409-065-0050. (8) The Authority must publish sub-regulatory guidance on the Program website outlining allowable financial plans including a template for the proposed plan and the availability of additional technical assistance. Financial penalties must: (a) Benefit community members who reside in or in close proximity to a geographic area in Oregon that the payer or provider organization serves, and (b) Not directly and financially benefit the payer or provider organization. (9) The payer or provider organization must pay the totality of the financial penalty within 60 months after receiving a Final Order Imposing a Financial penalty from the Authority, inclusive of all appeal periods. (10) The following payer and provider organizations are exempt from OAR 409-065-0045 and will not be subject to a financial penalty: (a) A Federally Qualified Health Center, as defined in 42 U.S.C. 254b, that is not affiliated with a hospital through ownership, governance, control, or membership. (b) A pediatric clinic or group of pediatric clinics that predominantly treat individuals under the age of 21, that is not affiliated with a hospital through ownership, governance, control, or membership. (c) The Oregon Health Plan Open Card, also known as Fee For Service, Program. (11) No later than December 31, 2030, the Authority must reassess and, if necessary, revise the financial penalty calculation methodology outlined in this rule. Statutory/Other Authority: ORS 442.386 Statutes/Other Implemented: ORS 442.386 History: OHP 4-2024, adopt filed 07/22/2024, effective 07/22/2024