New OHA Report Reveals Payer and Provider Performance Under the State’s Cost Growth Target

Posted on May 10, 2023

Data highlight opportunities to improve health care affordability

PORTLAND, Ore. – Today Oregon Health Authority (OHA) released its first report on cost growth trends for health insurance plans and large provider organizations across the state. The report provides insight into health care spending growth across the commercial, Medicaid and Medicare markets for 29 payers and 51 provider organizations. Payers and provider organizations were more likely to meet the cost growth target for their Medicaid line of business (and Medicaid patients) compared to commercial and Medicare Advantage.

Overall, health care costs grew 3.5% between 2020-2021, just above the cost growth target of 3.4%. Cost growth was primarily due to increased utilization of health care services as people resumed care they may have postponed in the first part of the COVID-19 pandemic.

“The cost growth program was created to show us system trends and shine a light on the work that needs to be done to allow for more equitable access and affordable health care,” said Dave Baden, OHA’s interim director. “Now that we have this data and understand more about the impacts of COVID-19 on health care utilization and cost growth, we have even more reason to come to the table to find solutions.”

In 2019, the Oregon Legislature established the Sustainable Health Care Cost Growth Target Program, which is designed to prevent health care costs from growing faster than wages, inflation and other economic indicators. In collaboration among large provider organizations, hospitals and health insurance plans, employers, and consumer/patient advocates, the program sets a statewide target for the annual per-person growth rate of total health care spending. The program is flexible by design and accounts for the impact of COVID-19 and historically high inflation.

Accountability measures for payers and providers exceeding the target cost growth rate will be phased in with a multi-year approach. Performance improvement plans (PIPs) for entities exceeding the cost growth will begin in 2025. No payers or provider organizations will be subject to a PIP based on the data in this report.

A few key trends from the 2020 – 2021 report include:

  • Overall cost growth was greatest in the commercial market. Statewide, total health care expenditures grew 12.1% in the commercial market, compared to 6.5% growth in the Medicare market and a 2.1% decrease in the Medicaid market. Payers and provider organizations were more likely to meet the cost growth target for their Medicaid line of business.
  • Primary cost drivers include an increase in hospital outpatient and professional services utilization, as people resumed care they may have delayed in the first part of the COVID-19 pandemic. Because they had previously delayed care, many patients had increased needs or were sicker when they did access care, leading to higher costs.
  • There was also a shift in care sites. Due to capacity issues, patients received care in higher cost locations. For example, limited primary care availability meant that more patients sought care in urgent care settings. Patients had longer hospital inpatient stays when skilled nursing facility beds were not available.
  • Retail pharmacy spending grew in all markets. Statewide, retail pharmacy spending grew 3.6% between 2020-2021, even after pharmacy rebates were taken into account. Pharmacy rebates account for around $1 billion per year in Oregon. Statewide, about 23% of spending for retail pharmacy was returned to payers and pharmacy benefit managers (PBMs) through rebates.

On May 2, the Sustainable Health Care Cost Growth Target Program released a report with health care spending trends from 2018 to 2020. A May 17 public hearing will cover data from both reports. More information is available online.

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