Almost a year after CareOregon and SCAN Group announced plans to merge, the deal is still in the regulatory process.
In December 2022, the two nonprofit health plans said they intended to combine under the name HealthRight Group. When the deal was first announced, the nonprofits expected it to close by the end of 2023.
Oregon regulators are taking a close look at the merger — on Dec. 6, Oregon's Medicaid Advisory Commission issued a memo recommending the Oregon Health Authority disapprove the merger "in the absence of sufficient responses" to further questions from the commission.
Eric Hunter, CEO of CareOregon, told Becker's the regulatory process has been frustrating and one-sided.
"We're hoping that we'll get more clarity from the state, the ability to share more information with the public, and really engage in a dialogue, because it is important. We believe that, but it also has to move along," Mr. Hunter said.
A CareOregon spokesperson said the company did not learn about the advisory commission's concerns until it posted its memo recommending against the merger.
Portland-based CareOregon has more than 500,000 Medicaid managed care members. SCAN Group, based in Long Beach, Calif., has more than 285,000 Medicare Advantage members. The merger would create an organization with $6.8 billion in revenue and nearly 800,000 members.
Oregon regulators asked for further information on how the merger would affect the state's coordinated care organization system, health equity efforts and local control of Oregon's Medicaid dollars.
A spokesperson for the Oregon Health Authority said the affiliation is subject to three seperate reviews from state regulators.
"We appreciate CareOregon's cooperation as the agencies work to fulfill their statutory direction and ensure that the proposed transaction is not detrimental to people in Oregon," the spokesperson said in a statement shared with Becker's. "The three review processes have different requirements and options for community engagement that serve different purposes to inform the review. These include listening sessions, community review boards, and formal public hearings. All of these listening sessions have been opportunities for the public to inform the agencies of their concerns."
Sachin Jain, MD, CEO of SCAN Group, told Becker's the deal has been misconstrued as a takeover.
"This is very much a combination, and that is reflected in the funds flows, that gets reflected in the governance. The CareOregon board remains fully intact," Dr. Jain said.
CareOregon will retain its individual brand and staff, Dr. Jain said, and there's no planned reduction in staff or administrative costs associated with the merger.
As the deal moves through the regulatory process, CareOregon is in "a bit of limbo" in terms of organization and investment, Mr. Hunter said.
"With SCAN, as a part of HealthRight Group, I have more flexibility and freedom to do more innovative and creative things," he said. "Without the combination, I might invest less, because we have to be a little more wary of the downturn in Medicaid funding, which we know is coming."
Avoiding getting caught by the for-profit vacuum
Mr. Hunter said it was "never an option" to sell CareOregon to a for-profit company, but with big tech players like Amazon, Walmart and Google entering the healthcare space, and more companies merging, CareOregon needs some kind of partner.
"At some point there will be enough pressure in the system that we worry about our ability to continue to serve our populations like we do, with member-centric, trauma-informed care. With fair prices for our providers, with community engagement," he said. "That's my job. To protect our ability to do that not just now, but for the next 15, 20 years. That's in jeopardy with what's going on in the world. "
Both CEOs said the companies chose to merge because of a shared philosophy and cultural alignment.
The intent of the combination is to be multi-local, Dr. Jain said. With 800,000 members and multiple lines of business, HealthRight Group will have more purchasing power and better relationships with providers, he said, something that's necessary as more for-profits "vacuum up" nonprofits.
State regulators in Louisiana are scrutinizing the sale of Blue Cross Blue Shield of Louisiana to for-profit Elevance Health, and a potential merger between Humana and Cigna could further consolidate the nation's largest insurers.
"The truth is, if you're competing against people with much deeper pockets than you, you've got to be able to invest in capabilities that are going to allow you to compete and be better," Dr. Jain said. "One day we're going to wake up, and everything is going to be run by three big for-profit companies in this country. That's where we're trending. Folks who are questioning this transaction aren't reading the national tea leaves on that."