Bend, OR – Oregon hospitals are grappling with significant financial challenges, as rising operating costs and underfunded Medicaid reimbursement rates put increasing strain on healthcare facilities across the state. Hospital officials warned that more than half of Oregon’s hospitals are operating at a loss or with thin profit margins, with some rural facilities, such as in Baker City, even forced to close maternity wards due to high costs.
Becky Hultberg, President and CEO of the Hospital Association of Oregon, addressed the issue during a press conference on Wednesday, explaining that the gap between net patient revenues and operating costs is widening, making it difficult for hospitals to remain financially viable.
The Oregon Health Plan, which provides insurance to more than one-third of the state’s population, is a significant contributor to the financial woes. The plan reimburses hospitals only 56 cents for every dollar spent on Medicaid patients, leaving hospitals to cover the remaining costs. In 2023 alone, the underpayment totaled $1 billion.
“We are not coming forward to ask for $1 billion this session, but what we are saying is we have to begin to close the gap between what it costs to provide care for Oregon Health Plan members and what hospitals are paid,” Hultberg said. She emphasized that the issue will likely require ongoing conversations over multiple legislative sessions.
The financial difficulties are compounded by rising labor costs, as hospitals struggle to retain staff while also managing the increasing demand for services. The Association is calling for adequate funding for the Oregon Health Plan, as well as measures to ease the discharge process for patients ready to leave the hospital but unable to do so due to barriers in accessing long-term care facilities.
Hospitals across the state are also backing proposals in Governor Tina Kotek’s budget, which include a $35 million boost for hospital maternity rates, a $4 million increase in funding for graduate medical education, and $25 million for hospitals with a high proportion of Medicaid or uninsured patients. Additionally, a state task force has recommended changes to reduce the bureaucratic obstacles preventing timely patient discharges to other care settings.
Rural hospitals, in particular, are struggling to maintain essential services. Saint Alphonsus Medical Center in Baker City, for example, closed its maternity ward in 2023 due to financial strain. Salem Health, which operates Salem Hospital, is also contending with high costs for maternity services, with Medicaid covering only about 60% of the costs. In the 2023 fiscal year, Salem Health faced a $66 million shortfall in its maternity care budget due to underpayment.
“Patients and their access to care is what matters most,” said Cheryl Nester Wolfe, President and CEO of Salem Health. “Providers have for years found ways to make up for reimbursement shortfalls, but this patchwork approach is not sustainable.”
One of the key challenges for rural hospitals is the relatively low number of deliveries, which makes it more difficult to cover the costs of providing maternity care. These facilities must still maintain on-call staff, including doctors, nurses, and anesthesia professionals, which can be expensive. Daniel Grigg, CEO of Wallowa Memorial Hospital in Enterprise, emphasized the need for solutions that support rural healthcare, including a proposal for “standby pay” to help cover on-call staffing costs.
“We are committed to keeping our maternity services open,” Grigg said, “and we believe that standby pay would significantly help ensure ongoing access to care.”
As the state legislature prepares to meet in the coming months, hospital leaders are urging lawmakers to prioritize funding reforms to address the financial challenges facing Oregon’s healthcare system. With many hospitals facing closures or service reductions, particularly in rural areas, the call for action has never been more urgent.
In the meantime, hospital officials continue to explore other strategies to alleviate financial pressure, but they warn that without meaningful changes to Medicaid funding and policy adjustments, the state’s healthcare system may be at risk of unsustainable collapse.
