Willamette Week | News| Health Care

State lawmakers won't descend on Salem for another month, but managed-care reform is already shaping up to be a top issue for the 1999 session.

Nationally, the key battle is between patients and insurers over access to health care. In Oregon, however, that debate is being upstaged by an equally contentious but less obvious row: the standoff between physicians and hospitals.

The Oregon Medical Association, the lobbying group for Oregon's physicians, is drafting a new study that will set the stage for a fight over how to distribute the $763.4 million set aside for the Oregon Health Plan in Gov. Kitzhaber's latest budget.

The advent of managed care in the 1990s has realigned the political landscape of health-care policy debates. Under the old fee-for-service system, doctors and hospitals rarely clashed. Now the two groups are at odds, harping over a limited pot of dollars rationed out by insurers. In its draft report, the OMA has fired the first shot, using the Oregon Health Plan as an example.

The findings of the draft report, recently shared with OMA members, suggest that hospital reimbursements are out of whack. The OMA has previously reported that the Oregon Health Plan paid hospitals $25.7 million in 1996, more than triple the $7.8 million reimbursed just two years earlier. OMA lobbyist Scott Gallant says the new draft relies on similar numbers.

Ed Patterson, a lobbyist for the state hospital association, says the revenue increases are easily explained. First, the Oregon Health Plan has brought 120,000 more patients into the system in the past four years. Second, the Health Plan has upped Medicaid reimbursements from 40 cents to 50 cents on the dollar.

"Yes, we're being paid more," he says, "but the report says this is a huge windfall for hospitals. That's not true."

Patterson says the additional money has allowed hospitals to hold down costs on private insurance. He says those costs have risen just 1.7 percent in the last five years.

Docs say that Patterson misses the point. They aren't grousing that hospital reimbursements are going up. They're upset because the hospitals' share of managed-care reimbursements are outpacing the doctors' share.

OMA's Gallant is adamant on the point. "Money going to hospitals is going up precipitously higher than funds being used to pay physicians' services," he says. "That's disconcerting. The hospitals are getting a bigger and bigger chunk, and physicians say their costs aren't being covered."

Ultimately, reimbursements are determined in negotiations between insurers, physicians and hospitals. So far, the OMA isn't calling for legislative action, but Senate President Brady Adams says that for the Legislature to avoid cutting back on services, it will have to take a hard look at reimbursement costs.

That's why hospital administrators are nervous about the OMA's report, drafted by consultant Joseph Henery.

"This report has created a lot of apprehension on the part of legislators," says Patterson. "All of a sudden there's this consultant saying hospitals are ripping off the system. The Henery report makes it look like we're the bad guys. "

Jim Kronenberg, associate executive director of the OMA, says the report highlights a real problem. He says hospitals are getting a bigger slice of the reimbursement pie because they have better bargaining power with insurance companies. Hospitals are often the only game in town, he says, while insurers have lots of physicians to choose from.

Even Ken Rutledge, executive director of the Oregon Association of Hospitals and Health Systems, acknowledges that doctors are "vulnerable" in the bargaining process.

Whatever the case, for now the squabbling between docs and hospitals over insurance dollars is preempting the larger question: namely, what those insurance dollars should cover.

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Willamette Week | originally published December 9, 1998