After careful consideration, I cannot lend my support to the proposed CareOregon-SCAN merger. First and foremost, I believe this merger runs counter to the original vision for Oregon’s Coordinated Care Organizations (CCOs), and instead, represents a de facto shift towards traditional Medicaid managed care. Such a change in public policy should be led by Oregon policymakers, and should be the product of an intentional, forward-looking vision for Oregon’s CCOs.
When we created the CCO model in 2012, the vision was crystal clear: each CCO would be a new local entity, rooted in its community, and governed by local citizens and local providers. The CCOs would assume responsibility and accountability for health care in a defined area, for a defined population, and would engage as full partners in advancing community health and addressing the upstream social determinants. In short, CCOs were intended to move beyond old-fashioned Medicaid managed care, in which a state simply privatizes its Medicaid program and puts large-scale insurance companies in charge of running it. Because the CCO vision was unique, it was not only granted the requisite Section 1115 waivers from the Obama Administration—it was given a $1.9 billion initial investment to make the transition to this new care model.
The proposed SCAN-CareOregon merger represents a marked departure from this original vision, and raises concerns about losing both the local governance and the grounded “community flavor” of each CCO. Furthermore, under this merger, Oregon funds, intended for investment in Oregon communities, could leave the state for other purposes. Both SCAN and CareOregon have confirmed that funds could be moved out of Oregon to support SCAN’s businesses in other states. This too runs contrary to our founding vision. CCOs were intended to operate within a global budget indexed to a sustainable growth rate. Cost savings from the innovations and efficiencies necessary to operate within this budget structure, were to be invested back into the communities from which they came not sent to an out-of-state entity.
Of broader concern, the entire framing of this merger seems to assume that Oregon has already abandoned the CCO model and has decided to transition back to traditional managed care. The central justification for the merger is that the combined resources of SCAN and CareOregon are necessary to compete with huge national for-profit health insurers, seeking to purchase smaller Oregon CCOs. 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. Nothing is forcing Oregon policymakers and regulators to hand our publicly funded CCO program over to large insurance companies—be they for-profit or nonprofit. The notion that CCOs are simply commodities to be bought and sold on the open market, reflects all that is wrong with where the U.S. health care system is headed today. Furthermore, it undermines a key tenet of these organizations: to look beyond the narrow clinical model and focus more broadly on community health. Doing so requires organizational stability over time in order to build the important trusted community relationships necessary for a long-term investment strategy. These relationships take years to build and will be destabilized if we adopt a policy that essentially says “CCOs are up for sale.” This kind of uncertainly will also create a disincentive for CCOs to make the long-term local investments in both social capital and infrastructure that support community health.
I recognize that there is the potential that CCOs—especially, the smaller ones, which were originally created from Independent Practice Associations—could become targets for purchase by big, publicly traded health insurers. We saw that with Trillium, but that was never the intent of this model, nor should it serve as a policy precedent without a much larger public conversation. And in any event, it should be addressed explicitly by state policy, not through this proposed merger. Furthermore, this is a hypothetical concern. At this moment in time, I am unaware of any of our smaller CCOs that are facing insolvency and at risk of being sold to an out-of-state insurer.
The future of Coordinated Care Organizations should be a matter of open public discussion, and the result of intentional policy decisions. Do we want to recommit ourselves to the original vision for these community-based organizations? Should CCOs be owned by any out-of-state headquartered entity—be that entity publicly traded or nonprofit? Do we want Oregon Medicaid dollars flowing out of the state for other purposes? How do we empower our CCOs to be focused on community health over insurance contracting? These are rich policy questions that should involve the state legislature and should animate the next round of CCO reform. We should not be backing into these answers through CCO mergers and acquisitions.
For these reasons, I do not believe that the proposed CareOregon-SCAN merger is in the best interest of Oregon consumers in general, or the Oregon CCO model in particular.