Mounting scrutiny was too much to overcome for the organizations’ partnership.
SCAN Group and CareOregon have abandoned their plans to combine in the face of regulatory pressure and outside criticism.
The proposed merger, which the health insurers announced in December 2022, was intended to unite the two nonprofits under the HealthRight Group to strengthen their position against their for-profit competitors. Instead, the move failed to meet the expected close date of December 2023 and was greeted with skepticism, leading to the organizations mutually agreeing to call it off.
"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,” SCAN Group and CareOregon said in a joint statement. “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."
HealthRight Group would have had $6.8 in revenue and nearly 800,000 members, bringing together SCAN Group’s 285,000 Medicare Advantage (MA) members across Arizona, California, Nevada, and Texas with CareOregon’s 500,000 members in Medicaid and MA plans.
Oregon’s Medicaid Advisory Committee this past December recommended that the Oregon Health Authority disapprove of the merger, citing “flow of taxpayer dollars leaving the state and the potential loss of local control of CareOregon’s affiliated CCOs.” Additionally, the committee argued that the partnership had the potential to reduce access to care, negatively impact the ability to address health inequities, and take away financial resources from local communities.
Multiple politicians, including former Oregon governor John Kitzhaber, joined in on opposing the merger, further putting pressure on the organizations to nix the deal.
"The argument is that Oregon CCOs must choose the lesser of two evils — merging with a multi-state, multi-billion-dollar Medicare Advantage company like SCAN, or being purchased by an even bigger for-profit insurance company such as UnitedHealthcare. This is a false choice,” Kitzhaber wrote in a blog post.
In an exclusive interview with HealthLeaders in March of last year, SCAN Group CEO Sachin Jain spoke on the necessity of nonprofits scaling to compete with for-profits.
"These are two renowned not-for-profits coming together as a viable alternative to for-profit plans in the government space … We want to be able to scale to meet challenges at the level of for-profits and private equity organizations,” Jain said.
Pushback on the merger and its ultimate withdrawal may also have been somewhat influenced by the industry’s cooling on MA. Between the government cutting benchmark payments by 0.2% and the introduction of new reimbursement rates, the private program could be much less profitable than payers have become accustomed to.
Jay Asser is the contributing editor for strategy at HealthLeaders.
KEY TAKEAWAYS
Health insurers SCAN Group and CareOregon have mutually agreed to end their proposed merger, which would have brought them together under HealthRight Group to create $6.8 billion in revenue and nearly 800,000 in membership.
The merger had been called into question by Oregon’s Medicaid Advisory Committee and politicians for the alleged harm it would do on taxpayer money and access to care.
SCAN Group and CareOregon’s vision for the partnership was to scale the nonprofits, allowing them to compete with bigger for-profit companies.