Oregon’s Cost Growth Target: Balancing Payer and Health System Accountability with Flexibility 

Since 2019, Oregon’s Health Care Cost Growth Target Program has been a key strategy for keeping the state’s health care spending in line with wages and economic growth to improve the affordability of care for residents. But simply measuring cost growth isn’t enough to slow spending alone. Real accountability from health care payers and provider organizations is also required. With this in mind, the Oregon Health Authority (OHA) is currently implementing a mix of transparency, performance improvement plans, and financial penalties to ensure health plans and provider organizations take actions to meet the state’s target.

Every year, OHA reports on whether entities that are subject to Oregon’s cost growth target have met or exceeded the target. Drawing inspiration from Massachusetts, Oregon’s statute calls for required Performance Improvement Plans (PIPs) when health plans and provider organizations exceed the target with statistical confidence and without an acceptable reason. However, to date, Massachusetts has only required one entity to prepare a PIP, and Oregon wanted to take accountability a step further. Oregon’s approach establishes a layered accountability system that uses PIPs as a standard tool, then applies financial penalties if entities continue to exceed the target over time.

Which Oregon Payers Met the Cost Growth Target in 2021-2022?

During Oregon’s recent rulemaking process to operationalize these accountability measures, some payers and provider organizations argued that public reporting alone could be effective in motivating health care entities to meet the cost growth target. However, after two years of publicly reporting on payer and provider organization performance against the cost growth target, we’ve seen that concern for reputational risk if an entity is named in a state report hasn’t driven everyone to consistently meet the cost growth target.

Balancing Accountability and Flexibility

It’s challenging for state cost growth target programs to balance accountability with flexibility, especially when regulating payers and provider organizations in underserved communities with complex needs. Oregon has adopted a two-pronged approach to address this:

1. No Mandated Solutions: Oregon does not prescribe required actions or policies that payers and provider organizations must implement to meet the cost growth target. The program allows payers and provider organizations to determine what actions they take to meet the cost growth target as long as they maintain service access. This flexibility ensures strategies can be tailored to local needs.
2. Acceptable Reasons for Cost Growth: Oregon recognizes that some reasons for cost growth, such as increased behavioral health spending, align with state policy goals. In these cases, exceeding the target is acceptable. For each payer and provider organization that exceeds the cost growth target, OHA will go through a process to “determine reasonableness” of that cost growth. This flexibility helps prevent unintended consequences, such as denying care or cutting services, while still maintaining the overall accountability structure.

Transparency: How Much Is Enough?

OHA has publicly reported payer and provider performance against the cost growth target for two years, providing a clear picture of who meets or exceeds the target. This year, the agency plans to increase transparency by publicly publishing its determination letters that detail to payers and provider organizations whether exceeding the target was deemed reasonable and why.

However, there’s still tension over how much information should be made public. While industry stakeholders call for confidentiality, advocates push for more open discussions that allow consumer voices to be part of the process. Oregon is still seeking the right balance — providing enough transparency to build trust and drive behavior change while also safeguarding sensitive information.

What’s Next for Accountability in Oregon?

Oregon will release its first batch of determination letters before the end of 2024, for cost growth between 2021 and 2022, marking the start of formal cost growth target accountability. This serves as a “first strike” toward financial penalties — if a payer or provider organization exceeds the cost growth target with statistical confidence without an acceptable reason three times within a five-year period, they will have to pay a financial penalty. Next year, these letters will also outline which entities need to implement PIPs.

OHA’s approach emphasizes understanding the root causes of rising health care costs and how these cost drivers affect health plans and provider organizations, rather than simply penalizing entities for exceeding the targets. This collaborative framework allows provider organizations and payers to work to address cost drivers and meet the cost growth target, while protecting access to services.

As more data is collected, the program’s accountability structure will be reassessed. OHA has committed to evaluating the effectiveness of financial penalties and PIPs in 2030.

Final Reflections

Oregon’s cost growth target program is just one tool among many needed to improve health care affordability. OHA and the Oregon Health Policy Board (OHPB) will continue to explore additional strategies and policies to ensure access to affordable care. In 2025, OHPB plans to launch a new committee that will center patient and purchaser voices and focus more broadly on affordability.

Oregon Health Authority’s new strategic plan highlights a key pillar: ensuring access to affordable care for all Oregonians. OHA is committed to making health care costs manageable, guided by the principle that care should be available to everyone in our state. Balancing the needs of providers, payers, and consumers is no small feat, and OHA continues to refine its approach to achieve this goal.

Looking ahead, OHA is fostering a cultural shift toward accountability, setting clear expectations for payers and provider organizations to actively work toward meeting the cost growth target each year. It’s a long road, but as the state refines its approach and learns from its own data, it may well be setting a precedent for states across the country.