Hospitals Lose Battle to Delay Implementation of Outpatient Cuts

Starting January 1, hospitals must start using Medicare methodology to pay for Oregon Health Plan members, and state and school district employee outpatient costs
The Lund Report

December 22, 2011 – The Oregon Association of Hospitals and Health Systems lost an attempt to stop the implementation of a new law that will reduce their outpatient reimbursements by up to 50% starting January 1.

Pleading for more time, Kevin Earls, the association’s senior vice president, had asked for a delay of at least six months in a letter to Dr. Bruce Goldberg, director of the Oregon Health Authority.

That would allow, he wrote, “hospitals, insurers and OHA to address the significant challenges of this transition with the order, financial integrity and least amount of rework necessary.” If these changes cannot happen without duplicative reprocessing, he suggested a further extension.  

Legislators, who took up this issue earlier this week, told hospital officials they did not have the power to change the statute. During the last legislative session, they passed Senate Bill 204, which required health plans to pay hospitals using Medicare methodology for outpatient expenditures for Oregon Health Plan members, and school district and state employees (Oregon Educators Benefit Board and Public Employees’ Benefit Board).

Patty O’Sullivan, senior policy advisor for the association, told legislators that hospitals more time to install new software, switch over to the new methodology, sign contracts and avoid duplicative processes.

“Hospitals have told us it’s impossible to make these changes in two and a half weeks,” said O’Sullivan, referring to the delay by the Oregon Health Authority in drafting the emergency rules for this new methodology.

Goldberg acknowledged it would be “nice to have additional time,” but said the process was in place, and assured legislators he’d help hospitals and health plans deal with the impending changes.

Rep. Val Hoyle (D-West Eugene) reminded her colleagues that Senate Bill 204 was painful, and said, “I don’t want to go into the February session with the same pain.”

That may have been the case, but Senate Bill 204 was passed by the majority in both chambers, responded Sen. Jackie Winters (R-Salem). The House passed the measure by 52-7, while there were no dissenting votes in the Senate.

Some onlookers characterized the back-room conversations about the lowered hospital reimbursements as a tug of war between the managed care plans and the hospitals, with the plans having the upper hand this time around.  

But, legislators had not problem addressing it head on.

“You need to work together, no fighting,” said Sen. Alan Bates (D-Medford), referring to the hospitals and the health plans.

“Hopefully, transformation will offer new ways of bringing hospitals and plans together to figure out the dollars rather than having to legislate,” Goldberg said.

Paul Phillips, meanwhile, whose lobbying firm represents the managed care plans, emphasized that the discussion around these changes began in 2007, and said the result was good policy. “This is not a true fight between hospitals and plans,” he told legislators.

From Jeff Heatherington’s perspective, the Oregon Health Authority is to blame for the implementation delays, and said the discussions about the new methodology should have begun much earlier.

“The Oregon Health Authority didn’t do its homework as usual; they’re the ones responsible for the problems,” he said.

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