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Hospitals and insurers urge pause on cost'growth penalties as OHA begins first PIPs; lawmakers signal bills to revisit rules
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Summary
Oregon Health Authority explained the cost growth target program, its reasonableness review, and the start of performance improvement plans; Providence and Regence told lawmakers they seek a moratorium on financial penalties, arguing the program is backward'looking and risks passing costs to consumers.
Oregon Health Authority staff briefed the Interim Committee on Health Care on the statewide cost growth target program and the initial determinations that will trigger performance improvement plans (PIPs) this year; industry witnesses testified they want a pause on the program's financial penalties.
Claire Pierce Grobel described the program's intent to limit total health care spending growth to an annual target (set at 3.4% for an initial five'year period) using a total cost'of'care methodology across Medicaid, Medicare and commercial markets. OHA compiles and validates payer and provider data annually, applies statistical scrubs to identify organizations that exceeded the target with confidence, and then determines whether those increases have acceptable reasons (for example, changes in state/federal law, mandated benefits, frontline workforce cost increases or new high'cost pharmaceuticals).
Grobel said financial penalties are phased in over a five'year window and are only applied after an organization exceeds the target without an acceptable reason in 3 of 5 years; this year OHA issued determinations and for the first time is requesting three entities to submit PIPs within 90 days. Grobel emphasized that penalties, when assessed, are not paid to the state but must fund programs that benefit affected community members and must be implemented over up to five years.
Speakers from Providence and Regence Blue Cross Blue Shield asked the committee to pause enforcement and reconsider penalty design. Jessica Adamson (Providence) said the program as currently written looks backward and could hold organizations financially responsible for historic cost trends they cannot undo; she cited recent layoffs and negative margins across hospitals and asked that PIPs be forward'looking and tied to compliance rather than used as an automatic trigger for fines. Maryann Cooper (Regence) asked the legislature for a moratorium on enforcement and described penalties as an "all'or'nothing" approach that can produce large dollar fines and escalate year'to'year (a 5% starting penalty that rises by 5 percentage points), potentially threatening market participation and pushing costs onto consumers.
Committee members asked OHA and program staff to clarify methodology, to provide additional public reports and to discuss whether targets and acceptable reason criteria should be updated. Grobel said OHA is operating a work group to advise target setting for the next five'year window and that only a handful of payers and providers face near'term PIP requests; she reiterated the program's intent to identify unreasonable cost growth while allowing acceptable offsets for policy'driven or data'verified cost increases.
Chair Noss said the committee will introduce short'session bills touching the rate process and a proposed moratorium on penalties and indicated the committee will continue this policy conversation in the short session.
