Legacy Embroiled in Negotiations with LifeWise

January 28, 2010 -- Legacy Health System and LifeWise Health Plan of Oregon are at the crossroads. Unless a contract can be negotiated by March 31, approximately 6,500 people who utilized a Legacy hospital last year would either have to pay higher out-of-pocket costs or choose a different facility.

 

Among the 73,000 statewide members of LifeWise, 25,000 live in the five-county region (Multnomah, Washington, Clackamas, Yamhill and Clark counties).
 

“We’re trying to bend the cost curve, and Legacy has been firm in their position,” said Deana Strunk, communications manager for LifeWise.

 

Legacy, which owns five hospitals in Oregon and Southwest Washington, earned an estimated profit of more than 31 percent on LifeWise-related business in 2008, according to an analysis of paid medical claims and financial reports filed publicly with state officials, Strunk said.

 

Negotiations over a 2010 contract began in December. Legacy is demanding a 9 percent increase, which would give them a 37 percent profit on LifeWise members, Strunk said.

 

LifeWise is willing to give Legacy a 6-6.5 percent increase, and the other hospitals in Oregon have agreed to those rate hikes.          

 

“At this point neither side has issued a termination notice,” said Strunk, adding that hospital charges represent the largest component of healthcare costs. “We’ve been reaching out, and have ongoing conversations this week with Legacy officials.” 

 

Legacy spokesmen declined to respond to a request by The Lund Report. However, in a Portland Business Journal article (January 15, 2010), Brian Terrett, their spokesman, said: “We have negotiated in good faith with LifeWise, and tried to show them specifically that the costs we’re talking about are supported.”

 

Terrett also said LifeWise has paid Legacy low rates in the past that don’t reflect the cost of hospital care, but did not share details. 

 

In 2008, the overall medical cost trend for LifeWise was 10.7 with facility costs absorbing the highest amount – 12 percent, compared to physician costs which represented 9.8 percent and ancillary expenditures, which include laboratory costs, stood at 5.1 percent, Strunk said. For a detailed look at the historical trends, click here. 

 

LifeWise, which is taking a transparent approach to rising healthcare costs, held a forum last week with key employers and insurance producers to explain what’s responsible for those increases. Legacy officials were invited but did not attend.

 

“In light of those conversations, we hope Legacy will re-evaluate its request for this significant rate increase and instead join us in focusing on controlling costs for Oregon families and businesses,” said Allison Bechtel, vice president of healthcare delivery services for LifeWise.

 

“We’re all paying more and more for healthcare, and yet healthcare costs are a mystery for most people,” she added. “Consumers and businesses can’t press for changes that address rising costs if they don’t know what’s driving those costs higher. That’s what we’re trying to achieve by having open and transparent discussions with some of our most affected customers.”

 

Although high profits by hospitals on commercial insurers are often defended as necessary because of losses on government programs such as Medicare and Medicaid, “continued cost-shifting is not sustainable,” she added.