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Oregon Hospitals Seek More Funding to Close Reimbursement Gap

Oregon hospitals are grappling with rising costs, forcing some to operate at a loss or thin margins. As the gap between patient revenue and operating expenses grows, health officials urge state legislators to increase funding to keep critical services running.

Rising Financial Pressures: The Struggle to Stay Afloat

Oregon’s healthcare system is at a breaking point. The financial troubles facing hospitals have grown more pressing, with more than half of the state’s hospitals now operating in the red. Emergency rooms are overflowing, with patients sometimes waiting for days to get a bed, and rural facilities are forced to scale back essential services, like maternity wards. For hospitals, the situation is becoming unsustainable.

A major factor behind this is the underfunding of the Medicaid-funded Oregon Health Plan, which provides insurance to over a third of the state’s residents. According to Becky Hultberg, president and CEO of the Hospital Association of Oregon, the reimbursements the state provides for Medicaid patients fall far short of the actual costs of care.

In 2023 alone, hospitals received only 56 cents for every dollar spent on treating Medicaid patients. The result? An eye-watering $1 billion gap. This funding shortfall has pushed hospitals to the brink, threatening access to healthcare for many Oregonians.

Hultberg stressed that this issue isn’t going away anytime soon. “Hospitals can’t lose money indefinitely,” she said, echoing a sentiment that is becoming all too familiar in many healthcare systems across the U.S. But it’s more than just a financial issue—it’s a question of community health.

Solutions on the Table: Proposed Funding and Legislative Action

The Hospital Association of Oregon isn’t asking for a quick fix, but they do want to start closing the reimbursement gap. Hultberg emphasized that this would be a “multi-session conversation” but urged lawmakers to begin addressing the issue in the current legislative session.

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A key part of the proposed solution is increased funding for hospitals, especially those serving vulnerable populations. Governor Tina Kotek’s budget proposal includes a $35 million boost for maternity services, as well as $4 million for graduate medical education. Another $25 million is being proposed for hospitals that handle high numbers of uninsured or Medicaid patients.

Additionally, hospitals are hoping for changes to the state’s Medicaid program and more efficient patient discharge processes. A state task force has recommended several reforms to help hospitals discharge patients more quickly, especially those who are ready to leave but are held up by bureaucratic hurdles or a lack of available beds in long-term care facilities.

The proposal includes:

  • Expedited discharge processes for patients awaiting transfer to long-term care
  • Increased payments for maternity services to cover the rising costs
  • Funding aimed at reducing the financial burden on hospitals treating uninsured and Medicaid patients

These proposals represent just the beginning of what hospitals hope will be a longer conversation about reforming Oregon’s healthcare funding system.

Rural Hospitals Hit Hardest: Maternity Services at Risk

Rural hospitals in Oregon have been hit especially hard by these financial pressures. In Baker City, Saint Alphonsus Medical Center was forced to close its maternity ward in 2023, citing the inability to cover the rising costs of providing care. The closure was a devastating blow to the community, as rural areas already struggle with limited access to healthcare services.

Salem Hospital, which operates as part of Salem Health, is also feeling the strain. Cheryl Nester Wolfe, president and CEO of Salem Health, noted that maternity services are particularly vulnerable. The Oregon Health Plan only reimburses about 60% of the costs associated with maternity care, which leaves hospitals like hers with a significant financial gap. Salem Health, which saw over 3,000 newborns in 2024, continues to provide these services despite the financial challenges.

The closure of maternity wards in rural areas represents a significant loss, particularly for expecting mothers who now face longer travel times and fewer options for care. The strain on hospital finances is making it harder to keep these vital services open, and if action isn’t taken soon, more rural facilities could follow suit.

Oregon’s hospitals are at a critical juncture. The rising gap between what the state reimburses for care and the actual costs of delivering that care is unsustainable. With more than half of the state’s hospitals in financial distress, healthcare leaders are urging lawmakers to take action. While there is no easy solution, hospitals hope the proposed increases in funding and legislative reforms will be a step toward stabilizing the system and ensuring that healthcare remains accessible for all Oregonians.

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