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Hospital hot seat

Ken Rutledge keenly feels the pinch in health care

Back in the days before Oregon became the national poster child for states in severe fiscal crisis, Ken Rutledge would brag to other health care executives around the country about the Oregon Health Plan and other innovations that made the state a medical model.

'Now, I find myself for the first time being one of those people folks want to have come to talk about the horror show Ñ about all the bad things that are happening and how our state is coping with them,' laments Rutledge, president of the Oregon Association of Hospitals and Health Systems for the last 15 years.

It's his job to represent the interests of the state's 61 hospitals and other health care organizations.

The job's never been easy, of course, whether it's balancing the needs of metropolitan and rural hospitals, dealing with shortages of health care workers or lobbying lawmakers on the Oregon Health Plan and other hospital-related policy issues.

But the state's budget crunch Ñ and its potentially devastating impacts on patients, doctors and hospitals Ñ is turning out to be one of the biggest challenges of Rutledge's career.

What keeps him awake nights, he says, is the possibility that the state's hospitals could lose $260 million in state and federal funding that pays for medical care for Oregon Health Plan and other low-income and uninsured patients.

Hospitals, he says, would have to absorb those costs and pass them on to paying customers Ñ that is, anyone covered by private insurance plans.

Premiums for employers and individuals probably would increase even more than the 15 percent to 18 percent already expected for next year and could force some businesses or families to drop their health insurance coverage.

The cuts also could force some hospitals to cut back on programs, Rutledge says.

'This has got everybody in our membership engaged,' he says, poring through spreadsheets that cover the desk in his sparsely furnished office in Lake Oswego. 'A lot of our members really fear what the impact will be. They see it as literally unthinkable that all these bad downsides could happen.'

To forestall the 'unthinkable,' the association earlier this year filed two lawsuits against the Oregon Department of Human Services, which cut back on the amount of money it pays hospitals to treat Oregon Health Plan patients.

The association also is fighting a proposal Ñ endorsed by Gov. Ted Kulongoski and leaders of the Oregon House and Senate Ñ that would essentially eliminate hospital care coverage for about 100,000 people covered by the Oregon Health Plan.

Rutledge contends that it is unfair for the health plan to cover doctor visits, prescriptions and other medical treatments but not hospital care for those patients.

'There's a perception that hospitals are doing so well financially, they can afford to take these people and not get paid or get paid significantly less,' Rutledge says. 'Well, some hospitals are doing well, but 21 Oregon hospitals are losing money and another 10 have operating margins of less than 2 percent.

'The fact is, operating margins for hospitals across the state have declined over the past year.'

The hospitals do have one option offered by the Oregon Legislature: a so-called 'provider tax' that would raise revenue to help make up for the lost funds.

It's a controversial proposal that has divided the state's hospital officials and has Rutledge trying to find a consensus.

'I have members who don't want this tax under any circumstances, and make that very clear, and others who think we're waiting too long in cutting a deal on the tax,' he says. 'No matter what you do, you're not going to make everybody happy.'

But the discussion has been fairly civil, he says.

'Ken has a difficult job, but he thoroughly understands the problem,' says Robert Pallari, chief executive officer of Legacy Health System and one of four hospital executives who accompanied Rutledge on a visit with Kulongoski last month to seek the governor's support.

'He's dedicated to solving the health care problems we have in this state,' Pallari says.

In fact, dealing with the budget crisis has occupied a good chunk of Rutledge's time over the last year. It curtailed almost all of his business travel and even caused him and his wife, Joan, to scuttle a vacation to Italy last September, when the Oregon Legislature was meeting in a special session.

'United Airlines gave us credit for the tickets and said I had 13 months to buy tickets of equal value,' he says. It's July and we haven't done it yet.'

The Rutledges hope to slip in a vacation to Hawaii before the time expires. But if Rutledge finds he can't leave, his wife may take the vacation with her sister, he says with a resigned laugh.

An economist by training, Rutledge holds a master's degree in economics from Lund University in Lund, Sweden. He took his first health-related job in the mid-'70s as a health planner for Montana, his wife's home state.

He came to Oregon to head the hospitals association in 1988, a year before the Legislature adopted the Oregon Health Plan, which Rutledge regards as 'a good concept' but flawed because it has always been underfunded.

As a result, hospital officials and the state's physicians have argued over their share of Oregon Health Plan revenue.

'Ken sees things differently than we do in this particular area (Oregon Health Plan revenue), though we agree about 95 times out of a hundred,' says Jim Kronenberg, associate executive director of the Oregon Medical Association. 'Ken is very effective, a very erudite fellow. É He's good at what he does.'

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