Oregon's health agency has given the state's second largest Medicaid carrier just over 24 hours to decide whether it will continue working with the state in 2018.

The state also informed FamilyCare on Wednesday morning that health officials are beginning the process to move patients to other Medicaid administrators.

"Today we let FamilyCare know we have shifted from planning a transition, to implementing a transition," Patrick Allen, director of the Oregon Health Authority, said in an interview on Wednesday.

FamilyCare manages Medicaid benefits for approximately 113,000 children and adults in the Portland area. The company's board voted last week not to sign a new contract with the state, and its president and CEO Jeff Heatherington gave the company a slim chance of survival. FamilyCare and the state have a long-running dispute over reimbursement rates that FamilyCare contends are too low and would force the company into bankruptcy next year.

Oregon officials prepare for shutdown of the state's second largest Medicaid carrier

The state is working with three other coordinated care organizations to take on FamilyCare's members: Health Share of Oregon, Yamhill Community Care and Willamette Valley Community Health.

Allen said the decision was "driven by the fact that there is now a lot of concern by providers and patients ... We're also becoming aware of actual denials of care. Providers not willing to see people even this year, transportation providers not willing to schedule transportation for appointments in January."

Allen said state health officials even learned of one case in which a skilled nursing facility declined to admit a Medicaid patient who was discharged from a hospital.

Those denials of care by providers would violate their existing contracts with FamilyCare, Allen said, and the company has worked to correct them. But Allen said the problems made it clear the state needed FamilyCare to make a final decision by noon Thursday whether to sign a 2018 contract with the state. The health authority also offered FamilyCare a temporary extension to help transition its Medicaid members to other organizations.

The situation does not affect patients' eligibility for Medicaid, and patients who are currently receiving treatment can continue to see the same health care providers for at least 90 days, Allen said.

Heatherington, who was travelling to Salem to meet with Gov. Kate Brown this afternoon, said he was aware of just one case of a Medicaid member who was denied the ability to schedule services in 2018. He and Allen both said FamilyCare had resolved the problem. Heatherington disputed Allen's statement that there were other examples.

"That is a flat out lie and you can quote me on that," Heatherington said, followed by an expletive.

"We're on the hook to pay for all bills until December 31, which we will," Heatherington said, adding that FamilyCare sent a letter to health care providers making it clear they must continue to serve Medicaid patients. "But if that's a true story, and I don't know that it is ... (the state) should be telling us and we should be making sure the patient is taken care of."

-- Hillary Borrud

503-294-4034; @hborrud