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CareOregon urges Kotek to speed up merger review

The Oregon Health Plan provider, which would send $120 million to a merged California nonprofit under the deal, wants the state to wrap up a process nearing the 12-month mark — even as opposition mounts
CareOregon and The Scan Group of California announced their plan to merge in December 2022. | JOZEF MICIC/SHUTTERSTOCK
November 28, 2023

The state is taking too long to review a California entity’s absorption of CareOregon, a Portland-based nonprofit overseeing the public-funded health care of about 500,000 low-income Oregonians, CareOregon’s board chair wrote in a recent letter to the governor.

CareOregon and The Scan Group of California announced their plan to merge in December 2022 and filed their formal notice of the deal in January. The deal sparked the first-ever full-blown state review of a transaction under the health care merger review program the Oregon Legislature authorized in 2021

The Oregon Health Authority-run program will make a recommendation to the Department of Consumer and Business Services, which will determine whether to approve the deal.

Both agencies are under the supervision of Gov. Tina Kotek, and in a Nov. 14 letter to her, CareOregon Board President Damien Hall criticized the state for a poorly executed and “haphazard” public outreach campaign, saying the entities could incur a $250,000 filing fee if the transaction is not approved by March 23, 2024.

CareOregon’s complaint was sent even as public comments have started to flow in about the merger, the majority of them raising concerns. Hall’s letter urged Kotek to get the two state agencies to hold any formal public hearings on the merger by early December or cancel them entirely.

“As the agencies’ review extends into its 11th month with no schedule for conclusion yet proposed by the agencies, we are becoming increasingly concerned about the escalating costs and uncertain timeline of this review process.”

CareOregon supports the merger review program, he wrote, but added, “As the agencies’ review extends into its 11th month with no schedule for conclusion yet proposed by the agencies, we are becoming increasingly concerned about the escalating costs and uncertain timeline of this review process.”

If approved, the merged entity would be named the HealthRight Group, with operations in Oregon, California, Arizona, Nevada and Texas. CareOregon would be a subsidiary, and the umbrella nonprofit would be headquartered in Long Beach, California — where The SCAN Group is based now.

But the transaction has raised eyebrows in health care circles. CareOregon has built up massive reserves off of state and federal funds that it uses to serve low-income members of the Oregon Health Plan, the state’s version of Medicaid.

Significantly, the Oregon nonprofit would send $120 million of its reserves to newly formed HealthRight Group to consummate the deal. Nothing in the proposal bars further reserves from being transferred out of state in the future.

Leaders of both organizations have defended the proposal as providing needed improvements to care in Oregon while assisting The SCAN Group. The organization is a nonprofit that has been rapidly expanding as it tries to compete with larger for-profit competitors in the Medicare Advantage program, the increasingly controversial privatized version of the federal health care program.

Some providers have weighed in supporting the merger, but others have opposed it, and so have other members of the public, including John Santa. Santa is a volunteer member of the Oregon Health Policy Board — which plays no role in the decision, but has said he is speaking for himself.

Asked for comment on the letter, Santa said he viewed it as a “blame-the-state” strategy to increase pressure on decisionmakers. But “I don’t think that is correct,” he said, adding that he’s tallied up 47 questions posed by the state in successive letters, of which only some of which have been answered, even as many details of the merger remain redacted from the public’s view. 

“One of the most common responses is ‘we’ll get back to you, we need more time,’” he added.

Hall, however, laid blame for some of the delays on the law firm the state hired, Morgan Lewis, to facilitate the review.

“We have routinely received duplicative (often identical) information requests,” he wrote. “Moreover, we recently learned that, for a period of at least three months, Morgan Lewis was not sharing responses to these duplicative information requests between the agencies, despite our specific requests that they do so.”

Hall particularly faulted the state’s public process, alluding to “listening sessions” the state has announced to elicit public comment but with scant notice, scant outreach and little effort to translate wordy details into plain-language resources for members of the public. Criticisms of the process Hall and others raised echo earlier ones leveled against the Oregon Health Authority’s secretive treatment of the effects of a new health plan for the working poor that is projected to significantly boost premiums and other health care costs for people of modest incomes who don’t qualify for the program.

Wrote Hall, “Participants in the October 11, 2023 listening session requested more information about the transaction and had specific questions about how the transaction would impact their care. However, OHA would not respond to questions, and neither CareOregon nor SCAN were permitted to speak. Participants expressed frustration that this format felt ‘awkward’ and ‘pro forma.’ We fear that the three upcoming listening sessions, which were scheduled with only a week’s notice and with virtually no information about format and purpose, will compound the public’s frustration and confusion without meaningfully adding to public knowledge about the transaction.”

Santa agreed the process has been lacking, but attributed it to the high stakes of the transaction and the newness of the program. “This is a new process,” he said. “I’m sure this is the most complicated highly lawyered situation that they’ve been in.”

State won’t say whether it will change plans

Asked for comment, Kotek’s office did not respond.

A spokesperson for the Oregon Health Authority declined to say whether the agency intended to change its plans in light of the CareOregon letter, instead issuing a general comment.

“It is important for the agencies to gather a complete set of information about the proposed CareOregon-SCAN Group combination and hear public input in a transparent process, so regulators can evaluate the proposed transaction under applicable law.  Oregon law provides a comprehensive set of procedures for gathering information from the applicant, holding hearings and issuing orders. Those procedures have been rigorously followed … We will continue to review documentation and seek public input in accordance with the procedures provided under applicable regulations, and will render a decision on the transaction in accordance with Oregon law.”

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


Submitted by Megan Robinson on Tue, 11/28/2023 - 14:46 Permalink

It's so interesting to see the entries employ an argument about the filing fee as though it's consequential. The filing fee is not new at all, it's just a scheduled increase in price for a fee the federal government charges no matter what. I imagine it's fear that the negative public sentiment will only build up as more people find out the merger is happening.