Oregon flags 3 health insurers, a hospital group and a clinic for unexplained surge in costs

Oregon regulators are calling out five health care organizations for driving up medical costs without offering a convincing explanation.

The state in 2021 set a 3.4% limit on how much organizations - hospitals, insurance companies and medical groups - can increase their per-person spending on patient care. The policy, first approved in 2019 and strengthened two years later, is part of a broader push to curb rising medical bills and keep care affordable.

The companies must offer hard evidence or an acceptable explanation to back up anything above that percentage.

The Oregon Health Authority said St. Charles Health System in Bend, The Corvallis Clinic and insurers PacificSource, UnitedHealthcare and Moda Health blew past that limit in 2023 without making a convincing case for why.

Another 66 organizations also overshot the target, but state analysts found those increases reasonable -- tied to factors such as rising prescription drug prices, higher spending on behavioral health services and caring for patients with exceptionally high medical bills.

The state's latest report signals a turning point in Oregon's program aimed at bringing more transparency around where health care dollars go and how spending changes year to year. For the first time, state regulators are requiring organizations to answer for how much more they are spending each year.

The scrutiny is necessary, state health officials said, at a time when health care costs continue to grow far faster than Oregonians' wages. In 2023, per-person health spending in Oregon jumped 5%, well above inflation. That trend, they said, is pushing health care out of reach for many working families.

"Making health care affordable benefits everyone," said Clare Pierce-Wrobel, who leads the health authority's Health Policy and Analytics Division. She said the cost growth program is designed to distinguish between cost increases that expand access to care from price hikes that offer little benefit to patients.

"Not all cost growth is bad," Pierce-Wrobel said. "Some can address areas of historic underinvestment or ensure access to care."

The biggest jump came at St. Charles Health System, where costs for commercially insured patients soared 26% in a single year, nearly eight times the state's cap. St. Charles operates hospitals in Bend, Redmond, Prineville and Madras, along with more than 30 clinics.

Alandra Johnson, a spokesperson for St. Charles, argued that the state's finding overlooks real-world pressures facing central Oregon's only hospital system. She said many of the forces that pushed costs higher -- post-pandemic recovery efforts, higher operating costs in rural areas and declining federal reimbursements -- were beyond the organization's control and "cannot fairly be attributed to St. Charles."

Johnson said the health system "continues to work hard on cost containment" and plans to ask the state health authority to reconsider its determination.

But Sarah Bartelmann, the state's cost-growth program manager, said St. Charles' dominance in the region plays a major role in driving up prices.

"The payers in central Oregon have to contract with (St. Charles) if they want their members to have access to hospital care ... because they're the only game in town," Bartelmann said. "We see that both health plans and the primary care patients who end up needing hospital services are paying more. It affects costs all the way through the system."

At the Corvallis Clinic, costs for commercially insured patients rose nearly 9% -- almost triple the state's cap. The medical group was purchased by Optum in early 2023 in an emergency deal that bypassed the state's regulatory review intended to prevent corporate buyouts of physician practices from harming local access to health care.

UnitedHealthcare, which shares a parent company with Optum, reported a 6% increase in Medicare Advantage spending. The insurer attributed the rise to sicker patients, federal payment changes, post-pandemic care patterns and higher costs in provider contracts. But state analysts said the insurer did not provide enough evidence to support most of those claims.

The company did not respond to an email seeking comment.

Moda Health's Medicare Advantage line reported a 15% increase in spending. For insurers, analysts say rising prices and increasingly complex payment arrangements -- especially in Medicare Advantage plans, where more payments now happen outside the traditional claims system -- are playing a growing role.

That complexity, the health authority's Pierce-Wrobel said, makes it harder to pinpoint exactly what is driving costs.

Moda officials previously said the company's Medicare Advantage plans saw a surge in post-pandemic service use that drove premiums to unsustainable levels. Because of that, the insurer left the Medicare Advantage market in 2025.

The state found that PacificSource increased its commercial health care spending by 7% -- more than twice the state's limit. Regulators accepted some of the insurer's explanations, such as higher pharmacy costs and required behavioral health investments, but rejected others, saying the insurer did not provide enough data to support claims that its members were sicker or that hospital price increases were unavoidable.

Lauren Thompson, a spokesperson for PacificSource, said in an email that the insurer's commercial costs rose largely because of "factors outside any single organization's control, including steep specialty drug price inflation, higher utilization as members returned to deferred care, and broad inflation across the health sector."

PacificSource, UnitedHealthcare and St. Charles will have to submit performance improvement plans by January, outlining what is driving their cost growth and how they will bring spending back in line with the state's target.

State officials said they won't require Moda Health to file a plan because it has since ended its Medicare Advantage line. The state also temporarily excused Corvallis Clinic from filing a corrective plan so that regulators can instead evaluate its parent company in future review cycles, officials said.

Financial penalties for exceeding the target are still years away and will apply only if an organization exceeds the target three out of five years without acceptable reason. That means the earliest any fines could come is 2028.

Meanwhile, the state is reassessing whether its 3.4% spending cap should remain in place for the second half of the decade. A work group is expected to recommend changes later this month.

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