Oregon State Hospitals and Ability-to-pay Order

Dady K. Blake, Elder Law Attorney

Scope of Article

The article covers the Oregon State Hospital system and a patient’s legal responsibility for payment of in-patient mental health treatment determined under an Ability-to-Pay Order and the appeal of that Order.

In this article the use of the term “patient” is used frequently as a shorthand way to refer to an adult who is or was a in-patient for mental health treatment at an Oregon State Hospital facility and/or that person’s authorized representative.


As Elder Law attorneys we are used to dealing with long-term care issues and Medicaid benefits. We are generally not used to dealing with Oregon State Hospital and issues involving payment for this care. When we do, there is little out there to guide us. Over the years I’ve had a handful of these cases and each time I’ve gone out searching for information and have found willing colleagues to be guide me. I am writing this article in the hopes of sharing what I have learned. I would encourage readers with experience in this area who have something to add to what is written here, to send me your insights at dady@dadylaw.com to be considered for a future article or update on this topic.

Oregon State Hospitals/OHS

Oregon State Hospitals (OSH) operate under the direction of the Department of Human Services’ Oregon Health Authority’s Addictions and Mental Health Division. (After this, simply “OHA”) There are currently three locations including campuses in Salem and Portland, and the Blue Mountain Recovery Center in Pendleton. Another campus is planned in Junction City. Adults needing intensive psychiatric treatment for severe and persistent mental illness are civilly or criminally committed as in-patients to OSH in order to receive treatment. In addition, placement can occur “voluntarily” by a court-appointed guardian. Each year over 10,000 persons are served statewide by OSH. OSH is funded by state and federal funds and patient’s funds.

Ability to Pay Determination

A patient is potentially liable for the full cost of care. Currently, the cost of care for in-patient mental health treatment services is $28,745/month at the Portland and Salem facilities and $19,120 at the Blue Mountain Recovery Center. These amounts represent the actual cost of the patient’s care as determined by OHA. ORS 179.701. (Note: there are different types of treatment, all with different costs.) However, the maximum each patient is required to pay towards the full cost is limited to the patient’s ability to pay. ORS 179.620 In making this determination, the State considers the following related to the patient:

1. All income from any source, including Veteran’s benefits

2. All property, both real and personal

3. The need for personal support after discharge from OSH system

4. 3rd-party benefits available such as Medicare and private insurance.

5. Other obligations

See ORS 179.640 and OARs 309-12-0025, 309-12-0030, OAR 309-12-0031 and 309-12-0034.

Consideration of the patient’s primary residence is subject to similar exceptions as found in the Medicaid eligibility process. Thus, a primary residence that a patient expects to return to after discharge is not considered an available resource. Additionally, the home is not considered where there is a spouse, or a minor or disabled child in the home. See OAR 309-012-0033(3)B).

Government benefits and private insurance may cover part or all of the patient’s stay. Currently, Medicare Part A may be billed for an eligible patient who receives a covered treatment from a Medicare-certified hospital unit. Medicare Part B program may be billed at any of the OSH facilities for professional services provided by physicians and licensed clinical psychologists. Medicaid may be available to patients under 21 and 65 and older if the patient otherwise meets the financial qualifications for Medicaid. Otherwise, Medicaid benefits do not apply. Facilities vary as to their licensing for Medicaid and Medicare.

Private insurance may also provide coverage. OHA will bill private insurance companies for any covered services. In the author’s experience, private insurance provides very limited coverage of this care. I recommend that you start the process of seeking clarification from a private insurance provider early. If the patient has options as to facility placement, determine whether a particular facility is more likely to meet the criteria for reimbursement by the insurance provider.

The State does consider other legal (and sometimes moral) obligations of patient in making the ability-to-pay determination. For legal obligations other than administratively or judicially ordered child and/or spousal support, the person must have demonstrated an intent to pay the obligation, either by showing a history or regular payments toward the full amount owing, or by providing a plan showing dates and amounts of payments to be made in the future. See OAR 309-012-0033(3).

Ability to Pay Order/APO

Based on the patient’s financial information provided by the patient and the State’s determination of the full cost of care for services provided to date, the State provides the patient an “Ability-to-Pay Order” or APO. ORS 179.640 and OAR 309-012-0030. The APO includes a summary of the patient’s financial resources and the full cost of hospital care to date; where care is ongoing, it includes the projected costs and patient liability. The patient also receives a notice of right to appeal which includes description of the patient’s appeal rights and instructions. ORS 179.640(4) and (7).

Generally for an appeal to be considered, it must be a timely (i.e., within 60 days of notice) and signed writing by the patient that includes both the basis for disagreement with the APO and the specific relief sought. The APO becomes final if the patient fails to make a timely appeal. However, the deadline for an appeal can be extended to provide notice to an authorized representative, such as a conservator or guardian, who has not received notice. ORS 179.653(4) and ORS 179.610(1).

In addition, while a patient may request a formal hearing, the rules allow for the request of an informal conference. If an informal conference does not lead to satisfactory resolution, the patient may still engage in the formal contested case appeal process. OAR 309-012-0034(5). From the author’s experience, it is possible to make an appeal in the form of a written submission without a hearing and without waiving the patient’s right to a hearing. See OAR 309-012-0025 et seq for description of rules and procedures for an appeal of an APO.

Grounds for Appeal

ORS 179.640 and OAR 309-012-0033(3) establish the criteria for establishing a patient’s ability to pay. These factors direct the State to consider patient’s complete financial picture in the context of the patient’s well-being. Typically an appeal will be based on one or both of the following:

1) Funds for Personal Support Following Release: A critical area for appeal on behalf of a patient is the determination of the financial resources that a patient will need following his or her discharge to be able to the live in the community. See OAR 309.012.0033(3). The period of review is limited typically to six months following release. OAR 309-012-0031(10) Most patients will have extensive, ongoing needs. Therefore consider a phased approach of support including intensive immediate post-hospitalization support and ongoing support thereafter. While the specific goal of the appeal is to preserve as much of the patient’s funds for future needs, the primary goal of the patient is not to be readmitted to an OSH facility. To do so, broadly assess the support the patient will need in the community to ensure the patient’s continued success outside the hospital setting. Enlist mental health and care professionals as well as family, friends, any support network, and, if possible, the patient in making this assessment. Provide in your appeal process statements of professionals as to the need for care levels recommended and monthly budgets for professionals and/or paid family members. Consider the employment of professional fiduciaries and care personnel to supplement or replace (quite likely overwhelmed) family members and friends who are involved.

2) Financial Snapshot: Estate evaluation and offsetting legal obligations: Careful consideration should be given to the financial information provided to the State at the onset of hospitalization. There are likely to be errors here that can be easily corrected in the appeal process, if not before. Often the OHA is simply provided bank balances on date of admission and income numbers, without offsets for outstanding checks, income taxes, and professional fees, and other legal obligations.

Liens/Priority of Claims

When the APO becomes final, the State has a lien against the property of the patient or the patient’s estate for the cost of hospitalization. This includes a lien against the assets held by a conservator, trustee, personal representative or other authorized representative of the patient. ORS 179.653. Note that a conservator can not avoid payment of OSH liability based on the priority provisions of ORS 125.520 (i.e., priority of claims in a protective proceeding). Under ORS 179.653(3), a conservator is expressly required to comply with the APO regardless of the provisions related to priority of claims in ORS Chapter 125. If conservator, personal representative, or other authorized representative does not comply with an APO, the State may file a motion to require compliance. There are very limited grounds for a patient’s to object to the State’s motion. See ORS 179.653(6) et seq.

Once an APO is final, consider a waiver of collection based on the best interests of the patient or where there has been a change of patient’s circumstances. ORS 179.731 and OAR 309-012-0033(6).

Timing: Consideration of Resources

There are three critical periods for review of a patient’s liability for OSH in-patient treatment.

1) Initial: The State takes an initial snapshot of the patient’s ability to pay at the beginning of hospitalization and this becomes the basis of its APO. Unlike Medicaid eligibility, there does not appear to be any look-back period or penalty for transfers.* That said, the OHA will react to obvious recent transfers in avoidance of patient liability and take legal action to rescind such transfers.

2) Three-year period post hospitalization: At any time while patient is hospitalized or within three years of discharge, the State is required to consider changed circumstances and issue a new APO if the patient’s financial circumstances change. ORS 179.620(5).

3) Death of patient: At the patient’s death, the State is authorized to collect from the patient’s estate for any unpaid balance of the patient’s full cost of care. Please note carefully that this is not the amount that has been determined by the APO (as appealed or adjusted), but the full amount as determined as the patient’s actual cost of care under ORS 179.701. The State’s presentation of claims in an Estate is subject to the typical priority of Estate claims under ORS 115.125. OHA receives all probate filings and reviews for monies due to them. Recovery by OHA, when it occurs, is most likely because a patient has died with a home in his or her name. See also ORS 179.620(3) and ORS 179.740, OAR 309-012-0033(3).

Supplemental Needs Trusts

Traditionally lawyers have advised disabled persons under age 65 with resources and the potential for significant ongoing care costs to consider the creation and funding of a Supplemental Needs Trust pursuant to 42 USC 1396p(d)(4)A). Typically these trusts are created for persons receiving Medicaid benefits for long-term care needs. For many OSH patients, Medicaid is not the source of public funding and the Medicaid rules do not apply. Nonetheless, for persons meeting the age and disability qualifications, a transfer of funds to a self-funded irrevocable SNT prior to hospitalization can be an important method to safeguard limited resources as well as ensuring eligibility for other government benefits. The OHA when reviewing available resources will review a SNT to look for language suggesting the availability of resources to pay OSH bills and will find such trusts (if done properly) not to be an available resource for payment under an APO. See OAR 309-012-0031(2) (Treatment of Trusts).

Ordinary creditor-debtor laws apply related to avoidance of valid debts. Under no circumstances can a patient be relieved of his or her financial obligations under an APO by creating and funding a SNT that is subsequent to the issuance of an APO or subsequent to the care covered by the APO. The State will aggressively pursue the assets in the SNT and the SNT will offer no protection whatsoever. ORS 179.653(3).

At the patient’s death, depending on how the SNT was written, funds may be considered available to pay back the State for hospitalization up to the full cost of care. Please note that unlike Medicaid eligibility rules, the payback language does not appear to be requirement by OHA. Any payback to the State for OSH liability would come after any reimbursement to the State for Medicaid benefits.

Parting Thoughts

When faced with a situation where state hospitalization is likely or has already occurred, take quick action. Consider a Supplemental Needs Trust. Stay on top of getting notices. Obtain a complete a financial picture for the patient. Get appropriate professional advise to help present a complete picture of the scope and costs of services for recovery and support. Encourage and support strong advocacy to get the patient out of the hospital and onto recovery.

Keep in mind that the priority of claims under ORS 125 (Protective Proceedings) does not apply to OSH liability. An APO or Ability-to-Pay Order will create a current liability against the patient’s resources; however the patient may still be subject to additional reimbursement to the State for actual cost of his or her care for care if patient’s financial situation changes within 3 years after OSH stay AND if at the patient’s death, there is an estate subject to probate administration.




Oregon Health Authority/OHA Institutional Revenue Services P.O. Box 14900 Salem, OR 97309-5016

Department of Human Services/DHS Institutional Revenue Services 500 Summer Street NE Salem, OR 97309-5016

Oregon State Hospital – Salem 2600 Center St. NE Salem, Oregon 97301 503-945-2800 800-544-7078

Oregon State Hospital – Portland 1121 NE 2nd Ave. Portland, Oregon 97232 503-731-8620

Blue Mountain Recovery Center 2600 Westgate Pendleton, OR 97801 541-276-0810

Administration, Kirkbride Building 503-945-2870

Deborah Howard, Consumer and Family Services 503-945-7132

OSH Institutional Revenue Services 503-945-9840

The Oregon Health Authority/OHA provides a comprehensive brochure for family and friends of patients, Family Guidebook. Guidebook provides useful information with extensive contact information, practical information such as driving instructions, visitation h ours, parking. Guidebook can be found online at http://www.oregon.gov/oha/amh/osh/Pages/friendsandfamily.