The nonprofit organization CareOregon is looking to partner with a California-based nonprofit healthcare organization

This article will be updated throughout the day.

CareOregon is getting a lot bigger. The Portland-based nonprofit, which provides medical care to low-income Oregon residents through the Oregon Health Plan and other programs, joins a rapidly expanding California-based nonprofit, The SCAN Group.

The combined not-for-profit umbrella will be known as HealthRight Group and will have offices in Oregon, California, Arizona, Nevada and Texas. The parties involved hope the merger will be completed in the coming year, although it is subject to regulatory approvals.

As a subsidiary of HealthRight, CareOregon will continue to operate in Oregon with a separate board and maintain its state-mandated community advisory councils working with its coordinated care organizations administering the Oregon Health Plan. CareOregon operates Jackson Care Connect in Jackson County and Columbia Pacific, serving Columbia, Tillamook, and Clatsop counties, and participates in Health Share of Oregon, which covers Clackamas, Multnomah, and Washington counties.

HealthRight will be headquartered in Long Beach, California, and Eric C. Hunter, CEO and President of CareOregon, will lead HealthRight’s new Medicaid division.

“Everyone will be like, ‘Hey, what’s the downside?'” Hunter told The Lund Report. “It shouldn’t be if we do this right. We want to use the knowledge of more people, more skills, and more resources to do more for the people we currently serve and to serve even more people.

“We’re thrilled,” he added. “It’s something we’ve been working on for a couple of years based on a conversation about missions. And it kind of grew from there.”

The news surprised many in the Oregon health care community, as it came amid an ongoing debate about whether out-of-state agencies should participate in the low-income Oregon Health Plan, in which some organizations are making big profits.

“When there’s a lot of money, there’s a lot of interest … We’ll see how it plays out,” Bob Dannenhoffer, a physician and longtime administrator with experience at the Oregon Health Plan. If the goal is really to improve care, that’s a great thing. However, you have to worry about losing Oregon values ​​and losing focus on Oregon. If you have an away master, the away master will want input on some of the things that are happening.

Still, he added: “That could be a good thing, right? Because it’s a non-profit organization, if you can better serve seniors (and) give CareOregon a little boost, those would all be good things. But there’s also a chance it won’t be.”

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Hunter said members and providers should see no immediate difference in CareOregon’s programs as CareOregon moves under the HealthRight Group. He said there will be no layoffs at CareOregon — the company has budgeted about 1,200 employees, including many at its downtown Portland headquarters, but faces challenges that, like most healthcare employers, fill them. “We do not expect any staff reductions in the foreseeable future. It’s not on the table at all right now.”

The combined company will have revenues of $6.8 billion, serve nearly 800,000 members who receive Medicare and Medicaid, and employ approximately 2,500 people.

As part of the agreement, SCAN Group hopes to expand its Medicare Advantage plans and other offerings in Oregon under HealthRight while leveraging CareOregon’s experience and offering Medicaid services in the other states in which it operates. In the meantime, CareOregon hopes to improve its Medicare services as it already offers Advantage plans, including for those who qualify under Medicaid, known as “dual-eligibles.”

SCAN’s Medicare Advantage plan has been rated 4.5 stars for six consecutive years. CareOregon currently has a 3.5 in Medicare — lower than some of its peers — with performance declining in several areas between 2020 and 2021.

Hunter said CareOregon has spent more on administration to improve its services, while joining HealthRight will allow for pooled investments in technology and other improvements, and boost purchasing power to receive employee benefits and medications through pharmacy benefits managers.

“The difference between three and a half (stars) and four and a half is real money and real benefits that we can offer our members to really better support our providers,” he said.

Medicare Advantage — essentially the privatized version of Medicare — has come under scrutiny lately as some companies’ business practices have been criticized. And SCAN’s plan was the subject of critical federal scrutiny earlier this year. The company questioned the results of the audit, although the auditors defended them.

SCAN CEO Sachin Jain has written that a review of the Advantage plans is appropriate and helpful, but defended the program as a whole.

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SCAN began as the Senior Care Action Network in 1977 before becoming SCAN Health Plan, which offered Medicare Advantage plans. The SCAN Group is an umbrella company that includes the health plan as well as other subsidiaries, most of which are non-profit.

Sachin Jain, SCAN’s MD and CEO, described the transaction less as a merger and more as a combination that will continue to focus on service and healthcare equity while competing with larger for-profit companies.

“I think both SCAN and CareOregon separately started to realize that we were facing a lot of competitive pressure in the marketplace, we were dealing with a lot of for-profit market participants, you know, venture-backed, private equity-backed market participants in our marketplaces . And, you know, we’ve realized that while each of us is a multi-billion dollar organization on our own, we’re relatively small in the managed care landscape.”

He added, “I think if we come together, it increases the likelihood that we will continue to thrive as two different organizations.”

New unit could pool reserves

The transaction comes amid a staggering rate of consolidation across the healthcare industry, including in Oregon. For-profit Centene’s purchase of the Medicaid-funded Trillium Community Health Plan, currently its 26th

Such concerns have led to legislation in the past — including a bill co-sponsored by then-Speaker Tina Kotek, now Gov. — to require all coordinated care organizations that serve the Oregon Health Plan to be nonprofit, in order to ensure profits are reinvested in the community.

Speculation continues that extrastate, for-profit organizations like Humana and UnitedHealth might buy other coordinated care organizations in Oregon to capitalize on Medicaid’s profits, as the physicians who founded some of the organizations are nearing retirement age. Joining HealthRight could put CareOregon in a better position to buy them to “keep them in the family” and prevent them from operating for profit, Hunter said.

But what about CareOregon’s reserves?

CareOregon has experienced high margins, or profits, during the pandemic as usage and services provided have not kept pace with rate growth based on pre-pandemic assumptions. The 11 percent profit margin in 2021 was so high that in July state officials announced a plan to invest another $100 million in improved services.

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“I think the point is that we’re going to be looking at ways to make all of our businesses more successful and there’s going to be money flowing back and forth, we’re not going to deny that,” Hunter said. But he added that profits and reserves are not being shifted out of the state for that reason or to fuel dividends to foreign shareholders.

“We were built by that community,” said Jeremiah Rigsby, Hunter’s chief of staff. “The money must continue to support the communities that have asked us to come together to become CareOregon and our affiliated CCOs, which is still very important to us.”

Is it fair to assume that CareOregon’s profits will fuel future HealthRight expansions? “It’s not fair to assume that,” Jain said. “Our focus is on developing new models of clinical care and bringing that to Oregon.” Among these, he said, are the nonprofit homeless services, which operate under SCAN Group, the Homeless Medical Group, and expanded services like offering insulin without patient co-payments, like the SCAN Health Plan is doing in California.

“One of the things that the CareOregon and SCAN teams talked about when we came together as HealthRight was the first day that we really focused on bringing skills to the state of Oregon for people living with homelessness.”

One change could be the tone of HealthRight’s communications as it competes with Centene and other for-profit companies. While CareOregon has kept a somewhat low profile, Jain has positioned himself as a thought leader, aggressively taking a stand on the moral obligations of CEO leaders and championing the superiority of community care.

“When you’re not tied to quarterly profit targets, you’re making decisions that are long-term oriented for the communities and the people in those communities,” he said. In the for-profit world, companies serve stakeholders that include investors and shareholders, he added, while SCAN has offered co-payment-free insulin to serve patients, not profits. “If you’re a non-profit organization like us, the only stakeholder that really matters is the patient.”

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

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