Hospitals See Their Medicaid Rates Cut by 15 Percent

Officials from the Oregon Association of Hospitals and Health Systems admit they’re disappointed with Governor Kitzhaber’s decision that occurred after the legislature adjourned
The Lund Report

October 17, 2011 – Oregon’s largest hospitals aren’t pleased with a decision by Governor Kitzhaber that reduced their Medicaid payments by 15 percent on October 1.   

“Hospitals were extremely disappointed in this post-session budget decision that was made outside of the legislative process,” said Andy Van Pelt, director of communications at the Oregon Association of Hospitals and Health Systems.

“We shared our concerns directly with the Governor,” he added. “With that said, this process has made it very clear to all involved that in the face of historic state budget shortfalls, the temptation to find easy answers to our budget problems will only increase.  There are simply no easy answers -- only solutions that will require collaboration and consensus building on the part of our elected officials. We have committed to continuing to be constructive partners at those tables.”

Because of the lagging economy, the decision to lower hospital rates was unavoidable, said Dr. Bruce Goldberg, director of the Oregon Health Authority.

“I know that hospitals need to stay in business; so do the managed care plans,” he said. “We need to create a climate where the hospitals and the health plans can work together.”

Currently, urban hospitals receive Medicaid payments based on a person’s medical condition, known as a Diagnostic Related Group (DRG). If hospitals could work alongside health plans to lower admission rates for people with asthma or heart failure, for example, ultimately they could share in those savings, Goldberg said.

“Hospitals make their finances work by admitting people so they need some incentives to keep people out of the hospital,” he added. “We have to move away from managing care by reducing rates or reducing benefits to create a more efficient healthcare system, and we hope that we can continue getting support from the federal government to move forward.”

But there’s not enough money in the current rates to generate any savings, said Jeff Heatherington, CEO of FamilyCare.

“The whole concept of saving a whole bunch of money at this point is mostly smoke and mirrors on part of the Oregon Health Authority because plans have squeezed most of savings out of the hospitals and out of utilization over the last 17 years,” he said. “The truth is that the Oregon Health Plan has been very successful in holding down the cost of healthcare, and the Authority has failed to recognize that success in their calculation of savings.”

Hospitals and Health Plans Align  

Following the decision by Governor Kitzhaber, the managed care plans have been attempting to sign contracts with the urban hospitals using the new rate structure.

“Everyone’s still talking, which is a good sign,” Heatherington said.

The state’s largest Medicaid plan -- CareOregon – has been working with its hospitals through the entire process, said Patrick Curran, director of business integration.

“We have active contracts with the majority of hospitals in our network, and the ones we don’t have we’re in active discussions with them. I’m confident we’ll have contracts with all of participating hospitals.”

Oregon Health & Science University has agreed to the new contract rates from CareOregon, according to Jim Newman, spokesman.

“We’re working with them collaboratively on contract language to reduce costs/utilization, and I’m told we will contract with the majority of the MCOs that cover our patients; this year is no different than any other year of who we contract with and who we don’t,” he said.

Tuality Health Alliance also has contracts with Legacy Health System and Oregon Health & Science University, said Janet Meyer, chief operating officer. “We’re able to meet our low cost estimate bids and move forward and are satisfied with our arrangement.”  

A Look at the New Rates

Under the new rate structure, hospitals that have contracts with managed care plans are being paid 68 percent, rather than 80 percent of the Medicare DRG value, which represents a flat rate based on a patient’s diagnosis and treatment.

As an example, for a vaginal delivery, Portland hospitals now receive $1,933.88 compared to the previous rate of $2,345.94. To look at the other procedures and their corresponding rates, click here.

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Cutting pay for doctors, is not going to slow healthcare inflation; unless of course you finally cut it enough that doctors quit seeing Medicaid patients. The driver of healthcare inflation is expensive new drugs and technologies. Not doctors and nurses. When are we going to stop playing politics and "man-up" to the problem. In the UK, right now, the National Institute for Clinical Evidence (NICE) is taking on the cost of Yervoy. As you may recall, Yervoy is now FDA approved in the US also. It treats advanced Melanoma. Currently the NICE has decided that they will not be able to pay for Yervoy because, at $126,000 for a course of treatment, they simply cannot afford it. All hail the Brits for having the honesty to actually say they can't afford something for their people. In America, have you ever actually heard someone official say they would not cover a life-extending cancer treatment, because it was just too expensive? I haven't. Never mind that we let 50,000 people die each year, just because they have no insurance at all! The truth is, that if you spend that $126,000 on someone with advanced cancer, you almost certainly are going to let someone else die because you didn't spend some of that money on them. It has come to that people. My greatest regret in all of this (aside from the unfortunate uninsured) is that we can't even talk about it, for fear of being labeled a "grandma unplugger." If you can't have a civil and reasoned debate over something as important as who lives longer, and who dies, then you basically have no hope of solving the problem. I am coming to the conclusion that the entire system will have to collapse before we can finally sit down and have a discussion about what is reasonable and sustainable for healthcare.

Pat Curren seems to be engaging in some shady double-talk. to quote: “We have active contracts with the majority of hospitals in our network, and the ones we don’t have we’re in active discussions with them. I’m confident we’ll have contracts with all of participating hospitals" If thaey are participating then they would ALREADY have contracts with CareOregon! Apparantly Mr' Curran is up to something.

So hospitals see a 15% rate cut- and yet Jeff Heatherington, Pat Curran,and Dave Ford continue to recieve their excessive salaries? Why is this not being discussed?

Hospitals are suffering, patients are losign access to care, docs are suffering- and the administrators at places like CareOregon continue to skim the state coffers for their own greedy directives. It is well known in the healthcare community that CareORegon used a good portion of their funds for large bonuses for managers and their CEO. They also purchased a building for millions of dollars and outfitted it with luxuries like pool tables for employees. This is true, go to their office and look for yourself, they are on 5th avenue downtown.

It would be interesting to line up the non-profit OHP and Medicare contractors and their less illuminated counterparts. Cut out the gamesmanship in reporting salaries (add salaries for the same person from multiple plans/entities together) and assess as a % of funding. Some of the people consistently fingering CareOregon are hiding more agregious behaviors. Hospitals and non-profits like CareOregon and Kaiser are consistently held to higher standards then the contractors/MCOs like Heatherington represents.

"So hospitals see a 15% rate cut- and yet Jeff Heatherington, Pat Curran,and Dave Ford continue to recieve their excessive salaries? Why is this not being discussed?" What are their salaries?

well Jeff H and Ford approach the 500K mark. Pat C, (a mid level manager )makes almot 200 grand.

All of their salaries are public record, I believe the figures I mentioned included benefits. In any event, they are way overpaid.

"Pat Curran is up to something." You are right! He is committed to negotiating better hospital rates than those we have been victimized by for so long. Taxpayers need a voice and someone who will let the hospitals know that the general public cannot afford to be sick at the hospital.

Lower Hospital Rates for Medicaid plans = Higher Hospital rates for the rest of us. That is a fact. I wonder how many of those cost savings CareOregon is going to direct into increasing their managers salaries? My guess? All of it.

"Taxpayers need a voice and someone who will let the hospitals know that the general public cannot afford to be sick at the hospital" That was an idotic statement and laughable. Are you a child? You think like one. Let me set you straight: Medicaid patients DONT HAVE ANY PATIENT RESPONSIBILITY. They never have and never will. Therefore, the ONLY benefit that cutting Medcaid hospital rates has is that it allows companies like CAREOREGON to keep more of OUR TAX MONEY. This takes MORE MONEY out of the system that could be used to KEEP OVERALL HOSPITAL CHARGES DOWN FOR ALL OF US. The proof is in the pudding, and in this case- the pudding is the tax records of careorgon, inc. which details CAREOREGON salaries over the years. They use this money to buy pudding, and probaly dont even eat it, they just throw it away.

I also disagree with the assertion that CareOregon is doing some sort of public good by shortchanging our hospitals. They need to pass their capitation back into the system. Medicaid isn't intended be some sort of profitable enterprise for organizations like Careoregon, whch are run by out of state transplanted carpet-bagger types.

Concerned oregonian.

Reading this article within the context of the recent Oregonian article detailing the $127 Million that CareOregon has stashed in reserves make me sick to my stomach. 

yes, Healthcare is expensive. But to blame the hospitals is foolish and misinformed. This article is about Medicaid funding specifically, yet fails to even hint at the profits that the managed care plans (most notabley CareOregon and FamilyCare) are skimming from their cap rates and depostiting directly into the wallets of their executives and managers. Where is the accountability? And why does our lackluster guv'ner refuse to act? It is my belief that his Kitzhaber refuss to address this isssue die to a them that is as old as america itself: he is a rich man, and as such, only emphathsizes with other rich men. All of his talk about helping the poor, and yet he oversees a medicaid program that cuts hospital payments and allows CareOregon managers to see their paychecks inflate to upwards of 100 grand a year? Disgusting. Shame on you Govenor and shame on You CareOregon and shame on you FamilyCare. And speaking of Familycare- why is there no mention Anywhere in the lund report of the lawsuite Teri Bunker filed against them for imprpoperly manipulating payment rates? It is my belief that the Lund report is too cozy with family care.

It would indeed be wonderful if The Lund Report could cover every lawsuit and story involving  FamilyCare and CareOregon. However, we have very limited resources.