Community Letter

March 5, 2024

Setting the record straight on our Regence contract negotiations

Tuesday, March 5, 2024

By Merrin Permut
Vice President & Chief Population Health Officer

Merrin Permut

As our negotiations continue with Regence BlueCross BlueShield on a new contract, it is important for us to correct misinformation you may be hearing. 

In recent messages, Regence has referenced federal COVID-19 relief funding that hospitals, including Legacy, received. Regence has suggested that Legacy received a bailout that should have shielded us from rising costs and that these funds should substitute for a fair reimbursement increase. This is not true. 

Here are the facts about the federal government’s COVID-19 relief program.

During the COVID-19 pandemic, the federal government provided $175 billion in subsidies to hospitals across the country, primarily through the Provider Relief Fund and the COVID-19 Uninsured Program. 
Research published in the JAMA Health Forum in 2022 showed that the subsidies were essential to keeping hospitals across the country running during the pandemic when patients deferred elective surgeries and non-urgent medical appointments and hospitals restructured their facilities to treat COVID-19 patients. 
Healthcare providers across the Northwest received federal COVID-19 funding.

At Legacy, we received $171 million in federal funding through the COVID-19 relief programs. While there has been research showing that some hospitals were profitable through the pandemic, that has not been the case at Legacy. 

We used the federal support to help cover financial losses related to the care we provided throughout the pandemic and the abrupt halt of significant portions of our operations. Legacy was extremely grateful to receive these funds and used them in support of our mission, more specifically to:

  • offset lost revenue from the shutdown of elective surgeries and non-urgent medical appointments
  • pay for increased staffing through overtime and contract labor to support patients during COVID-19 case surges
  • cover COVID-19 related supplies and equipment, such as personal protective equipment, ventilators and overflow facilities to treat patients 

While the federal funding reduced our financial losses, it did not completely cover the more than $200 million in negative impact we saw during the pandemic. 

Nonprofit hospitals nationwide see rising expenses and growing losses. 

Since we emerged from the worst of the pandemic in 2022, nonprofit hospitals nationwide have seen rising expenses driven by inflation and increasing costs for supplies and labor due partly to the national shortage in the healthcare workforce. Hospitals across the West saw expenses grow 24% from 2020 to 2023, according to Kaufman Hall’s National Hospital Flash Report from January. 

As a result, many nonprofit hospitals have continued to experience a historical financial crisis. At Legacy, those rising expenses led to a $172 million loss in our most recent fiscal year that ended in March 2023. 

While Legacy has big losses, Regence is reporting historically big profits.

In 2022, Regence’s profits were $215 million just in Oregon. That marks an 8.1% profit margin, compared to Regence’s 10-year average of 3.2%.
According to the latest report by the National Association of Insurance Commissioners, the health insurance industry saw a 6% increase in profits during the first half of 2023 compared to the corresponding period the previous year, amounting to more than $18 billion in profits.

Among six sectors of America’s healthcare industry, health insurance companies ranked as the third-most profitable in the first nine months of 2023, according to an analysis by Stat News in January. Health insurers reported an average profit margin of 5.2%. Nonprofit hospitals, like Legacy, ranked last among all six industries with a profit margin of 0.3%. 

While hospitals have been forced to deplete their savings to cover their losses, Regence has used its profits to continually build up financial reserves.
Regence’s financial strength means it is positioned to support fair reimbursement.

Legacy continues to have great working relationships with other health insurance companies, including regional, non-profit and national, for-profit companies. We have successfully negotiated several contract renewals in the last two years without needing to provide a notice of termination. Our other health insurance partners have been flexible and supportive in working with us.

While contract negotiations are not unique, unfortunately, Regence is unique with its record of reaching very public termination notices with health systems and clinics across the region, including Providence Health & Services in Oregon, MultiCare, The Polyclinic and The Everett Clinic in Washington state and University of Utah Health

Regence’s recent strong financial performance, large financial reserves and stable financial foundation make the insurance company well positioned to support their members’ care with fair and reasonable reimbursement without passing on the costs to employers and families.

You can join us in asking Regence for fair, equitable reimbursement. Visit our resource page to learn more. As a Legacy patient, you can also view our message to patients from Feb. 7 and our patient FAQ.

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