Exposing Asymmetric Power: Moda Health’s Unethical and Fraudulent Approach to Value-Based Contracting
A Discussion Paper
In the high-stakes world of healthcare negotiations, fairness and transparency are non-negotiable. Yet, recent actions by Moda Health have exposed a disturbing pattern of behavior that not only wastes significant professional resources, time, and money but also jeopardizes patient care, stakeholder interests, and public health. This article examines how Moda’s abrupt termination of negotiations, and the misleading rationale behind it, has harmed Mentor Research and its negotiating group, as well as up to 128 provider groups across several states. In doing so, it highlights potential violations of key Federal and State laws, including antitrust statutes, FTC regulations, and Oregon’s antitrust and consumer protection laws, and underscores the long-term risks to ethical value-based contracting. There is sufficient evidence to make a prima-facia case.
A Decade of Commitment to Value-Based Contracting
For over 10 years, MRI has been at the forefront of developing ethical and effective value-based contracting. This commitment stems from a deep understanding that innovative contracting can transform patient care and provider performance. MRI’s extensive experience positions it uniquely to ask the critical questions and perform comprehensive risk analyses, questions that many other provider groups may lack the background or knowledge to pose. Unfortunately, providers without this insight are almost certainly making decisions based on incomplete or unavailable information, which might otherwise prompt them to minimize their participation or opt out of potentially harmful agreements. MRI concludes that this information gap and the resulting decisions represent a blatant manipulation of provider groups by parties with asymmetric power.
The Investment in Ethical Value-Based Contracting
The provider group represented by Mentor Research Institute has invested considerable time, resources, and money to develop the technology and administrative infrastructure necessary to support ethical and successful value-based payment contracts. This investment was made with the expectation that negotiations would adhere to principles of transparency and fairness, ensuring that both providers and patients benefit. However, the negotiation process with Moda Health has revealed a stark contrast between these high standards and the conduct observed during contract discussions.
The High Cost of Negotiation
Negotiations involving complex contractual terms, such as value-based care, are resource-intensive endeavors. MRI and its negotiating team invested substantial professional expertise, time, and financial resources in discussions with Moda Health regarding an ethics point portal and independent auditing. Over the course of these negotiations, MRI documented over 100 concerns, including more than 40 critical issues, that were intended to be addressed with Moda. Despite repeated efforts to present these findings, Moda not only declined to review MRI’s extensive documentation but also failed to follow up on initial commitments to investigate these concerns through an independent auditor.
Unethical Contracting Behavior and Breach of Good Faith
Unfair Termination and Pretextual Behavior
While it is legally acceptable for parties to reassess negotiations, Moda’s decision appears to have been executed in bad faith. Rather than engaging with MRI’s extensive and well-documented concerns (papers, emails, conversations), Moda declined even to read the findings, preemptively dismissing the issues. At one point, the MRI proposed offering MRI’s documented library of standards and concerns to an independent auditor, a suggestion that Moda initially agreed to explore and promised to follow up on. However, this commitment was abandoned without explanation. MRI made multiple offers to explain the concerns directly to an independent auditor or legal counsel, yet these overtures were ignored. The response by the person who wrote the contract was unprofessional and verbally abusive. Such actions not only violate the principles of transparency but also suggest a deliberate effort to avoid accountability.
Violation of Moda Health’s Code of Conduct
Evidence indicates that the contract negotiations were fraught with unethical behavior, including instances of intimidation, misleading information, and the use of Moda asymmetric power. These actions directly contravene Moda Health’s published Code of Conduct, which mandates ethical behavior, transparency, and respect in all business dealings. The divergence between the provider group’s substantial investments in ethical value-based contracting and Moda’s unethical practices is both alarming and unacceptable.
Failure to Honor Mutual Commitments
The commitment to further discuss an ethics point portal and independent auditing was essential to safeguarding transparent and accountable contracting practices. Moda’s repeated failure to engage with MRI’s concerns, including those flagged as critical, amounts to a profound breach of good faith. This betrayal leaves MRI and its negotiating partners with significant financial and reputational damage, undermining trust in an industry where ethical contracting practices are vital.
Broader Impact on Provider Groups and Public Health
Widespread Consequences
Moda Health’s unethical behavior affects as many as 128 provider groups across several states. The evidence developed by MRI, which includes over 100 documented concerns, is of significant importance to these groups. Moda refused to identify those groups for which the MRI providers were expected to share risk, and who might want to compete in a pro-competitive manner. Moda’s asymmetric power, coupled with the critical information they are withholding, suggests a probable to almost certain moderate to catastrophic impact on patients, stakeholders, public health, and the operational practices of providers.
Systemic Harm and Negligence
Beyond the immediate contractual fallout, Moda Health’s actions reveal a broader systemic issue. Their refusal to engage with MRI’s findings, even when the concerns are repeatedly offered for review by independent auditors or legal counsel, constitutes an egregious neglect of ethical responsibilities. According to guidance from the U.S. Office of Inspector General, reporting potential legal violations to the responsible managers is not appropriate. In this situation, MRI is effectively forced into the untenable position of reporting potential criminal behavior to those who may have perpetrated it. MRI. This willful negligence not only defrauds the State of Oregon, its taxpayers, purchasers, and other health plans but creates a precedent which threatens to destabilize the entire mental and behavioral healthcare contracting system.
Legal and Regulatory Implications
Antitrust Violations Under the Sherman Act and the Clayton Act
Moda Health’s conduct raises serious antitrust concerns under the Sherman Act (15 U.S.C. §§ 1-7) and the Clayton Act (15 U.S.C. § 12, among others). The Sherman Act prohibits conspiracies or contracts that unreasonably restrain trade and competition. If Moda’s abrupt termination of negotiations is part of a broader strategy to stifle competition or create unfair marketplace advantages, it may constitute a violation of these provisions. Similarly, the Clayton Act addresses specific practices that can lead to anticompetitive outcomes, and any attempt by a dominant market player like Moda to leverage its asymmetric power to avoid fair competition can trigger serious legal scrutiny.
FTC Oversight and Regulatory Concerns
In addition to antitrust laws, the Federal Trade Commission Act (15 U.S.C. §§ 41-58) empowers the FTC to act against unfair methods of competition and deceptive practices. The FTC has broad authority to investigate and address conduct that misleads consumers or distorts competitive market dynamics. Moda’s refusal to engage in good faith negotiations—coupled with its apparent withholding of critical information could be seen as an unfair and deceptive practice under this statute. Should evidence emerge that Moda Health’s actions are designed to defraud or harm competitors and consumers alike, regulatory bodies may pursue enforcement actions that include fines, injunctions, or other corrective measures.
State Law Implications
Violations Under Oregon Law and Other States
MRI contends that Moda Health’s conduct violates not only Federal laws but also multiple State laws, with significant implications under Oregon law. For example, the Oregon Unlawful Trade Practices Act (ORS 646.045 and ORS 646.055) prohibits unfair or deceptive business practices. Moda’s refusal to honor its commitments and the withholding of critical information constitutes deceptive practices that harm provider groups and the broader public interest in Oregon. Furthermore, if similar patterns of behavior are identified in other states, coordinated enforcement actions by multiple state attorneys general could ensue, compounding Moda Health’s legal challenges. The cross-jurisdictional nature of these alleged violations underscores the potential for widespread regulatory scrutiny and legal liability, affecting competitive practices, consumer protection, and public health standards.
Impact on Stakeholder Trust and Market Dynamics
Ethical lapses in high-stakes negotiations disrupt not only contractual relationships but also the broader industry ecosystem. The erosion of trust among provider groups, stakeholders, and the public has potentially catastrophic implications. As provider practices, public health, and market dynamics are interlinked, Moda’s actions threaten to destabilize the system, leading to long-lasting negative consequences.
Conclusion
Moda Health’s decision to abruptly terminate negotiations, under the guise of reassessing risk and cost, is not only a breach of good faith but also a dangerous precedent for the healthcare industry. The significant investments of time, money, and professional goodwill by MRI and its negotiating partners have been undermined by a party that appears to be leveraging its asymmetric power for unethical ends. With as many as 128 provider groups at risk, and the weight of over 100 documented concerns, including more than 40 critical issues, Moda’s actions are not merely a procedural setback; they are a calculated evasion of responsibility.
The provider group’s longstanding commitment to developing ethical and successful value-based contracting infrastructure stands in stark contrast to the unethical behavior exhibited by Moda Health. Evidence of intimidation, misleading information, and the misuse of asymmetric power blatantly violates Moda Health’s published Code of Conduct. MRI’s repeated efforts to address these concerns, through offers to work with independent auditors or legal counsel, have been met with willful negligence. Moreover, MRI’s unique decade-long experience in value-based contracting has revealed that many provider groups lack the background and knowledge needed to ask critical questions or conduct thorough risk analyses. This information gap leads providers to make decisions without the full picture, effectively enabling blatant manipulation by Moda Health.
By forcing MRI into the untenable position of reporting potential criminal behavior to those who may have perpetrated it, Moda Health’s actions not only defraud the State of Oregon, its taxpayers, purchasers, and other health plans but also undermines the integrity of the entire healthcare market. Given the potential violations of the Sherman Act, the Clayton Act, the Federal Trade Commission Act, and relevant State laws, immediate regulatory and legal scrutiny is warranted to restore transparency, accountability, and fair competition in healthcare negotiations.
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DISCLAIMER and PURPOSE: This discussion document is intended for training, education, legislation, and research purposes only. The information contained herein is based on the data and perspectives available at the time of writing. It is subject to revision as new information and viewpoints emerge.
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