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For-Profit Willamette Valley Hospital Tops Charges to OEBB at 411% of Medicare

A Milliman actuarial report compared charges to the health plan for educators with Medicare. Tuality Healthcare and Providence Willamette Falls Hospital lead the Portland Metro Area while Legacy offered the lowest prices.
October 23, 2013

 

A 2013 report prepared for the state teachers’ union shows wild disparities in the amount hospitals are charging the Oregon Educators Benefit Board for services, compared to the federal health plan for the elderly, Medicare.

Charges to OEBB and its principal health insurance carrier, Moda Health, ranged from a low of 201 percent of Medicare at Legacy Good Samaritan Hospital in northwest Portland to a whopping 411 percent of Medicare at the for-profit Willamette Valley Medical Center in McMinnville.

In raw figures, Willamette Valley charged OEBB $4.7 million for procedures that would have cost Medicare $1.1 million. Legacy Good Samaritan charged OEBB $3.4 million while Medicare would have paid $1.7 million.

Overall, OEBB was charged at 281 percent of Medicare statewide, and 272 percent of Medicare among the larger, diagnostic-related group, or DRG, hospitals. The total charges to OEBB through Moda Health were $195 million for procedures that Medicare would have paid $69 million.

With a few exceptions, hospital charges were the highest at the critical access hospitals, which are located in isolated rural areas. This was especially true of Oregon’s coast, which had nine of the 13 most expensive hospitals, topped by Columbia Memorial Hospital in Astoria, which charged OEBB 407 percent of Medicare.

“Low-volume hospitals have to remain economically viable even though they have much lower volumes,” said Scott Ekblad, director of the Oregon Office of Rural Health, explaining the higher costs at rural hospitals. “You have a certain amount of fixed costs regardless if you have one patient a day or 100 patients.”

All hospitals have costs dedicated to maintain facilities, stock medications, and higher staff, regardless of patient volume. “If you have a much bigger hospital, it’s easier to recoup those costs,” Ekblad added.

The report was prepared for the Oregon Education Association by the actuarial firm Milliman, which has offices in downtown Portland. Milliman used a modified Medicare formula to make comparisons to OEBB’s commercial health insurance providers. The charges were compiled between July 2011 and June 2012.

The OEA ordered the report from Milliman to explore the idea of capping payments to hospitals at a certain percentage of Medicare. OEA representatives did not respond to The Lund Report’s request for comment by press time.

Andy Van Pelt, the chief operating officer at the Oregon Association of Hospitals and Health Systems, also noted that small hospitals have disadvantages that lead to higher costs:

“A cost structure of a small and rural hospital will be very different than that of a larger urban facility,” Van Pelt said in an email. “It is an issue of economies of scale, geographic location, access to providers in a community and simply providing materials and resources to smaller/rural areas of the state.”

Among the larger, diagnosis-related group hospitals in Oregon, Samaritan Albany General Hospital and Mercy Medical Center in Roseburg followed Willamette Valley as the state’s most expensive DRG hospitals, with 335 percent and 333 percent of Medicare respectively.

Tuality Healthcare (279%) in Hillsboro and Providence Willamette Falls Medical Center (270%) in Oregon City had the highest charges to OEBB in the tri-county Portland metro area.

But as a rule, high competition left Portland with the lowest hospital rates while counties where one hospital or health system is dominant suffered the highest charges.

Three Legacy hospitals — Meridian Park in Tualatin (208%) and Mount Hood in Gresham (214%), along with Good Samaritan, had the lowest charges. They were followed by Adventist Medical Center in Portland with 218% of Medicare, Oregon Science & Health University Hospital (227%) and Legacy Emanuel Hospital (229%).

Other expensive hospitals were Sky Lakes Medical Center (326%) in Klamath Falls, Providence Medford Medical Center (320%) and McKenzie-Willamette Medical Center (318%) in Springfield, the state’s other for-profit hospital.

The report did not look at charges to OEBB members who receive healthcare through Kaiser Permanente’s integrated health model, excluding Kaiser Sunnyside Hospital in Clackamas from the report.

Chris can be reached at [email protected].

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