Healthcare markets are undergoing disruption, and that’s created an opportunity for fast-acting leaders to gain market share, according to internal documents detailing plans for a partnership between Legacy Health and PacificSource. Both companies are Oregon-based nonprofits, and both see financial and strategic value in partnering together.
Across hundreds of pages of plans, presentations and internal reports leaked to The Lund Report, officials at both companies mapped out their concerns and considerations in a fast-changing healthcare marketplace. This week, The Lund Report is drawing on those documents to examine the assumptions and forecasts underpinning Legacy and PacificSource’s planned partnership.
We’ve found a PacificSource that is predicting unprecedented profits for itself in the coming years, a Legacy that sees population health management as key to its future, and two companies that believe that by working together they can each accomplish more than working alone.
Earlier, we looked at the path they took to partnership, and the ways that the Affordable Care Act shaped their talks.
PacificSource: Forecasting profits in coming years
Across its multiple health insurance programs, PacificSource finished 2013 with a net profit of $6.3 million. In 2014, it had a net loss of $8.2 million. This year it is on track to again be profitable, and forecasts a net profit of $10.8 million.
Financial forecasts obtained by The Lund Report show that PacificSource expects profits to climb significantly in the coming years: to $20 million in 2016, to $32.3 million in 2017, and to $37 million in 2018.
The forecasts are based on numerous estimates about future premiums across different types of plans, the cost of providing care in the future, taxes and commissions paid to brokers, salaries and administrative expenses, investment gains and other inputs – making it virtually impossible to assess how accurate PacificSource’s rosy projections are likely to be. But from 1999 through 2014, PacificSource has never before seen profits or growth that would match what it predicts for the next three years. Its net income has never topped $30 million – and last time it got close was in 2005, a decade ago.
Legacy: Looking to population health
Legacy documents obtained by The Lund Report provide less information about the hospital chain’s financial expectations than PacificSource documents, but Legacy goes into greater detail on its strategy, which involves expanding on recent investments in population health. Under a population health approach, individual and family care is supported at work, in the hospital, and across a larger integrated continuum.
Already, Legacy is working to reduce hospital readmissions, work more closely with physician networks, and make better use of high-tech tools, documents also identify gaps to close, including:
- A wide breadth of services must be integrated across geography.
- Analytics and data reporting require continuing improvements.
- Legacy needs to improve its tech integration with providers who do not use the Epic software suite.
- Governance is not fully centralized.
“Though Legacy’s capabilities go beyond traditional fee for service models, they are not sufficient to deliver population health in support of value-based reimbursement,” the nonprofit company wrote in an assessment of itself. It aims to develop new information technology capabilities and to improve its work on population health, as part of an effort to “support a new, leading model of care.”
Legacy’s management team has set a goal of getting 20 percent to 30 percent of patient revenue from value-based healthcare within five years, and sees a partnership with PacificSource as central to this goal, according to internal documents.
Guiding vision: A three-year plan
Documents obtained by The Lund Report outline opportunities that the Legacy-PacificSource partnership intends to pursue in stages over the next three years. In a presentation in September, consultants outlined a “Synergistic Partnership Framework.”
Stage one, in 2016, will involve the following aggressive market entries:
- Expand value-based arrangements within existing networks, targeting populations where the two health organizations overlap, within the Portland metro area and across Oregon.
- Use partnered products to drive up Legacy’s commercial large group market share in the Portland metro area, including Washington state suburbs, and in Marion County.
- Pursue OEBB and PEBB commercial large group contracts.
- Pursue managed Medicaid opportunities in the Portland metro area.
During 2016, the partnership will be at work developing value-based care models using PacificSource health plans and Legacy physicians, documents say.
In 2017, the partnership aims to build on its 2016 growth, and also to expand aggressively into new markets:
- Use partnered products to drive up Legacy’s market share among commercial small group, commercial individual and Medicare advantage plans, across the Portland metro area and Marion County.
- Scale up what consultants have called a “differentiated provider partnership model” across Oregon.
And in 2018, the partnership aims to have solid baseline presence in the markets entered in the previous two years, while again targeting aggressive market entries, this time outside Oregon, when it aims to:
- Scale the differentiated provider partnership model in Idaho, Montana and Washington.
Across 2017 and 2018 – what consultants have dubbed the intermediate term – the partnership will develop Legacy-centric products for self-insured employers, fully insured group plans, and Medicare Advantage. It will also focus on creating Medicaid Centers of Excellence, in order to secure more referrals. And it will be at work developing marketing and acquisition strategies that will aid with expansion into new markets.
In 2018 and beyond, dubbed the “long term” by consultants, the partnership aims to deepen provider relationships and enhance PacificSource affiliation platforms. It also aims to expand partnered products in commercial markets.
Modeling growth
Though documents say the partnership aims to grow aggressively, Legacy and PacificSource seem aware that it’s hard to predict the growth rate that will follow. Documents obtained by The Lund Report suggest that the companies see a 5 percent market share as achievable under a conservative action plan, 12 percent market share with an aggressive push, and 18 percent market share to be an aspirational goal.
That conservative-aggressive-aspirational approach has driven how consultant HealthScape Advisors developed its growth projections for the partnership. Depending on growth, projections see the following possible enrollment figures by line of business:
- 140,000 to 210,000 commercial group members
- 80,000 to 170,000 people covered under self-insured plans.
- 85,000 to 130,000 people enrolled in Medicaid plans
- 80,000 to 170,000 people enrolled in Medicare plans.
That represents a significant boost to PacificSource, which had 167,734 members enrolled across all publicly reported plans as of Sept. 30 of this year. By being able to engage in risk management and population healthcare, Legacy also anticipates a benefit to its bottom line, according to an internal document from October, which reads: “Within five years, Legacy will have 20%-30% of net patient revenue derived from value-based care, representing approximately 100-120k managed members.”
