Oregon implements acuity-based rates for adult foster homes and residential care facilities

Oregon Department of Human Services officials told the Joint Ways and Means Human Services Subcommittee on Feb. 9 that new provider rate models designed to pay for individual acuity went into effect Jan. 1 and are intended to reduce reliance on exception payments and make rates more reflective of care complexity.

The new approach, driven by budget directions in SB 5526, establishes a points-based assessment across activities of daily living (ADLs) and instrumental activities of daily living (IADLs), adds points for cognitive and behavioral needs, and converts point totals into service tiers that determine reimbursement. Dr. Nikisha Nye Coyle, director of the Office of Aging and People with Disabilities (APD), said the reforms were accompanied by two appropriations: $22,400,000 in general fund for adult foster home rates and $4,100,000 in general fund for residential care facility rates.

APD officials said the previous AFH model—developed more than 40 years ago—paid a base rate plus one to three add-ons and often failed to reflect combinations of needs, which led to a high rate of 'exception' payments (the slide presented cited roughly 39 percent of payments). "The methodology was straightforward," APD said, "but it did not reflect individual-specific care needs," and that created administrative burden and left providers underpaid for complex cases.

Under the new model, each assessed task receives points (1–3 points based on frequency), plus additional points for high cognitive needs or challenging behaviors. Total points place a person into a tier; higher tiers include minimum additional staffing hours tied to the tier. APD gave an example where a resident whose overall assessment placed them in a higher tier could see individual monthly reimbursement rise substantially (presenters referenced a sample change from roughly $2,506 in 2025 to $5,916 in January 2026 for a higher-tier case on the slide shown).

Officials said both rate models were implemented Jan. 1 as required by the budget notes, that AFH rates were collectively bargained with SEIU within the allocation the legislature provided, and that administrative rules were tightened to require more documentation before exceptions are approved. APD said providers receive their first payments under the new rates on Feb. 1 for January claims.

To ease the transition, APD said it will phase out exceptions gradually: consumers who previously received exceptions remain 'held harmless' until they are reassessed at a lower need level, move out, or an exception review determines the provider no longer provides the required hours. APD also said exception approvals will require a staffing plan and annual (or more frequent) reviews that include payroll-record audits; licensors will continue at least annual visits and may do unannounced inspections when concerns arise.

Reluca Stoyica, identified on APD slides as president of the Oregon Care Home Council, was quoted in the presentation: "For many providers this rate increase represents the difference between closing their doors and remaining operational." APD also said approximately 2,400 individuals were in adult foster homes as of the most recent census slide shown.

Why it matters: APD says the new rates aim to reduce administrative burden, lower the frequency of costly exception processes, and better align payment with care needs and staffing requirements. Committee members pressed agencies on fiscal impacts and on how many providers or homes might face material changes in revenue under the new tiers; APD said impacts will vary widely by home composition and case mix and offered to provide additional, itemized fiscal detail to the committee.

What’s next: APD committed to follow-up answers for questions posed during the hearing (including more granular fiscal-impact figures and comparative rates in neighboring states). There was no formal committee action in this informational session; the presentation closed and the committee moved on to an Agency with Choice update.