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eDocTalk article

Oregon budget preserves Medicaid funding; hits Legacy with hospital taxes

August 2017

Oregon’s new legislative budget will affect providers. In a recent update from Legacy president and CEO George Brown, M.D., he reports the primary area of interest to hospitals and providers this session was the legislature’s effort to pass a Medicaid budget.

At one point, the overall state budget gap was $1.9 billion, including a $900-million shortfall for the Oregon Health Plan, which is the state’s Medicaid program for low-income citizens.

Given the continued uncertainty around health care spending, Legacy went into this session to push for continued health insurance for low-income citizens. Here is a summary of key outcomes:

  • The Oregon legislature passed a budget to pay for Medicaid, in part by increasing the tax on hospitals by 0.7 percent. The tax will cost Legacy about $14 million a year, close to what we had estimated. The tax does not apply to individual providers.
  • The Oregon budget also includes funding to cover 17,000 children who did not have Medicaid coverage previously.
  • This budget eliminates the Hospital Transformation Performance Program (HTPP), beginning in 2019, to also help fund the Oregon Medicaid program. HTPP paid incentives to hospitals for meeting quality targets. In the latest year, Legacy hospitals were paid more than $16 million.
  • Together these two changes, estimated at $30 million a year, are a significant hit to our operating margin.
  • The Washington state budget didn’t result in big changes to Legacy.


The truth is that the provider tax gives low-income citizens a better chance at improved health and keeps people from going to the emergency room for routine care, or worse yet, not receiving care because they can’t afford it. Though it is the right thing to do, the hospital tax will make our job much more difficult with even more limited resources.

The real bottom line for Legacy and providers is this: We need to accept that the cost of health care continues to grow at a pace that exceeds health care reimbursement. The only way to flourish in that environment is to be more efficient.

Physician partnerships matter

With change and uncertainty ahead, Legacy and our provider partners must keep working together on efficiency, follow through on current strategic initiatives and most importantly, develop deeper partnerships that position all of us well for the future.

For our collective success, Legacy needs your active ideas, input and participation in finding ways to improve care in a more efficient manner. Times are changing rapidly around us, whether it’s technology, advances in medicine or reimbursement. The only way we can adapt in a way that maximizes patient care and value is to work closely together.

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