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In support of its efforts to make care more affordable, a detailed review of statewide health care spending data led Oregon Health Authority to determine most of the state’s health care organizations had acceptable reasons for high cost growth in 2023. However, OHA also found five entities didn’t have an acceptable reason for their spending increases that year.

For the first time, OHA will require three organizations to develop plans to meet the state’s health care spending target. In a related analysis, OHA also found compensation for frontline health care workers grew slower than for others who worked for Oregon hospitals and medical groups in 2023.

“Making health care affordable benefits everyone: People can more easily maintain their health, employers can better support their workers, and the health care industry can serve more members of their communities,” said OHA Health Policy & Analytics Division Director Clare Pierce-Wrobel.

“As directed by state law, OHA’s Sustainable Health Care Cost Growth Target Program provides additional transparency into what the state spends on health care,” Pierce-Wrobel said. “In the few cases where OHA finds cost growth is unreasonably high, the program follows thoughtful and gradual accountability standards. When the state, insurers, hospitals, providers and others work together, we can make health care affordable and accessible for everyone in Oregon.”

Health care costs in Oregon and around the country are rising at an alarming rate, outpacing wages and making care unaffordable for working families. Rising costs also strain the budgets of businesses and government agencies that pay for employer health coverage. In addition, reduced federal support for Medicaid and Affordable Care Act health plans is expected to further increase costs by causing people to lose coverage and avoid care until they need more expensive emergency care.

Measuring spending

Each year, OHA’s Sustainable Health Care Cost Growth Target Program collects and analyzes data from health insurance companies and other sources to measure what people and organizations in Oregon spend on health care. The program has aimed to limit health care cost growth to a 3.4% average annual increase per person since 2021. The Oregon Legislature established the program to help control health care spending.

While evaluating how spending changed between 2022 and 2023, OHA found most entities had an acceptable reason for higher-than-hoped cost growth, including for things like increased frontline workforce costs, high drug costs or increasing services to meet growing community needs. OHA made a total of 120 comparisons between insurance plans, hospital systems and medical groups while examining how those organizations spent while serving people with commercial, Medicare Advantage and Medicaid coverage. These comparisons led OHA to determine three insurance plans, one hospital system and one medical group did not have an acceptable reason for spending more than the state’s target.

The following five entities were found to have unreasonably high health care cost growth in 2023:

St. Charles Health System, whose costs for serving people with commercial insurance increased 26.3%
ModaHealth’s Medicare Advantage insurance plans, which increased 15.4%
The Corvallis Clinic, whose costs for serving people with commercial insurance increased 8.7%
PacificSource’s commercial insurance plans, which increased 7.3%
UHC Company’s Medicare Advantage insurance plans, which increased 6.3%

Improvement plans

The 2022-2023 measurement period marks the first time that OHA can require organizations to submit performance improvement plans if their high cost growth didn’t occur for an acceptable reason. OHA is requiring three of the above organizations – St. Charles Health System, UHC Company and PacificSource – to submit plans.

As allowed by state law, OHA is excusing two others with unreasonable cost growth. ModaHealth’s Medicare Advantage insurance plans don’t need to submit an improvement plan because they are no longer offered. OHA is also excusing The Corvallis Clinic this year so it can focus on holding its parent company, Optum, accountable in future measurement periods.

The organizations’ performance improvement plans must identify what is causing their high cost growth, name actions they will take to address those cost drivers, and provide a timeline by which their cost growth will be reduced. OHA must approve the plans, which will be due by the end of January 2026.

Starting in 2028, OHA can begin issuing fines to health care entities that consistently fail to meet the target in three out of five years. By design, the Cost Growth Target Program does not immediately penalize an organization for their high cost growth in a single year or two, even if it is determined to be unreasonable. The program may only penalize organizations that fail to meet the cost growth target – without an acceptable reason – three times in a five-year period.

Workforce costs

Because workforce costs are a significant driver of health care spending and OHA considers spending on frontline workers an acceptable reason for exceeding the state’s health care cost growth target, OHA has also published a related report that examines frontline worker compensation at a subset of the hospitals and medical groups that are subject to the target.

Frontline health care worker compensation recently grew at a slower rate than compensation for others who work at hospitals and medical groups, concludes the report. Frontline worker compensation grew 3.3% in 2023, compared to 13.0% for non-frontline workers. Further, frontline worker compensation represented 60% of total compensation in 2023, down from 62% in 2022.

The 2023 state law that created a requirement for OHA to conduct this analysis defines frontline health care workers as those who aren’t managers and receive total compensation that is less than $200,000 a year. While some providers – including many physicians and nurse anesthetists – earn more than that, they are not considered frontline workers in this analysis.

As planned when Oregon’s Cost Growth Target was first created, OHA is currently revisiting the target’s rate for 2026 through 2030. A short-term workgroup is expected to make a recommendation to OHA after its last meeting on Nov. 19.

More information is in the following reports:

Health Care Cost Growth Trends in Oregon, 2022-2023; Addendum to 2025 Sustainable Health Care Cost Growth Target Annual Report Provider Organization Cost Growth
Cost Growth Target Accountability, 2022-2023; Addendum to 2025 Annual Report of Sustainable Health Care Cost Growth Target Program
Health Care Workforce Costs, 2022-2023; Frontline Workforce Costs for Provider Organizations Included in Oregon’s Sustainable Health Care Cost Growth Target Program

Source: Oregon Health Authority