The biggest bet Gov. John Kitzhaber has placed in his third term is that he can save Oregon billions by shaking up the way the state pays for medical care.

Right now, Oregon pays the medical bills for the state's neediest people as the charges come in from doctors, hospitals and other healthcare providers.

Last session, Kitzhaber persuaded lawmakers to try a novel experiment: The state would bring together healthcare providers paid out of Medicaid under "coordinated care organizations," or CCOs. Coordinated care would approach each patient's case holistically, rather than prescribe disparate and expensive treatments.

Lawmakers balanced the state budget on the premise Kitzhaber's reforms would save $239 million next year.

Now, doctors who fear they will bear the brunt of cost reductions are gearing up for a political fight. They want to make sure in the February legislative session that those savings come out of somebody else's pocket.

The state will spend about $6.5 billion over the next two years to provide health care for nearly 600,000 low-income Oregonians. Much of that money goes to managed care organizations, groups of doctors who treat Medicaid patients.

They are churning some of that Medicaid money into political action committees to influence the upcoming session and next year's elections.

One political action committee, Doctors for Healthy Communities, has raised $450,000 this year—$200,000 more than it raised last year. Two other doctor-funded PACs have another $260,000 on hand. The doctors' PACs have seven times more money than the other big player, the Oregon Hospital Association.

Jeff Heatherington, president of Portland-based FamilyCare, a doctors' group that serves only Medicaid patients, says the reason his and other groups are raising so much money is simple: "It's survival."

"They keep saying they are going to do this 'transformation,'" Heatherington says, "but don't tell us how it's going to work or who's going to do it."

Kitzhaber's plan counts on hospitals, physicians and other providers to work together to find the most effective—and money-saving—approach. Rather than paying out on a per-patient basis, the state will put CCOs on a budget and leave it to them find the best mix of services for each patient.

Kitzhaber's reforms will attempt to link payments to outcomes, rewarding the CCOs that are best at practicing preventive medicine, educating patients and reducing unnecessary procedures and medications.

Physicians fear they will be penalized for medical outcomes and costs they can't control.

Paul Phillips, a lobbyist and former state senator who runs the Doctors for Healthy Communities PAC, says finding $239 million in efficiencies next year will be difficult.

"We already have the best system in the nation, bar none," Phillips says. "I am skeptical that you can get that many savings immediately."

Supporters say the reforms are in part a way to protect low-income patients, who have less political clout than other constituencies that get big chunks of the state budget: education and public safety.

State Rep. Mitch Greenlick (D-Southwest Portland), who co-chairs the House Healthcare Committee and supports Kitzhaber's plan, says doctors will have to give up some of their revenue. Last year, state figures show, nine out of 14 MCOs in Oregon made money.

"They want to keep the position they have," Greenlick says. "They are doing quite well today. If they don't control the budget, that's going to be different."

One of Kitzhaber's long-term goals is to bring tens of thousands of public employees into the system he's designed. That prospect could mean large savings for government agencies, but it's already a concern for public employees accustomed to Cadillac healthcare plans.

"We are really nervous about the quality of care the CCOs will provide," says Arthur Towers, who represents 50,000 Service Employees International Union workers in Oregon, including 20,000 who depend on Medicaid.

There's some irony for the doctors: Kitzhaber, himself a physician, championed the Oregon Health Plan with the support of doctors who saw the possibility of higher Medicaid payments. Now they find themselves defending a system that Kitzhaber and many others say isn't working.

Heatherington says many doctors, faced with bearing cuts, may stop taking Medicaid patients.

"The piece about less money has a lot to do with the question of whether there is enough money in the first place," he says. "If we reduce payments, physicians will walk."