Regulators in Oregon are alleging that five healthcare providers have raised medical costs without offering satisfactory explanations.
In 2021, the state established a 3.4% ceiling on how much hospitals, insurers, and healthcare organizations can increase per capita spending for patient care. This policy, initially approved in 2019 and enhanced in 2021, aims to tackle soaring healthcare costs and enhance access to care.
These providers need to present solid evidence to justify exceeding this threshold.
According to the Oregon Health Authority, St. Charles Health System in Bend, Corvallis Clinic, and insurers like Pacific Source, United Healthcare, and Moda Health exceeded this limit in 2023 without convincing justification.
Moreover, an additional 66 organizations also surpassed their targets, but state analysts deemed their increases reasonable, attributing it to factors like escalating prescription drug prices and the demand for behavioral health services.
The latest report from the state marks a significant shift in Oregon’s efforts to enhance transparency regarding healthcare spending. For the first time, regulators are requiring organizations to disclose their annual spending increases.
Health officials stress the need for this scrutiny as healthcare costs continue to outpace wage growth in Oregon. In 2023, per capita healthcare spending rose by 5%, significantly exceeding inflation rates. This trend is making healthcare increasingly unaffordable for many families, they noted.
“Making healthcare more affordable benefits everyone,” stated Claire Pearce-Lobel, who is in charge of health policy analysis at the health authority. The cost increase program is intended to distinguish between necessary cost increases aimed at expanding access and those that provide little value to patients.
Pierce-Lobel acknowledged that not all cost increases are detrimental. Some are essential for addressing long-neglected areas or ensuring care access.
The most significant increase was recorded at St. Charles Health System, where costs for commercially insured patients surged by 26% in just one year, nearly eight times the state limit. St. Charles operates multiple hospitals and clinics across central Oregon.
St. Charles Hospital’s spokesperson, Alundra Johnson, contended that the state’s findings fail to consider the genuine pressures faced by the only hospital system in central Oregon. She pointed out that factors such as post-pandemic recovery and rising operational costs are largely beyond their control and should not be attributed solely to St. Charles.
Johnson added that the health system is committed to managing costs and plans to appeal the state’s decision.
In contrast, Sarah Bartelman, who oversees the state’s cost escalation program, highlighted that St. Charles’ dominant market position contributes significantly to rising costs in the region.
“In central Oregon, providers have no choice but to work with St. Charles to ensure their members receive hospital care,” Bartelman explained. “This situation is leading to increased costs for both health plans and patients needing hospital services.”
At the Corvallis Clinic, costs for patients with commercial insurance climbed nearly 9%, almost triple the state’s cap. This medical group was recently acquired by Optum in an emergency deal.
UnitedHealthcare, under the same parent company as Optum, reported a 6% rise in Medicare Advantage spending, attributing the increase to worsening patient conditions and changes in federal payments, among other factors. However, state analysts have indicated that the insurers have not sufficiently substantiated most of these claims.
They did not respond to requests for comment.
Moda Health reported a 15% increase in its Medicare Advantage spending. Analysts indicated that the impact of rising prices and complex payment frameworks is on the rise, especially with Medicare Advantage plans.
Pearce-Lobel of the health authority noted that the complexity makes it challenging to identify the origins of these cost increases.
Moda Health previously indicated that a spike in usage of their Medicare Advantage plans post-pandemic caused premiums to become unsustainable, leading to their exit from this market in 2025.
The state found that PacificSource had increased its commercial health spending by 7%, which is more than double the set limit. While regulators accepted some of the explanations, such as rising pharmacy costs, others were rejected due to a lack of supporting data.
Lauren Thompson, a spokesperson for PacificSource, indicated that the cost increases were primarily driven by factors beyond any single organization’s control, including rising specialty drug prices and increased utilization as members return to previously deferred care.
PacificSource, UnitedHealthcare, and St. Charles must submit plans by January detailing the reasons for their cost increases and how they plan to align spending with the state’s goals.
Moda Health is exempt from this requirement as it has discontinued its Medicare Advantage line. Additionally, the Corvallis Clinic has been temporarily exempted from submitting a remediation plan while regulators assess its parent company’s situation for a future review.
Penalties for exceeding targets are not imminent, as organizations would need to surpass these limits three times in five years for fines to be issued, which could occur as early as 2028.
Meanwhile, the state is revisiting whether to maintain the 3.4% spending cap into the latter half of the decade, with recommendations expected later this month.
