Hospitals Warn Against Massive OHP Changes

The hospital association agrees to increase provider tax as lawmakers move forward with transformation
The Lund Report

May 17, 2011 – The Oregon hospital association confirmed it’s prepared to finalize an agreement with lawmakers to increase the hospital provider tax as a way to dampen the massive cuts to the Oregon Health Plan slated over the next two years.

The tax is used to leverage federal dollars and pay for the entire OHP Standard population comprised of about 75,000 current enrollees who represent an expanded Medicaid population. The proposed increase to the provider tax would extend to services for all OHP clients.

“It’s a pretty dangerous thing,” Kevin Earls, vice president of policy and advocacy for the Oregon Association of Hospitals and Health Systems, told the Statesman Journal editorial board last week. “The governor has committed to us that if we do that, it is a temporary measure. It’s obviously a big moment in trying to address the problem.”

A video of the interview with Earls and Norman Gruber, CEO of Salem Hospital, at the Statesman Journal offices in Salem was posted on the hospital association’s web site last week.

Instead of a proposed 19 percent reduction to hospital and physician reimbursements in the first year of the 2011-2013 biennium, and around 34 percent in the second year – as Governor John Kitzhaber has proposed based on assumed savings -- an increased hospital provider tax could reduce the impact by about 7 percent. Providers would then be looking at 12 percent and 27 percent reductions.

But it may not be enough to stem the catastrophic consequences that will come as Oregon prepares to transform the OHP delivery system at the same time, according to Earls.

“This will have a decimating impact on care to Oregon’s poor and vulnerable,” he said. “It will severely challenge the healthcare delivery system particularly hospitals.”

Both Earls and Gruber issued a harsh criticism of the governor’s plan to transform the Oregon Health Plan delivery system. Gruber said the cuts will likely create a massive access problem that will force more people to the emergency room and drive up the cost of commercial insurance.

“You’re not going to transform healthcare in one or two years and certainly not by making huge cuts. You have to change how healthcare is delivered,” Gruber said. “You’re going to have to really change how you deliver it and reduce consumption. I would rather see the creation of more clinics.”

The governor’s proposal, which is currently taking shape as HB 3650, seeks to integrate physical, mental and oral healthcare services under Coordinated Care Organizations and global budgets. The plan estimates savings in the second year of around $500 million in total funds.
Lawmakers passed the bill out of committee on Monday to mixed reviews.

“I don’t believe where we are going with this, nor did I at the beginning, that we are going to be able to achieve in the next biennium enough efficiencies for whatever transformation model to essentially mitigate the effects of those costs,” said Rep. Mitch Greenlick (D-Portland). “We are going to end up wtih Medicaid people who aren't going to be able to get physician services. But I do think the transformation takes a step toward the future. That is a very important thing.”

Rep. Jim Thompson (R-Dallas) said he was very concerned.

“We didn't get it right,” Thompson said. “We set off to transform healthcare, and we didn't do it. We knew we couldn't do it in one sweep. The budget cuts are going to be very Draconian.”

Gov. Kitzhaber called the bill an important first step in reducing healthcare costs.

“The cost of health care is perhaps the fastest growing cost for families, individuals and businesses,” according to sa press release from Kitzhaber. “This move by the legislature is an important first step in giving Oregon a leadership role in reforming the healthcare system for our state and, perhaps, the nation.”

Earls, last week, stressed the disproportionate burden the state’s Medicaid population is being asked to shoulder in relation to the overall state budget shortfall.

Not including the education budget, which has already been settled, the state faces a $735 million general fund budget shortfall in the next biennium. Some $698 million is slated to come from the Oregon Health Authority budget, representing a total of $1.19 billion including federal matching funds.

Out of those cuts, 88 percent is slated to come from Medicaid. Reductions to hospital reimbursements are likely to account for around 42 percent of the state’s remaining budget shortfall, according to Earls.

“That is a devastating balancing act for a state budget to land on the shoulders of Oregon’s poor and vulnerable citizens,” Earls said. “We think that’s a story that’s not understood. In a time like this Oregon needs to share the sacrifice. The picture we’re presenting presents a different concept of sharing. The focus of budget cuts land in a very disproportionate way on the Medicaid program and its enrollees.”


News source: 


here we go again comparing health care to health insurance. two different things. The insurance system is broken. we are paying for insurance instead of care---wrong, wrong, wrong

The last quote from Mr. Earls is 'right on'. This really is not transformation, it is a fools errand and clearly a 'bridge too far'. Nobody is going to be happy and the most vulnerable among us are the ones who will ultimately suffer. There is no way in any real world that the envisioned magnitude of 'cost saving' can be realized in an evolving CCO. I need to disclaim that I am not speaking for Providence. Bill Gillanders, Program Director Providence Family Medicine Residency Director

The tax dollars [both property and income] that NFP community based hospitals & systems are allowed to keep are frequently spent on excessively opulent replacement buildings, attempts to drive up unecessary utilization, art work, large real estate porfolios, executive retirement packages, and proposed trips to Japan. under the guise of providing better health care in their communities. Wake up John Doe Public!! Wake up Legislators!! How much is enough?