Chapter 5: Be Financially Responsible
The year 2020 will be remembered for the unprecedented challenges it brought to everyone. Our company and our 7,500 employees worked to address the COVID-19 pandemic to ensure our members continue to receive the care and services they need. I’ll also remember the inspirational way our teams and my colleagues rose to meet these challenges while staying true to our values.
For me, the economic impact of the pandemic really hit home when my teams started modeling and planning for the possibility of a recession with a 30% unemployment rate across California. That was something I had never imagined in my career and it was a sobering moment to look at a worst-case scenario in which millions of families could lose their livelihoods. At the same time, I was encouraged by Blue Shield of California’s solid financial footing and grateful that our commitment to being financially responsible over the years put us in position to weather the storm and use our resources to help others do the same.
Throughout all the difficulties this pandemic has put us through as individuals, families, and as a society, the resiliency shown by Blue Shield employees and our business has inspired me. The commitment to healthcare transformation and innovation that is essential to our company’s mission enabled us to decisively respond to the most challenging health crisis in a century while making lasting changes for the future of the entire healthcare system. Here are some highlights from the past year:
- Operating responsibly: Blue Shield of California generated $21.8 billion in revenue from premiums and other revenue sources in 2020, and we paid nearly $18 billion to healthcare facilities and providers for our members’ medical care – approximately 83% of total revenues. Additionally, I am pleased to share that Blue Shield achieved $71 million in administrative savings for 2020. Click here to view our 2020 Consolidated Financials.
- Supporting healthcare providers: In April 2020, we made available $200 million in support to providers and hospitals. By supporting struggling providers in our network with advance payments, we could use our resources to ensure our members had a robust network for their care when the stay-at-home orders were lifted. Hundreds of small and independent providers received support through this program to help them maintain their operations and staffing after elective and non-emergency care dropped precipitously during the pandemic. In addition to advance payments, we restructured contracts for select providers so they could receive reliable monthly revenue for caring for Blue Shield members.
- Supporting our members: We leaned in to help members who felt the brunt of the economic impact of the pandemic by making access to telehealth provider Teladoc free-of-charge and by providing over $50 million in premium relief.
- Committed to our nonprofit “2% pledge”: In 2020, we adopted a new process and we now use a three-year average for calculating the pledge amount. This aligns with the approach we use for calculating our contributions to Blue Shield of California Foundation and will increase the consistency of our pledge amounts compared to the previous method of calculating the pledge each calendar year.
- Enhancing innovation: As part of our Health Reimagined initiative, we set out to transform the medical-billing and payment process to offer transparency and choice for patients, while reducing administrative burden on providers. The results from our pilot program showcased that members experienced faster, simpler, and more transparent billing.
- Advancing diversity, equity, and inclusion: Our Global Business Services team continued to increase company purchases from businesses owned by women and people of color. Our supplier diversity program spend has continuously grown this year to 5.6%, up from 4.7% in 2019. In 2020, women-owned businesses represented 57% of our diverse supplier spend. Notably, DiversityInc ranked Blue Shield #1 on its Top Regional Companies list in 2020 for supplier diversity spend, leadership accountability, and management practices.
- Investing in our communities: Over the last three years, we invested $120 million in California communities through the Blue Shield of California Foundation. During the pandemic, we contributed to regional relief funds, including $500,000 to support Oakland COVID-19 emergency fund. And our 2:1 match during the Shield Cares giving campaign helped inspire a record $1.4 million in employee giving (with company match). Additionally, we supported our providers by distributing 3,500 PPEs such as face masks, gowns, and sanitizers to seven clinics that primarily serve Medi-Cal beneficiaries in the Los Angeles area.
- Strategic investments: We also invested seed money in business initiatives that are transforming health care. We invested in Altais to help it continue to advance primary care reforms. And we supported Seae Ventures, which builds and invests in early-stage healthcare companies founded by women and people of color.
- Boosting efficiency and reducing costs: We continue to make improvements and investments to enhance our efficiency and improve our services to our members. We championed the formation of a cross-functional team, which automated functions to speed up processing times and reduced manual labor. As a result, we now do our period financial close 40% faster and achieved costs savings of $500,000.
Throughout the organization, we significantly reduced administrative costs which led to more than $35 million in savings in 2019 and enabled us to deliver an additional savings of more than $70 million in 2020 – resources we will apply toward transforming health care.
As chief financial officer of Blue Shield of California, one of the largest health plans in our state, I am proud to carry the flag for our mission to ensure all Californians have access to high-quality health care at an affordable price. Our company’s north star is to help create a healthcare system worthy of our family and friends, and sustainably affordable. Based on our progress in 2020, I cannot wait to see what we accomplish in 2021.
Where do member premium dollars go?
Here’s how a Blue Shield member’s premium dollar is spent: