FamilyCare Health has announced the potential layoffs of 322 employees from its workforce in Portland, Oregon.
The layoffs are expected to be done in two different rounds. The first round of layoffs will be taking place on or around January 5, 2018, and would amount to 250 employees. 72 more layoffs are expected to take place at a future date.
The member services division, care management, and the information technology segments will see the greatest number of layoffs.
Why Are the Job Cuts Occurring Now?
FamilyCare was unable to agree to terms on a new deal, which resulted in the news of the layoffs for the coming year. The FamilyCare board of directors decided not to sign the deal.
The coordinated care organization (CCO) deal was being negotiated with Oregon Health Authority (OHA) and represents 90% of FamilyCare’s business. CCO are services that are provided as a package, which would include: physical health care, mental health care, and dental care services. The purpose of this one-stop solution is to prevent patients from visiting emergency solutions. It puts less of a burden on the system.
If FamilyCare signed the deal, there would have been a deficit generated. This is not the intent of the business; operations earning a profit is the goal of the company. Over the past three years, FamilyCare has offered the lowest rates for its services when compared to its competitors. It has operated at a loss in order to gain these contracts in the past.
What Really Went Wrong?
When a business deal is in the negotiation process, there are two parties involved. The best deals are the ones where both parties benefit and can walk away with the deal happy.
In the case of the FamilyCare and the Oregon Health Authority negotiation, it seems that the deal was very one-sided. If it was signed, then the only beneficiary involved in the deal would be the OHA.
Now is this FamilyCare’s fault?
Yes, FamilyCare is responsible for its own destiny. Over the past few years, it agreed to offer the lowest rates for its services. This then gave a lot of negotiating power to the OHA, when there was the discussion of new terms being agreed to. In this scenario, FamilyCare did not have any power of asking for a higher rate.
In addition, OHA represented 90% of the revenue for FamilyCare. This then meant that full power of the negotiations was given to OHA. In previous years, deals were signed to ensure there was a deal signed with the hope that a more lucrative deal would be signed. Unfortunately, things didn’t go the way that FamilyCare desired in the end.
All this has resulted in the CEO of FamilyCare Health, Jeff Heatherington, saying “We’re out of options.” Also Heatherington estimates that a loss of $95.0 million is expected, which is higher than the first estimates of a loss of $75.0 million. This is just further evidence that the company was not managed well for the present and future.
“WARN Act Notice for FamilyCare Health,” FamilyCare Health, December 15, 2017.
“FamilyCare files layoff notice, says failed talks would mean 322 layoffs,” Portland Business Journal, December 19, 2017.