CareOregon merger proposal scrapped amid opposition, concerns

A proposed merger between CareOregon, which oversees care to 500,000 low-income members of the Oregon Health Plan, and a California entity has been scrapped in the face of heated opposition and concerns raised by the state.

A representative of Quinn Thomas, an Oregon public affairs firm, emailed The Lund Report at 5:09pm Feb. 13 with a joint statement on behalf of CareOregon and the SCAN Group, the California-based Medicare Advantage plan that had proposed combining with CareOregon. 

“SCAN and CareOregon share a commitment to preserving and protecting nonprofit, locally based healthcare and that has always been our goal in combining under the HealthRight Group,” the statement said. “Our intent in coming together was to support Oregon’s healthcare system and the people that CareOregon serves. However, despite our efforts, there are still questions about our combination.  As a result, SCAN Group and CareOregon have mutually agreed to withdraw our applications with the Oregon regulatory agencies and to terminate our affiliation agreement.”

The statement represents an about-face from determination previously expressed by leadership of both entities to address any concerns raised. And it caught even people following the situation closely by suprise, including John Santa, the former state official who'd been vocally opposed to the deal.

“I'm pleased,“ he said, adding that he considers CareOregon the “jewel” of the Oregon Health Plan, explaining his opposition to the merger. “I'm thrilled that they're going to continue as is.”

In submitting their proposal a year ago, the two entities had argued the transaction to form a new California-based entity, HealthRight Group, would benefit Oregonians. 

The deal, sought in the name of efficiency and economies of scale, was viewed by many early on as a matter of not if, but when. Sachin Jain, the well-regarded CEO of SCAN Group, was on a mission to grow his not-for-profit organization into additional states to do battle with giant for-profit players. And Eric Hunter, the CEO who'd overseen CareOregon's rise from a struggling, low-profile entity into a major health care player, expressed confidence that his nonprofit's operations would not be affected.

But one by one, obstacles cropped up. First, there was opposition from  Santa, a high-profile member of the Oregon Health Policy Board. Later came concerns and opposition raised by volunteer members of the state Medicaid Advisory Committee. Then former Gov. John Kitzhaber, considered the father of the Oregon Health Plan, and former Oregon Health Authority Director Patrick Allen came out against. On Jan. 16, state Rep. Travis Nelson, a Portland Democrat who sits on the House Behavioral Health and Health Care Committee, became the first state lawmaker to come out publicly against the merger.

The critics argued that since then that the proposed merger would hurt local control of spending in the Oregon Health Plan, the state's version of Medicaid. A primary concern: that control over CareOregon's $1 billion in reserves would move out of state.

Concerns appear to have been expressed by key representatives of state government as well. Last month, on the eve of the state's merger review office issuing a key recommendation on the merger, The Lund Report reported that lawyers for the state on Jan. 12 shared "concerns" and "issues" with the two entities about the merger. 

Through a lawyer, SCAN and CareOregon promptly requested a 60-day pause to let them address those concerns before the state issued its recommendation on the merger. The state agreed.

Now, however, the two entities have instead chosen to withdraw their application.

It's unclear whether any specific follow-up discussion with the state prompted the decision. The joint emailed statement added that CareOregon will be offering no additional comment “for the immediate future.”

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