Health Care Costs Surge in Central Oregon

BEND, Ore. — The St. Charles Health System in Central Oregon has seen costs for insured patients rise by 26.3% in 2023. This increase significantly exceeds the state’s target of just 3.4% annual growth in health care expenses, as reported by the Oregon Health Authority (OHA) on Monday.

Due to these excessive hikes, OHA has indicated that St. Charles, along with two other health care providers in Oregon, must submit performance improvement plans. These plans are necessary because the organizations failed to provide valid justifications for the notable cost increases.

OHA’s detailed news release elaborates on these findings. KTVZ News has contacted St. Charles for comments, and they mentioned a statement should be ready later today. An update will follow.

Cost Growth Evaluation

SALEM, Ore. — In its pursuit to enhance health care affordability, the Oregon Health Authority reviewed statewide spending data and found that the majority of health care providers presented justifiable reasons for their cost increases in 2023. However, five organizations lacked adequate explanations for their spending spikes.

For the first time, OHA is mandating three organizations to create plans that align with state health spending targets. Additionally, OHA’s analysis revealed that pay for frontline health care workers is projected to grow at a slower pace than that for other hospital and medical group workers in Oregon this year.

“Making health care more affordable benefits everyone—it’s easier for people to maintain their health, employers can better support their teams, and the healthcare industry can reach more community members,” stated Claire Pierce Lobel, director of OHA’s Division of Health Policy and Analysis.

“OHA’s program for Sustainable Health Care Expenditure Growth Targets adds transparency to state health care spending,” Pierce Lobel explained. “In cases where costs rise unreasonably, we follow a structured accountability process. Collaborating with states, insurers, hospitals, and health care providers can help make health care more affordable and accessible for all Oregonians.”

Health care costs are escalating at an alarming rate both in Oregon and nationwide, surpassing wage growth and turning health care into a heavy burden for working families. This rise also puts pressure on businesses and government entities that pay for employee health insurance. Moreover, anticipated cuts in federal support for Medicaid and Affordable Care Act plans could lead to even higher costs as people lose coverage and delay seeking necessary care.

Evaluating Expenses

Each year, OHA gathers and analyzes data from health insurance providers and other parties to track health care spending in Oregon. The aim is to restrict annual expenditure growth to an average of 3.4% per person, a target established by the Oregon Legislature to help manage costs.

When looking at changes in spending from 2022 to 2023, OHA found that while many companies had accepted reasons for their increased expenses, such as rising personnel costs and higher drug prices, three health plans, one hospital system, and one medical group could not justify their spending beyond state guidelines.

Here are the five organizations identified with significant health care cost growth in 2023:

• St. Charles Health System experienced a 26.3% rise for its commercially insured population.
• ModaHealth’s Medicare Advantage plans saw a 15.4% increase.
• Corvallis Clinic had an 8.7% increase for its commercially insured patients.
• PacificSource’s Commercial Insurance Plans grew by 7.3%.
• UHC’s Medicare Advantage plans increased by 6.3%.

Required Improvement Plans

This is the first year that OHA can mandate organizations to submit performance improvement plans if their cost increases are deemed unreasonable. St. Charles Health System, Corvallis Clinic, and PacificSource are being asked to provide these plans.

OHA has exempted two other companies from this requirement due to unusual cost increases. Since ModaHealth’s Medicare Advantage plan is no longer available, they are not required to submit a plan. In addition, OHA has chosen to exempt Corvallis Clinic for now to ensure accountability from the parent company, Optum, in subsequent assessments.

Each organization must outline the reasons for their high cost growth, what they plan to do about those factors, and a timeline for reducing costs in their performance improvement plan, which OHA will need to approve by the end of January 2026.

Starting in 2028, OHA may begin imposing fines on health care institutions that consistently fail to meet their goals across three out of five years. This program doesn’t immediately penalize organizations for significant cost increases over just a year or two, allowing them some leeway before any consequences kick in.

Workforce Costs

Labor costs are a major component of health care expenses, and OHA regards increased spending on frontline workers as a viable justification for surpassing state growth targets. In tandem, OHA released a report investigating compensation trends for frontline healthcare workers across various hospitals and medical groups.

The report revealed that pay for frontline healthcare workers has risen more slowly than for other hospital staff. While compensation for frontline workers increased by 3.3% in 2023, compensation for non-frontline workers jumped by 13%. Moreover, frontline workers will represent 60% of total compensation in 2023, down from 62% the previous year.

OHA is currently reevaluating target rates from 2026 to 2030, with recommendations to be made by a workgroup after their last meeting on November 19.

For additional information, refer to the associated reports.