Hospitals to Legislature, Governor: Punitive Cuts Will Cause Disruptions

July 6, 2017

After the Oregon Senate passed legislation today to move forward with a series of devastating payment cuts to Oregon’s community hospitals under the guise of cost containment, hospital leaders from around the state joined with hundreds of concerned Oregonians to warn of devastating consequences. The purported $190 million in cost savings in SB 1067 is based on a flawed method of tying public employee and school employee health benefit hospital rates to a percentage of Medicare. When combined with other legislative action earlier this session, the impact of this measure results in almost $500 million in new taxes and payment cuts over the next several years. The earlier legislation raised the hospital tax by $120 million and eliminated the Hospital Transformation Performance Program, (HTPP) a federal/state quality and patient safety incentive program worth an estimated $180 million to hospitals now.

Hospitals reluctantly agreed to the new taxes and HTPP program elimination so that they could do their part to keep the Oregon Health Plan afloat in the next biennium, but they had sincerely hoped that the legislature would consider these positive actions before adding almost $200 million more in cuts. Now facing $500 million in negative fiscal impact as the result of the state legislature’s actions this session, many of our state’s hospitals are considering difficult choices to manage these impacts, especially as revenues have plummeted starting in late 2016. Their options include significant reductions in clinical programs, staff, and capital investments in their communities as well as price increases to other commercial insurers. None of these options are acceptable to hospital leadership and their boards of trustees and should be unacceptable to the Legislature, who will have a chance to revisit these cuts in 2018 before they take effect. Policymakers should be especially wary given the continued uncertainty at the federal level and dramatic decrease in hospital financial performance over the past two quarters.

“In addition to our commitment to provide nearly $390 million in new revenue to the state for the Medicaid program, the severe payment cuts contained in SB 1067 will force hospitals across the state into a series of difficult and unpleasant decisions if this unwise proposal passes the House and is signed by Governor Brown,” said Jim Mattes, Chair of the Board of Trustees for the Oregon Association of Hospitals and Health Systems (OAHHS). “From reductions in services and staffing, to price increases for other insurers and resulting higher insurance premiums for patients, these outcomes are deeply troubling. The purported savings the state would gain will be more than offset by forced layoffs, closure of services, reduced patient access, compromised health outcomes, and harm to our health care system. This is the epitome of a penny-wise, pound-foolish solution to Oregon’s budget issues. 

 “While small and rural hospitals were exempted from this proposal, these hospitals also vigorously object to this bill and believe that the damage to the larger hospitals will affect our ability to access higher and more complex levels of service when we must transfer our patients,” continued Mattes, also president and CEO of Grande Ronde Hospital.  “We send our patients to the large urban hospitals for complex and difficult specialty procedures. Cuts of this magnitude will endanger those service lines and thereby damage the health of our patients. We urge legislators in the House to vote against these provisions in SB 1067 to reverse this legislation before it takes effect. We are willing partners to help focus on solutions that bring people together for innovative cost savings rather than punitive and harsh cuts.”

“Controlling health care costs is a complex but important topic, and cuts made without careful and thoughtful consideration can have a devastating impact on patient care and hospitals,” said Carol Bradley, chair of OAHHS’ Public Policy Committee and incoming board chair. “We have a model in this state for controlling costs based on promoting value and preventative health through our CCOs. This bill is in direct conflict with that principle and does very little to continue to move our system towards a model that rewards health care organizations for keeping people healthy. There are numerous flaws with this legislation from a policy perspective, but chief among them is its move away from the pay for value model that has been a hallmark of our Medicaid CCOs.”

 “Our association has prided itself on being a proactive solution oriented organization,” said Andy Davidson, OAHHS president and CEO. “In my 12 years as CEO we have demonstrated time and again that we are willing partners in seeking solutions to the state’s myriad challenges. And this year we again stepped up to willingly provide $390 million in new funds for the Medicaid program. Unfortunately, by applying immense political pressure to their caucus members to pass SB 1067 with the hospital cuts, legislative leadership demonstrated that there is no reward for being constructive and proactive partners. This feels more like what is happening in Congress - not what we are used to in Oregon. What happened today with SB 1067 is simply not the Oregon way.”

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Media Contact Info

Philip Schmidt
Associate Vice President for Public Affairs
Direct: (503) 479-6020
pschmidt@oahhs.org

Andy Van Pelt
Executive Vice President
Direct: (503) 479-6018
avanpelt@oahhs.org

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