After announcing earlier this month that it wants to become part of giant Providence Health & Services, Portland-based nonprofit health insurer CareOregon now must persuade regulatory authorities to approve the deal.
At least two state agencies – the Department of Consumer and Business Services, which oversees the insurance industry, and the Oregon Health Authority – will review the proposal to see if meets state laws and rules, including those intended to foster competition and protect the insurance-buying public. It’s unclear whether other approvals are needed.
CareOregon and Providence have said they hoped to complete the transition by January 2020.
The state review and approval process often takes six months but can take more than 18 months in some cases, according to the Division of Financial Regulation, an arm of the consumer agency.
“Usually, it will take three months to complete a review of the transaction,” the division says on its website. “At that point, the division will schedule a public hearing. ... Once the public hearing is held, there will be a public comment period that normally runs from one to two weeks. At the conclusion of the public comment period, the division will review all comments and relevant information. After this final review, the division will issue an order to either approve or disapprove the transaction.”
Officials at Providence, which is taking the lead in public statements about the proposal, declined to name the agencies whose approval they need.
‘We are at the beginning of this process, and we’re prepared to work with all appropriate regulatory agencies for their review and approval,” said Gary Walker, spokesman for the nonprofit.
State insurance and health regulators said CareOregon and Providence have not yet submitted a proposal. Many details of the plan, including the financial structure, have yet to be disclosed.
Under the plan, CareOregon, the largest insurer of Medicaid patients in the state, would become a subsidiary of Providence, based in Renton, Washington. CareOregon insures about 312,000 Oregonians, mostly members of the Oregon Health Plan, but also covers Medicare and tribal members.
Providence primarily operates hospitals and medical clinics across six Western states, but also runs a number of health insurance plans and currently insures about 650,000 people, the great majority of them in Oregon.
By partnering, CareOregon and Providence would jointly provide health insurance for nearly a quarter of Oregon’s 4.2 million population.
In traditional business terms, the proposal is both a vertical and horizontal integration for Providence. The move would help the company grow beyond the pure provision of health care services – in essence, a vertical integration. But it would also strengthen Providence’s existing health insurance business – a horizontal integration.
CareOregon and its board “will retain specific rights to manage its finances and investments under the proposed structure,” the two entities have said, without providing specifics.
CareOregon has about $1.4 billion a year in revenues, mostly federal and state money to pay for medical services for low-income members.
CareOregon has accumulated large financial reserves, topping $300 million according to the most recent figures available.
The CareOregon-Providence plan fits into the much broader trend of mergers and partnerships in the health care field as entities from insurers to hospitals, clinic groups and pharmacy chains seek efficiencies and market control.
The CareOregon/Providence proposal bears some similarities to the 2016 deal between the nonprofits Legacy Health and PacificSource Health Plans. Under that deal, Portland-based health care provider Legacy, with a network of hospitals and clinics in the state, became a half-owner of Springfield-based health insurer PacificSource, agreeing to provide $247.5 million in capital for PacificSource over five years.
Nationally in the for-profit health field, health insurers have been on a shopping spree, buying up health care providers.
Last year, drug-store chain CVS bought insurer Aetna, while insurer Cigna bought the Express Scripts pharmacy benefit management company. Those huge deals required federal antitrust approvals.
The Oregon consumer and health agencies will jointly review the CareOregon/Providence plan, said Robb Cowie, a spokesman for the Oregon Health Authority. The consumer and health agency rules on such proposals are very similar, he said.
In reviewing and approving the Legacy/PacificSource deal, insurance regulators determined the linkup was not “inequitable or unfair” to insurance policyholders, would not reduce service to policyholders, would not diminish competition, would not jeopardize the financial stability of PacificSource and was not “hazardous or prejudicial” to the insurance-buying public.
CareOregon, with about 850 employees, specializes in offering Oregon Health Plan insurance and managing coordinated care organizations that insure OHP members. In the Portland metro area, CareOregon insures OHP members through coordinated care organization Health Share, and it also runs the Columbia Pacific care organization in the Columbia County area in the northwest corner of the state and Jackson Care Connect in the south. It also insures about 12,000 Medicare recipients.
Providence is a massive and sprawling system, employing more than 111,000 people at 51 hospitals and nearly 1,000 clinics across seven states in the West, including Oregon, where it has eight hospitals.
You can reach Christian Wihtol at [email protected].
