2019 Global Budget Performance The order of payments from the Global Budget is:

i. claims payments; ii. sub-capitated contract amounts;

iii. CCO required payments and expenses, including but not limited to hospital reimbursement allowances (for purposes of clarity, this does not include payment of claims), graduate medical expense, provider taxes, and reinsurance expense;

iv. risk-sharing agreements with providers;

v. administration expenses; and vi. margin

The Gorge CCO Financials to date have been providing the summary information up to and including the Health Plan operations portion but not the CCO 2% margin portion (the items following the orange arrow in the diagram).

The 2% margin is most, but not all, of the monies from OHA. It excludes sub-capitated contracts that contain their own administration and excludes the CGHC Operating fee of 0.325%. For 2020, PacificSource used an estimate of 15.77% of total revenue to account for the funds that are excluded from the 2% margin. Or, stated another way, 84.23% of total revenue does have a 2% margin applied to it. Using the 2020 Proposed Global Budget, the figures would be:

$71,251,559 - Gross Revenue (assumes QIM performance of 70%) ($11,236,371) – minus 15.77% of sub-capitated arrangements $60,015,188 - Revenue subject to 2% Margin $ 684,154 – projected net income for 2020 ( 0.96%) $1,200,304 – 2% Margin amount ($ 518,149) – projected Carryforward loss at the end of 2020

OHA

CCO

Health Council 0.325%

Provider contracts

Health Plan operations

CCO 2% Margin

Shared Savings

2019 is anticipated to have a carryforward loss based on current figures. With Global Budget financials moving by as much as $800,000 per month, it is difficult to know how 2019 will close out. While the original budget projection was for a $1.6M loss for the 2019 Global Budget, the overall budgeting process itself did not include the 2% margin figures. As a result, several people expressed surprise regarding the recapture process when the Global budget is showing a net profit. This will be the first time the Gorge CCO has a net profit, but the profit amount is insufficient to cover the contracted 2% margin. The recapture process would work like this for the coming years: For example, assuming a recapture amount of $500,000 from 2019

and … 2020 Global Budget performance scenarios

2020 Global Budget net income is > 2% margin

2020 Global Budget net income is > $0 and < 2% margin

2020 Global Budget has a net loss

Does Shared Savings exist?

Yes No No

Impact on Shared Savings

Up to 50% of Shared Savings is used to reduce the $500K to $0

N/A N/A

Impact on recapture balance

Recapture balance is reduced. If Shared Savings exceeds $1M then recapture balance is $0.

Recapture balance increases by the difference between net income and 2% margin.

Recapture balance increases by the full 2% margin amount.

1 | P a g e

Gorge CCO Finance Report Report dated December 20, 2019 for the eleven months ended November 30, 2019

Summary The following financials report year to date net income of $165k, ahead of the budgeted loss of $1.6M. There is $1.1M of positive adjustments for 2018 included in the current year results. Also included in the November financials is approximately $113k of large claims expense.

For the month ended

For the eleven

months ended

Budget for the

eleven months

Gorge CCO November 30, 2019 November 30, 2019 November 30, 2019 YTD $ Variance

Revenue 4,306,398$ 51,373,293$ 51,489,822$ (116,528)

Revenue: NEMT 58,716 644,495 485,923 158,571

Revenue: QIM - 1,465,297 971,744 493,552

Revenue: Dental 313,154 3,477,783 3,406,054 71,729

Revenue: Maternity 330,576 3,125,409 3,291,363 (165,954)

Revenue: Transfer (4,890) (54,200) (162,254) 108,054

Revenue: Cover All Kids 20,313 215,443 221,229 (5,786)

Revenue: Admin Fees - - - -

Revenue: Recoupment - - - -

Total Revenue 5,024,266 60,247,520 59,703,882 295,525

Claims: Medical (2,903,980) (33,956,781) (34,234,328) 277,548

Claims: Dental (325,785) (3,617,287) (3,406,054) (211,233)

Claims: Capitation (288,719) (2,895,762) (2,274,763) (620,999)

Claims: Mental Health Cap (232,121) (4,037,717) (6,411,394) 2,373,677

Claims: Cover All Kids (18,133) (140,766) (160,763) 19,996

Claims: Flexible Services 3,849 (81,365) (55,000) (26,365)

Claims: Pharmacy (796,904) (8,053,424) (8,343,567) 290,143

Pharmacy Rebates 23,848 276,395 333,743 (57,348)

Health Services Expense (112,563) (1,249,106) (1,242,091) (7,014)

Community Based Health-related Services (39,444) (428,214) (454,167) 25,953

Net Reinsurance (24,943) (168,225) (98,449) (69,776)

Network Fees (53,817) (576,039) (579,251) 3,211

Total Claims Expense (4,768,712) (54,928,291) (56,926,084) 1,997,793

Medical Loss Ratio 94.91% 91.17% 95.35%

Premiums Over Claims Expense 255,554 5,319,229 2,777,798 2,541,431

Premium Taxes (99,860) (1,071,783) (966,732) (105,052)

Total General & Administrative Expenses (335,621) (4,024,536) (3,988,219) (36,317)

G&A as a % of Premiums 6.68% 6.68% 6.68%

Underwriting Income (179,927) 222,910 (2,177,153) 2,400,063

U/W Income as a % of Premiums -3.58% 0.37% -3.65%

Total Other Income / (Expense) - - - -

Income Before Taxes (179,927) 222,910 (2,177,153) 2,400,063

Income Taxes 46,781 (57,956) 566,060 (624,016)

Net Income (133,146)$ 164,954$ (1,611,093)$ 1,776,047$

Net Income as a % of Premiums -2.65% 0.27% -2.70% 600.98%

2 | P a g e

Also shown are the prior year to date financials for comparative purposes:

For the eleven

months ended

For the eleven

months ended

Gorge CCO November 30, 2019 November 30, 2018 YTD $ Variance

Revenue 51,373,293$ 52,828,562 (1,455,269)

Revenue: NEMT 644,495 455,220 189,275

Revenue: QIM 1,465,297 1,439,365 25,932

Revenue: Dental 3,477,783 3,225,249 252,535

Revenue: Maternity 3,125,409 3,623,183 (497,774)

Revenue: Transfer (54,200) (76,627) 22,427

Revenue: Cover All Kids 215,443 189,339 26,103

Revenue: Admin Fees - - -

Revenue: Recoupment - (538,940) 538,940

Total Revenue 60,247,520 61,145,351 (1,285,673)

Claims: Medical (33,956,781) (33,217,239) (739,542)

Claims: Dental (3,617,287) (3,346,000) (271,287)

Claims: Capitation (2,895,762) (2,136,672) (759,091)

Claims: Mental Health Cap (4,037,717) (6,159,623) 2,121,906

Claims: Cover All Kids (140,766) (134,083) (6,683)

Claims: Flexible Services (81,365) (53,984) (27,382)

Claims: Pharmacy (8,053,424) (7,139,173) (914,252)

Pharmacy Rebates 276,395 269,363 7,032

Health Services Expense (1,249,106) (1,216,217) (32,888)

Community Based Health-related Services (428,214) (142,784) (285,430)

Net Reinsurance (168,225) (177,948) 9,723

Network Fees (576,039) (433,822) (142,217)

Total Claims Expense (54,928,291) (53,888,180) (1,040,111)

Medical Loss Ratio 0.91 88.13%

Premiums Over Claims Expense 5,319,229 7,257,171 (1,937,942)

Premium Taxes (1,071,783) (1,130,829) 59,046

Total General & Administrative Expenses (4,024,536) (4,084,509) 59,973

G&A as a % of Premiums 0.07 6.68%

Underwriting Income 222,910 2,041,832 (1,818,923)

U/W Income as a % of Premiums 0.00 3.34%

Total Other Income / (Expense) - - -

Income Before Taxes 222,910 2,041,832 (1,818,923)

Income Taxes (57,956) (530,877) 472,921

Net Income 164,954$ 1,510,955$ (1,346,002)$

Net Income as a % of Premiums 0.00 2.47% 104.69%

2020 Global Budget Approval

The Finance Committee expressed concern that the proposed budget did not include a 2% profit margin since it represents a contractual obligation.

On a motion made by Belinda Batcha and seconded by Scott Hege, the Finance committee approved the following recommendation for the Board:

Approve the 2020 Global Budget as presented with the following action items to be taken by CGHC Board, it’s committees and PacificSource:

1. Make all efforts to achieve 100% QIM performance. The difference between the budgeted 70% and 100% is significant.

2. Actively monitor continuous enrollment performance. The gaps on continuous enrollment not only impact continuity of care but impact revenue.

3. Actively monitor progress on redirecting ER visits where appropriate. 4. Actively monitor pharmacy costs and engage community where

appropriate.

Kim Bangerter voted against the motion due to the fact that the profit margin of 1% is insufficient to cover the 2% profit margin PacificSource is guaranteed. He felt strongly that the Finance Committee should not recommend a budget in which the contractual obligations cannot be met. The rest of the Finance Committee had the same concern but felt that a budget needed to be approved. The action list was in response to mitigating the gap in achieving the 2% profit margin in the budget.

Page | 1

Gorge CCO Finance Committee

Budget Report

Report dated December 20, 2019 for the Draft 2020 Budget Summary The CCO is budgeting positive net income for 2020 of 0.96% of premiums. This number is before the determination of net income sharing under the JMA. General and Administrative Expenses are 6.68% of revenue, while Health Services are $9.33 PMPM (medical). Membership Membership assumptions have remained largely static for 2020. The Oregon Health Authority (OHA) has not projected large changes in plan membership for the Gorge, but early OHA reports indicate gradual increases across the state. Detailed information is not yet available for the Gorge region. We’ll keep an eye on early OHA budget committee materials.

Actuals Actuals Projected Budget

Membership 2017 2018 2019 2020

Aid to the Blind/Aid to the Disabled with Medicare 1,846 1,753 3,067 3,506

Aid to the Blind/Aid to the Disabled without Medicare 5,680 5,748 5,730 5,613

CAF Children 2,545 2,644 2,597 2,508

Old Age Assistance with Medicare 2,053 2,022 4,247 5,090

Old Age Assistance without Medicare 250 238 241 214

PLM, TANF, and CHIP Children < 1 4,409 4,199 3,845 3,699

PLM, TANF, and CHIP Children 1 - 5 20,095 19,507 19,244 18,630

PLM, TANF, and CHIP Children 6 - 18 45,343 45,055 45,497 44,916

Poverty Level Medical Adults 1,683 1,236 1,295 1,342

ACA Ages 19-44 30,276 30,570 30,795 29,991

ACA Ages 45-54 10,263 9,568 9,211 8,683

ACA Ages 55-64 10,023 9,663 9,888 9,658

Cover All Kids 00-01 - 6 2 -

Cover All Kids 01-05 - 47 92 119

Cover All Kids 06-18 - 858 1,029 1,020

Cover All Kids - Poverty Lv Md Preg - 13 3 -

Temporary Assistance to Needy Families (Adults Only) 8,800 8,912 9,284 9,120

Special Needs Rate Group 39 35 18 12

Total Gorge Membership: 143,305 142,074 146,086 144,120

Page | 2

2020 Budget:

Actuals Actuals Projected Budget

Gorge CCO 2017 2018 2019 2020

Membership 143,305 142,074 146,086 144,120

Revenue 59,110,504$ 57,569,915$ 56,093,179$ 63,366,022$

Revenue: NEMT 475,921 496,197 659,159 -

Revenue: QIM 1,098,485 1,439,365 1,465,297 1,031,006

Revenue: Dental 3,324,437 3,514,844 3,778,492 3,741,601

Revenue: Maternity 3,380,923 3,803,168 3,527,191 3,054,843

Revenue: Transfer (130,101) (83,242) (88,580) (192,551)

Revenue: Cover All Kids - 209,500 234,638 250,638

Revenue: Recoupment - (581,708) - -

Total Revenue 67,260,169$ 66,368,039$ 65,669,376$ 71,251,559$

Claims: Medical (37,103,802) (36,428,602) (37,147,559) (40,805,676)

Claims: Dental (3,283,530) (3,640,360) (3,850,853) (3,711,196)

Claims: Capitation (2,184,612) (2,325,430) (2,857,096) (2,229,641)

Claims: Mental Health Cap (6,799,045) (6,692,340) (4,865,472) (5,326,168)

Claims: Cover All Kids - (141,730) (154,779) (217,495)

Claims: Flexible Services (29,383) (53,984) (93,101) (84,000)

Claims: Pharmacy (7,417,561) (7,734,324) (8,772,788) (9,318,438)

Pharmacy Rebates (46,663) 372,898 321,482 279,553

Health Services Expense (1,233,341) (1,325,180) (1,362,303) (1,344,640)

Community Based Health-Related Services - (148,746) (455,715) (455,000)

Net Reinsurance 140,066 (201,117) (142,205) (105,928)

Network Fees (458,272) (460,444) (622,099) (784,318)

Total Claims Expense (58,416,143) (58,779,359) (60,002,488) (64,102,946)

Medical Loss Ratio 86.85% 88.57% 91.37% 89.97%

Premiums Over Claims Expense 8,844,026 7,588,680 5,666,888 7,148,612

Premium Taxes - (1,232,397) (1,122,409) (1,467,177)

Total General & Administrative Expenses (4,492,980) (4,433,385) (4,386,716) (4,759,608)

G&A as a % of Premiums 6.68% 6.68% 6.68% 6.68%

Underwriting Income 4,351,046 1,922,898 157,763 921,828

U/W Income as a % of Premiums 6.47% 2.90% 0.24% 1.29%

Total Other Income / (Expense) - - - -

Income Before Taxes 4,351,046 1,922,898 157,763 921,828

Income Taxes (1,740,417) (499,954) (41,017) (239,674)

Net Income Pre JMA 2,610,629$ 1,422,944$ 116,746$ 682,154$

Net Income as a % of Premiums 3.88% 2.14% 0.18% 0.96%

Page | 3

Actuals Actuals Projected Budget

Gorge CCO 2017 2018 2019 2020

Membership 143,305 142,074 146,086 144,120

Revenue 412.48$ 405$ 383.97$ 439.68$

Revenue: NEMT 3.32 3.49 4.51 -

Revenue: QIM 7.67 10.13 10.03 7.15

Revenue: Dental 23.20 24.74 25.86 25.96

Revenue: Maternity 23.59 26.77 24.14 21.20

Revenue: Transfer (0.91) (0.59) (0.61) (1.34)

Revenue: Cover All Kids - 1.47 1.61 1.74

Revenue: Recoupment - (4.09) - -

Total Revenue 469.35 467.14 449.53 494.39

Claims: Medical (258.91) (256.41) (254.29) (283.14)

Claims: Dental (22.91) (25.62) (26.36) (25.75)

Claims: Capitation (15.24) (16.37) (19.56) (15.47)

Claims: Mental Health Cap (47.44) (47.10) (33.31) (36.96)

Claims: Cover All Kids - (1.00) (1.06) (1.51)

Claims: Flexible Services (0.21) (0.38) (0.64) (0.58)

Claims: Pharmacy (51.76) (54.44) (60.05) (64.66)

Pharmacy Rebates (0.33) 2.62 2.20 1.94

Health Services Expense (8.61) (9.33) (9.33) (9.33)

Community Based Health-Related Services - (1.05) (3.12) (3.16)

Net Reinsurance 0.98 (1.42) (0.97) (0.73)

Network Fees (3.20) (3.24) (4.26) (5.44)

Total Claims Expense (407.64) (413.72) (410.73) (444.79)

Medical Loss Ratio 86.85% 88.57% 91.37% 89.97%

Premiums Over Claims Expense 61.71 53.41 38.79 49.60

Premium Taxes - (8.67) (7.68) (10.18)

Total General & Administrative Expenses (31.35) (31.20) (30.03) (33.03)

G&A as a % of Premiums 6.68% 6.68% 6.68% 6.68%

Underwriting Income 30.36 13.53 1.08 6.40

U/W Income as a % of Premiums 6.47% 2.90% 0.24% 1.29%

Total Other Income / (Expense) - - - -

Income Before Taxes 30.36 13.53 1.08 6.40

Income Taxes (12.14) (3.52) (0.28) (1.66)

Net Income Pre JMA 18.22$ 10.02$ 0.80$ 4.73$

Net Income as a % of Premiums 3.88% 2.14% 0.18% 0.96%

Page | 4

Key Assumptions and Trends for 2020 2020 Rates: Rates (net of taxes) for 2020 increased in most categories. We held increases in projected costs to less than the rate increase. Revenue & Claims: The revenue in the budget for QIM dollars is estimated at 70% for the 50% portion retained by the CCO to fund the global budget, including associated provider risk arrangements tied to quality performance. Provider contracts are being negotiated. The budget does not reflect provider bonus payments or JMA shared savings (applicable only if margin is greater than 2%). The 2020 pharmacy claims expense budget has been adjusted to reflect an increase of approximately 8.1%, which is consistent with the pharmacy trend assumptions. Projected expenses in the forecast are based on current provider payment rates, plus a small assumed increase for budget conservatism. General & Administrative Rates: OHA set the G&A allocation included in the CCO revenue at 9.8% (added prior to quality pool adjustment and net of MCO tax). This amount covers G&A, health services, taxes and margin. This budget reflects a G&A expense of 6.68% of premium, and PacificSource’s margin is determined by the Joint Management Agreement with the Columbia Gorge Health Council. The budget also includes health services expenses of 1.9% for PacificSource expenses some of which can be counted in Medical Loss Ratio. Other Items: For purposes of the 2020 budget, we have not assumed any MLR rebate liability.

Elke Towey, PacificSource – Updated 2/18/2020

Columbia Gorge CCO Quality Incentive Metrics with

Data through December 2019

PRELIMINARY RESULTS

Emergency Department Visits for Members with Mental Illness Diagnosis

12 = 100% QUALITY POOL EST.

$2.8M $2.26M

TBD*

Hypertension Control – Performance

Diabetes Not in Control – Performance

CAHPS: Access to Care Will not know status until spring 2020

Timeliness of Postpartum Care Chart audit required—complete late March

Colorectal Cancer Screening Chart audit required—complete late March

11 = 80%

Effective Contraceptive Use Slightly missing target—claims still processing

10 = 70%

Dental Sealants 8-9 = 60% Oral Health- Adults with Diabetes

Adolescent Well Care Visits 6-7 = 50% Cigarette Smoking Prevalence

Developmental Screening 0-36 Months

4-5 = 40%

Childhood Immunization Status

Emergency Department Visits

DHS Custody

Weight Assessment & Counseling

Depression Screening Performance “Must pass” measures required

for 100% of earned payout.

SBIRT

Patient-Centered Primary Care Home

2019 CHALLENGE POOL measures

*In its February 2020 Rates Workgroup, OHA revealed that it will be varying CCOs’ 2019 quality pool payments (i.e., earned in 2019, paid in 2020). Quality pool payments will vary from 2.75% - 4.25% depending each CCO’s rate of growth, but must balance to 3.5%. More to come on this developing topic.