sNok signflz
OCTOBER 15, 2023
9
Profit margins are low, net income is inconsistent
SHASTA continued
from front page
$18,469,000
20
• Based on Kona Equity data.
• Annual revenue growth since founding.
$662,333
15
• Revenue per employee.
$291,569
• Revenue growth rate from first
known quarter to current.
148.4%
10
• Variance of revenue growth.
0.42%
5.4 M
5.4 M
5.4 M
13.909 M
2020 Q2
2020 Q3
2020 Q4
2021 Q1
18.469 M
5.0 M
2020 Q1
2023 Q1
5.0 M
2019 Q4
16.911 M
4.6 M
2019 Q3
2022 Q3
5.6 M
2019 Q2
13.909 M
5.2 M
2019 Q1
2021 Q2
5.6 M
5
2018 Q4
ficer Chris Leno said Shasta Ad-
ministrative Services is currently
repaying only the interest on its
previous two loans and that the
latest $600,000 was only being
made available should the company
request the funds.
“I don’t know at what point Coun-
cil will be willing to provide a report
to the membership,” Leno said. “I
know that project is moving along.
I don’t know, in terms of confi-
dentiality with some of the things
they’re going through and some of
the things that have been talked
through the process, that that
would probably be a better question
for Tribal Council.”
Tribal Council Chairwoman
Cheryle A. Kennedy added that
the Tribe is working on a long-term
plan for the company and looking
at having “things” wound up within
45 days.
However, Tribal Economic De-
velopment Manager Bruce Thomas
said on Thursday, Oct. 5, that the
Tribe is seeking to sell Shasta, but
remain a client. After the sale, he
said, the Tribe would recoup its out-
standing loans before any money is
distributed.
“We’re exploring that,” Thomas
said. “It’s an industry where effi-
ciency and economies of scale are
critical. And what’s happening
is that industry is consolidating
with bigger and bigger operators.
It’s hard for us with the number
of clients that we have with that
organization to really generate the
profit we were hoping for. While
we’re happy to have them as a
service provider, probably being an
owner is no longer in our interest.
“It’s made small returns, but not
the kind of returns that from an
economic development standpoint
you’d look for. For many years, it
was making a little bit of money,
but it doesn’t meet the goals I would
hope for for economic development.”
***
According to the Oregon Corpo-
ration Division, Shasta Adminis-
trative Services registered to do
business in the state on March 5,
2001, to provide “claims admin-
istrative services and telephonic/
electronic customer service support
for medical, dental and prescrip-
tion drugs.” It served the needs of
Jeld-Wen, an international com-
pany that fabricates windows and
fixtures, and other self-funded
employers in the Pacific Northwest.
The Grand Ronde Tribe became a
Shasta client in January 2009.
In November 2012, the Tribe along
with Hawaii-Western Management
Group, which provides third-party
services for insured and self-funded
employer groups’ health plans in
Hawaii, purchased the company
from Jeld-Wen with the Tribe being
the majority owner. The purchase
price was not disclosed.
Then-Tribal Economic Develop-
ment Director Titu Asghar said
the purchase made sense in the
Tribe’s pursuit of diversifying its
non-gaming businesses because the
company was already processing
claims for the Tribe’s self-funded
Administrative Services Inc. annual revenue
0
Graph by Samuel Briggs III
health plans.
“Since that time, Shasta has
achieved steady growth and main-
tained our reputation of integrity,
quality, value and service at a com-
petitive price,” the company states
on its website.
Current company officers include
President Paul Kaiser, a 30-year
veteran of the health insurance
industry, and Tribal Council Chief
of Staff Stacia Hernandez as Board
of Directors secretary. Its website
lists several Northwest Tribes
besides Grand Ronde as clients –
Chehalis, Jamestown S’Klallam,
Nisqually, Nooksack, Shosho-
ne-Paiute and Suquamish.
The initial $350,000 loan to
Shasta was designed to help the
company address cash flow issues
stemming from software system
upgrades and litigation expenses.
“It’s OK to share that earlier in
this year, or actually was it last
year, that they had a new software
system installed and that did not
go as well or as smoothly as they
hoped,” Tribal Council member
Kathleen George said during the
Sept. 27 meeting. “That resulted,
and some Tribal members ex-
pressed this to us as well, that they
were getting a backlog of bills.
“To try and catch up with that,
which they are doing now, it’s
required additional staff time and
overtime, and at the same time I
think they have lost a couple staff.
Again, this isn’t the whole answer,
but we wanted to share what we
can. This is definitely trying to
address the backlog of claims that
resulted from the difficulty in the
software change.”
Hawaii-Western Management
Group, which owns 49 percent of
Shasta, has not provided any ad-
ditional funding to the company,
Thomas said.
Shasta also agreed in November
2022 to release the Grand Ronde
Tribe and its entities from any
claims Shasta or its parent compa-
ny, Lamatsin LLC, have against
Tribal entities arising out of a
lawsuit filed by QualiCenters Sa-
lem LLC against Shasta and First
Choice Health Network.
The lawsuit, filed in the U.S. Dis-
trict Court in Oregon, alleged Shasta
and First Choice “regularly failed
and refused to fulfill their contrac-
tual obligations” in paying Quali-
Centers Salem network rates for the
treatment of a patient who worked
at Spirit Mountain Casino. It was
seeking approximately $1.5 million
for past billing and payments for
services it provided for the patient.
Shasta, however, asserted it is
the payor of last resort and Quali-
Centers Salem failed to bill Medi-
care first for the patient’s treatment
before attempting to collect from
Shasta.
The Grand Ronde Tribe is tradi-
tionally reticent about publicly re-
leasing information on how well its
business entities and investments
are performing. Annual briefings on
the economic performance of Spirit
Mountain Casino and the Tribe’s
endowments are always held in
executive session for Tribal mem-
bers only, and rarely are specific
revenue numbers released about
the performance of such companies
as Shasta and SAM Medical Prod-
ucts, a Wilsonville-based company
the Tribe purchased a 20-percent
stake in in December 2012.
***
The website Statista.com says
that the third-party administrator
market has enormous potential. In
2022, revenues totaled $333.4 bil-
lion worldwide with estimates that
the market will increase to more
than $567 billion in 2030.
“The revenue of the global in-
surance third-party administrator
market is predicted to grow by
almost 6 percent annually until
2030,” the site says.
According to an article by Fred
Hunt, active past president of the
Society of Professional Benefit
Administrators, the third-party ad-
ministration business is “extremely
competitive” with many entities –
venture capitalists, other investors,
insurance companies and medical
entities – interested in purchasing
companies.
“Don’t invest in a TPA expecting
to make X percent of profit every
year,” he advises in an article
published on the organization’s
website. “First of all, the TPA busi-
ness is so competitive that profit
margins are quite low. Second, net
income is not consistent, because
costs of implementing some new
government compliance require-
ment can be very expensive before
the clients are willing to be charged
for it.
“Also, occasionally, some large
competing source of business, such
as insurance companies or HMOs,
lower their prices below market in
order to build up their numbers.
They can’t sustain such losses,
and TPAs often get the client back,
seeking the personalized service,
but there has been a dent in the
TPA’s income in the meantime.”
According to the website
Datanyze, Shasta employs approx-
imately 60 people with revenues
of about $18.5 million annually, a
$1.5 million increase since Smoke
Signals last checked the site in
November 2022.
Also on a positive note, the website
konaequity.com, which is a market
intelligence platform, says that
Shasta’s revenue is greater than
the industry median, income per
employee is more than the industry
average, that revenue growth from
the first known quarter to the cur-
rent quarter is higher than industry
average and that annual revenue
growth since its founding is higher
than the industry average.
The website rates companies on
a scale of eight to zero, with eight
meaning the respective company
has satisfied all its assessment
criteria. Shasta Administrative
Services receives a score of 5.
“They’ve got value,” Thomas said
about Shasta. “Because of this con-
solidation that is happening, other
companies are looking to expand.
So having some eight or 10 existing
clients and a well-functioning sys-
tem for Tribes … so Shasta’s system
has value, too. That’s actually one
of the assets of the company, the
software. A lot of that is unique to
Shasta. For serving Tribal clients,
it’s got value.”
Thomas added he did not know
the Tribe’s initial investment in
purchasing Shasta, so he could not
estimate whether the Tribe would
make money in a potential sale.
“What I have been told is that
dealing with Shasta over the years
has saved us a whole lot of money
based on their relationships, their
network and relationships with
medical providers, and the fees that
we are charged,” he added. “That
has to be factored in, too, when
looking at return on investment.”
Thomas said a potential sale is in
process and an unnamed company
is currently looking at buying Shas-
ta. He added that Hawaii-Western
Management Group is on board
with the sale as well.