Legacy and PacificSource Joint Venture on Fast Track

PacificSource expects to turn a 1 percent profit in the third quarter compared to losses earlier this year.

The joint venture between Legacy Health and PacificSource Health Plans should be operational within six months following regulatory approval by the state’s insurance commissioner.

The leaders – Dr. George Brown and Ken Provencher – sat down with The Lund Report in Legacy’s corporate office yesterday to shed a little more light on the transaction.

“There’s distinct advantages in creating an innovative health system,” said Brown, Legacy’s CEO and president, which, inevitably fulfills the mission of the Triple Aim – improved the patient experience, achieve better outcomes and reduce costs. 

This joint venture has been compared to the systems run by Kaiser Permanente and Providence Health Plans – as well as the new venture among Oregon Health & Science University, Salem Health and Moda Health – by having all services under one roof – the providers, the hospital and insurance company – better known as integrated care.

When asked how non-integrated health plans such as Regence BlueCross BlueShield might fare under this transformed model, Brown insisted there’s room for both systems in this dynamic new marketplace.

“This is an exciting opportunity to bring the two of us together and do something special for our members,” was how Provencher, CEO and president of PacificSource, described the new venture.

Provencher took exception to what he called the mischaracterization of PacificSource’s financial performance this year, saying his system had $1.2 billion in revenue, and will be among the few plans to report a profit in the third quarter (which ended Sept. 30).The losses reported earlier, he said, resulted from the health insurance tax for statutory purposes.

“Right now we feel that we’re in a strong position,” he said. PacificSource has 280,000 members including its commercial, Medicare Advantage and Medicaid lines.

Once the venture has gone through all the regulatory hoops and ladders, PacificSource doesn’t expect to have a role in Health Share, the tri-county coordination care organization of which Brown is a founding member.

Brown also dismissed the idea that Legacy was on the search to purchase hospitals in central Oregon, Idaho and Montana where PacificSource has an active presence.

“There are always opportunities but this isn’t one of our strategic objectives.” He does expect the purchase of Silverton Hospital to be wrapped up early next year, bringing Legacy to seven hospitals under its belt. Legacy also has under 500 employed physicians.

Provencher made it quite clear that he doesn’t anticipate any layoffs under this new venture. ”Our brand, our structure and our management will all stay the same in one place.”

Legacy, which is investing $100 million in the first year and $150 million in subsequent years to become an equal partner in PacificSource is financially strong, Brown said. “We have a strong balance sheet – we've been working hard and prudently with our investments over a number of years to have money to make such investments.”

The two leaders entered into this joint venture having worked together as co-chairs of the Oregon Health Leadership Council.

“When we look at PacificSource, its culture and dedication to serving communities mirrors what Legacy believes,” Brown said.

PacificSource’s board established parameters about what a partnership should look like, and Legacy met those, Provencher said. “We thought it would be valuable to work closely with a health system.”

Provencher said his reason to collaborate had nothing to do with not being asked to participate in the OHSU/Moda Health/Salem Health venture.

“We didn’t do this as a reaction to OHSU but as a forward looking initiative.”

Diane can be reached at [email protected].

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