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CareOregon merger draws opposition from former top Oregon health official

On the eve of a key state recommendation, Patrick Allen, the Oregon Health Authority's former director, said he hasn't seen a 'compelling argument' that Oregonians' interests are served by CareOregon's proposed merger into a California-based entity. The nonprofit Portland-based insurer oversees care for 500,000 low-income members of the Oregon Health Plan.
January 12, 2024
This article was updated to include additional reporting.

Former Oregon Health Authority Patrick Allen said Friday that he believes that proponents of merging the Portland-based low-income care nonprofit CareOregon into a California entity have not made a “compelling argument” that the merger is “in the public interest.”

Allen’s statements to The Lund Report came five days before the state’s health care merger review office is expected to issue a proposed set of recommendations on whether the merger involving a major player in the Medicaid-funded Oregon Health Plan should be approved.

CareOregon, which oversees care to 500,000 low-income Oregonians, seeks to combine with the nonprofit SCAN Group, primarily a Medicare Advantage insurer based in Long Beach, California.

Leaders of the two organizations say that combining into a new entity that, like SCAN, will be headquartered in southern California won’t lead to immediate changes in CareOregon's operations or the care it oversees. They say it will help Oregonians over the long term by providing administrative savings and competitive heft at a time of rapid consolidation, one in which multinational health care corporations are increasingly absorbing large segments of the United States health care system. Many experts say the trend hurts care and drives up costs.

However, because of CareOregon’s prominent role, its $1 billion in reserves, and the Oregon Health Plan’s rules aimed at local control of health care, the proposed merger has become a flash point — drawing opposition from former Gov. John Kitzhaber and a state advisory committee, among others.

Allen’s views are notable because he oversaw the Oregon Health Plan for more than five years as the health authority’s director under former Gov. Kate Brown. His administration worked to put into place the Health Care Market Oversight Office, approved by lawmakers in a 2021 law intended to ensure major transactions don’t result in higher prices, less competition or restricted access to care.

“The point of the legislation was to assure that significant transactions like these are in the public interest,” Allen said in an interview. “I don't think SCAN and CareOregon have made a compelling argument to the public that this transaction meets that threshold.”

A CareOregon spokesperson had no comment on Allen's statements. A spokesperson for Gov. Tina Kotek was unable to immediately comment.

Allen has followed the transaction from New Mexico, where he now heads that state’s Department of Health. Unlike much of the rest of the health care market that is undergoing consolidation, the Oregon Health Plan is highly regulated, he noted. And he raised concerns that echo some of those opposing the deal, including that the merger could have implications for reforms to the low-income health care program that the Oregon Legislature approved more than a decade ago.

In those reforms, championed by Kitzhaber, lawmakers set up a system in which the state grants what amounts to local monopoly franchises to highly regulated insurer-like entities known as coordinated care organizations. In them, local patients and providers were to have a say in how funding was spent on care and on community health initiatives.

The CEOs involved in the merger say they intend to preserve local control, and that the combination of the two organizations is intended to boost purchasing power and leverage improvements in sharing services.

In 2015, Centene, a multinational, publicly traded health care company, sparked concerns about the future of the system when it purchased a care organization in Lane County, Trillium Health. Allen said the proposed CareOregon merger would increase those concerns.

“Much like Centene’s entry into the coordinated care market complicated a model of local control and local delivery of services, this would further add corporate ownership complexity to a system that should be pretty straightforward,” he said. “The more our (coordinated care organizations) are wrapped up in multistate companies, multistate businesses — whether for profit or not-for-profit — the harder it becomes to think of them as local organizations controlling local health care spending.”

He also raised concerns about the future of reserves that have been generated by CareOregon using state and federal funds to provide care for low-income people. 

Among other things, the reserves are intended to be a backstop for patients as insurers’ financial fortunes fluctuate, shielding people from cuts in quality or access to care if expenses grow unexpectedly.

On Jan. 17, the state’s health care market oversight office is slated to issue its recommendations, which could include denial, approval, or approval with conditions.

If the office recommends approval, Allen said that “any conditions would need to help ensure that Oregon maximize the benefit of its investments in health care for Oregon ... I would think that conditions would address the issue of reserves and the movement of money between the two organizations to assure that, wherever reserves get allocated, those reserves are benefiting Oregonians and not a corporate bottom line.”

Leaders of the two groups say that they intend for CareOregon’s reserves to be maintained for the benefit of Oregonians. 

In a recent interview, however, they balked when asked if they would agree to keep the reserves in Oregon should CareOregon and its parent HealthRight eventually decide to pull out of the Oregon Health Plan as other care organizations have in the past.

Leaders of the two entities have stressed that they are both not-for-profit entities, saying they provide a greater degree of commitment to their community. To Allen, the point is not entirely persuasive. At some point in their growth, a “nonprofit and a for-profit are pretty indistinguishable,” he said. “And nonprofits can decide to sell themselves to for-profit organizations.”

He suggested that the state may be at a turning point in the future of the Oregon Health Plan. Kitzhaber and other veterans of the program’s landmark reforms have said the state’s leaders should take action to bolster rules to preserve local control over spending and care.

“I think we're at a point where we're testing whether this vision is multigenerational and can be passed on from the original group of legislators and policymakers (who framed the 2011 reforms) to those who have taken their place.”

Now, those questions fall to health care leaders such as Sen. Kate Lieber and state Rep. Rob Nosse, he said.

“It remains to be seen if they've got the same commitment to the (reforms’) ultimate goals and vision,” Allen said, “or have a more compelling vision that’s an evolution of the thinking.”

To fulfill the original vision, he said, requiring the coordinated care organizations to be local nonprofits would be “the easiest thing organizationally.”

Before becoming governor, as speaker of the House, Kotek had cosponsored a bill intended to help keep Oregon Health Plan spending local. More recently she recently expressed support for further reforms along those lines. 

But she and Allen had not enjoyed good relations before she became governor a year ago. During Kotek’s campaign, which included sharp criticism of the Oregon Health Authority’s performance, she promised there'd be nobody named “Allen” at the agency if she were elected.  The comment was a shot at Allen as well as then-behavioral health director Steve Allen, suggesting they'd be fired.

He resigned shortly before she took office, subsequently taking the New Mexico job. Asked what he would say to people interpreting his comments as colored by that history, he responded that “I have no idea what the governor’s thoughts are on this merger. I'm simply offering my thoughts on the merger as someone who's been in this field for a while and someone who clearly doesn’t have an interest in this outcome. And you can take my opinion or leave it.”

You can reach Nick Budnick at [email protected] or at @NickBudnick on