The pending merger between PacificSource Health Plans and Legacy Health – two homegrown nonprofit healthcare players – hasn’t run into any stumbling blocks. No one showed up to testify at a public hearing and with the exception of a few people who submitted written comments, the merger appears to have fallen on deaf ears. People have until April 11 to comment.
Here’s what people have had to say thus far:
“My concern with this acquisition is that there will be less competition and as a result higher prices. What percentage of the Oregon market will the combined entity control?” asked Dan Caplis, a CPA.
Rebecca Ritter said she switched to PacificSource after being rudely treated by the customer service department at Regence BlueCross BlueShield, “as I was trying to deal with my preemie in the NICU. It was truly a terrible and expensive experience, and I just hope this merger with PacificSource can be made smoother.”
The most negative comment came from Laura Gonce, who praised PacificSource for its customer service and rates, but lambasted Legacy, calling the hospital system non-responsive and neglectful of their patients.
“I almost died under their care because of profound neglect and indifference,” she said. “Unfortunately large institutions like theirs are often impersonal and indifferent. I am a cancer survivor and at the time I had to find cancer doctors I chose Providence where my overall experience was very positive. I trust these doctors and I felt supported in my recovery. The relationship of the patient to their doctor and other caretakers is an essential ingredient in healing.”
Earlier, Ken Provencher, CEO of PacificSource, sought to put to rest concerns that his company was seeking to survive the losses hitting much of the health insurance industry. He noted his company had $1.2 billion in revenue, $340 million in assets and a $139 million operating margin. “We enter into this partnership not out of a desperate position but one of strength,” he said.
For Legacy Health, the Affordable Care Act has been a boon, with annual profits rising from a steady 3.6 percent in 2013 and 3.4 percent in 2014 up to 7.3 percent in 2015. Still, George Brown, CEO and president, claimed his health system lost $172 million from low Medicaid and Medicare reimbursements. PacificSource has anticipated that the merger would see revenues rise 6.5 percent in the first year, with only a 4.2 percent rise in costs, despite steep cost increases in the overall health insurance sector.
“We think both PacificSource and Legacy Health are compatible in our commitment to the communities we serve … We are completely convinced that our cultures are compatible,” said Brown. “PacificSource is not a healthcare provider, and Legacy Health is not a health plan. But the combined attributes create a company capable of integrated healthcare.”
Some outside observers, including Jesse Ellis O’Brien, the policy director at the Oregon State Public Interest Research Group, have expressed concerns about industry consolidation, but Provencher argued that since the two companies are in different sectors of healthcare, a merger would only buttress the local companies. “It is not a consolidation of healthcare systems or the insurance industry,” he said.
The merger will likely increase PacificSource’s share of the Portland health insurance market, which will likely begin offering coverage in Washington state, where Legacy operates the Salmon Creek Hospital in Vancouver.
PacificSource is a leading health plan in the Eugene area but sells insurance in most of Oregon as well as Idaho and western Montana. It also operates the Medicaid coordinated care organizations in the Bend and Hood River areas. PacificSource is licensed to sell insurance in Washington state, but has never done so.
Moda Health, one of its top competitors, left that market and retreated to its core Oregon and Alaska markets after taking heavy losses from its much larger presence in the federally subsidized individual health insurance exchanges.
Beyond the takeover of Silverton Hospital, Provencher thought Legacy Health would be less likely to expand its provider and hospital services south and east into PacificSource’s turf. Instead the big gain for Legacy would be the chance to offer an integrated health model similar to Providence where members receive both healthcare and insurance.
PacificSource will gain more direct access to the 2,300 Legacy Health partners, which include a small number of Legacy employees along with a larger number of independent physicians, nurse practitioners and other providers.
“(And) we’ll continue to work with other providers in all our markets,” Provencher told The Lund Report.
Despite their co-ownership of the umbrella company, Provencher said his employees should not see any disruption, and the two halves of the company will continue to operate with independent boards. “Our corporate structures will remain independent.”
Legacy’s five hospitals have 1,111 beds and an average daily census of 729 patients. Brown said that Unity Health -- a partnership with OHSU to offer more rigorous acute psychiatric care in the old Portland state mental hospital -- is on schedule to open in spring 2017.
Diane can be reached at [email protected].
