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Bills in state legislature aim to cut hospital costs

Oregonians for Health Security are pushing bills in the state legislature to reduce rapidly rising healthcare costs. The bills target hospitals and prescription drugs, the main drivers of healthcare costs. This would take the pressure off of public programs like the Oregon Health Plan, and also private insurance. A lot of strikes now, like the looming Lane Transit District strike in Eugene, are about medical insurance, as employers seek to transfer costs to employees, which amounts to a pay cut. -- Lynn Porter
The Register-Guard, Eugene, Oregon
March 4, 2005

SALEM - Runaway health care costs and a fast-growing population of Oregonians with no health insurance have prompted lawmakers to target the state's hospitals.

Lawmakers are considering at least three bills that seek to tackle rising medical costs, especially for the uninsured, by limiting what hospitals charge, how they spend their money and who they can bill.

But the hospital industry says it will fight the measures, which it characterized as well-meaning but misguided.

Hearings on the three bills, filed at the request of organized labor and health care consumer groups, began last week in the Senate Health Policy Committee and are to conclude Monday.

Senate Bill 504 would require hospitals to provide charity care to all uninsured patients whose income falls below 200 percent of the poverty line - which comes to $38,700 for a family of four. For those with income between 200 percent and 400 percent - up to $77,400 for a family of four - without insurance, hospitals would be required to provide discounted care on a to-be-determined sliding scale.

Senate Bill 502, modeled after a program in Maryland, would create an oversight commission to set rates for hospitals much as public utility commissions regulate what a state's power and telephone utilities can charge.

A third bill, down for a hearing Monday, Senate Bill 503, would expand Oregon's certificate-of-need program by requiring hospitals to win government authorization for any capital expansion - construction, renovation, or equipment acquisition - that costs $1 million or more. Currently such approval is required only for the construction of a new hospital or nursing home.

The health committee's chairwoman, Sen. Laurie Monnes Anderson, backs all three bills.

"This is the first step this body has taken to really curb hospital costs," said Monnes Anderson, a registered nurse before entering politics.

The hospital lobby isn't taking the campaign lying down.

"It's all about vilifying and picking out hospitals as the demons," said Ken Rutledge, executive director of the Oregon Association of Hospitals & Health Systems. "This is a terribly adversarial approach that they've taken. It's not about sitting down and collaborating."

Supporters and detractors of the legislation seem to agree that Oregon's medical-center building boom has fueled worries that hospitals are misdirecting their money into areas that serve their own interests in competing for market share, rather than helping make health care affordable and accessible.

The capital-spending spree is sweeping the Eugene-Springfield area, with PeaceHealth's bid to construct a $350 million hospital in the Riverbend area of Springfield and Triad's effort to build a new $85 million McKenzie-Willamette Medical Center in Eugene.

Brian Terrett, spokesman at PeaceHealth's Sacred Heart Medical Center in Eugene, acknowledged that the plan to build a new hospital at RiverBend has prompted community concerns about whether that would drive up consumer costs.

"When people hear the cost of a hospital, you can't help but be overwhelmed," he said. But Terrett said the capital cost represents a fraction of Sacred Heart's overall costs to operate, which is about $1 million a day.

"A $350 million hospital, spread over 10 or 20 years, it really is fractional," Terrett said.

Both sides come armed with plenty of data in their fight over whether to expand regulation of hospital charges and spending.

A new study by the labor-backed Oregonians for Health Security, "Behind Oregon's Health Care Crisis," lays the blame squarely on hospitals. In 2003, hospital outpatient services supplanted prescription drugs as the fastest-growing health care cost, the study said. And for both government and private payers in the health care market, hospital bills represent the largest portion of spending, the report said.

Maribeth Healey, the group's executive director, said hospitals have come under increased scrutiny for good reason. "It's because they're now the top cost drivers," she said. "And in terms of Oregon's hospitals, there's a lot of money being made. I think they would agree the health care system is in crisis and they need to step up to the plate and do their part."

The report said Oregon's trend toward hospital consolidation has paralleled the rise in hospital charges. It cited Lane County's experience, in which the number of hospitals has shrunk from five in the 1970s to the current situation in which two out-of-state corporations - Washington state-based PeaceHealth and Texas-based Triad - own all of Lane County's acute care beds.

Hospital officials say that while the proposals before the Legislature may be well intentioned, they are flawed.

The bill to create a rate-setting authority is based on a system in Maryland that Rutledge said "has done a lot of good work." But it couldn't succeed in Oregon, he said. For one thing, Maryland's rate-setting program works because all paying hospital patients - privately insured, self-paying and those with government-provided Medicare and Medicaid - can be billed at the same rates. In Oregon, that's not possible, since Medicaid covers only about 74 percent of actual costs and Medicare covers 87 percent. To make up for that, hospitals bill patients covered by private insurance at much higher rates. Rutledge said it would take about $190 million a year to boost the Medicare and Medicaid reimbursements to cover actual costs - money the state can't afford and the federal government won't provide. Also, the federal government would have to grant Oregon a waiver to its rules, which all parties agree is unlikely.

As for the proposal to require hospitals to provide free or discounted care based on patients' incomes, a PeaceHealth official said such steps, though well intended, weren't necessary because hospitals already follow such guidelines. Kevin McAndrews, PeaceHealth's director of patient financial services, said PeaceHealth seeks to screen patients for eligibility to publicly funded assistance programs or to PeaceHealth's own "Bridge" program, which helps those with low enough incomes and a lack of insurance that they qualify for charity care.