Dr Sachin Jain on Combining SCAN Group and CareOregon: “We’re Trying to Build a Very Different Kind of Company”

In recent weeks, news about some of America’s health systems has not been good. Leading institutions founded as nonprofits or not-for-profits have seemingly taken wrong turns: The New York Times chronicled how Ascension Health’s staffing strategy left it vulnerable to dangerous shortages during COVID-19, while The Wall Street Journal highlighted Cleveland Clinic’s questionable use of the 340B program, which lets hospitals buy expensive drugs at discount—although many fail to pass these price cuts along to patients.

But some health plans are trying to do things differently, and the time may be right for their growth. On December 14 came news that California-based SCAN Health Plan and Oregon-based CareOregon plan to combine their mission-driven health care organizations, with plans to move into more states. The new organization, to be called HealthRight Group, will align the specialties of these 2 nationally known entities, with a focus on “people traditionally underserved by the US health care system.”

SCAN Health Plan’s expertise in the Medicare Advantage market and CareOregon’s complementary strength in Medicaid will power this partnership, which requires regulatory approvals. Sachin Jain, MD, MBA, the current CEO of SCAN Health Plan and SCAN Group, will be CEO of the new entity, while CareOregon’s CEO and President Eric C. Hunter will retain that role and serve as president of HealthRight’s Medicaid division. However, SCAN Health Plan and CareOregon will continue as consumer-facing brands in their respective markets; CareOregon will retain is own board, community advisory councils, and staffing.

At the completion of this transaction, the combined resources of CareOregon and SCAN Health Plan, operating under the HealthRight umbrella, will have revenues of $6.8 billion and will serve nearly 800,000 health plan members through its Medicare and Medicaid managed care offerings.

In the announcement, Jain spoke of the need for mission-driven health care organizations to compete with the larger for-profit groups and said the creation of HealthRight will give the organizations the expertise and scale to do so. Already, SCAN Health Plan has moved into Arizona and Nevada—Texas is up in 2023—and SCAN Group has invested in multiple start-ups that align with its mission, including those that focus on geriatrics or home-based kidney care.

But for this next move Jain brings a track record—both with SCAN Group and his former employer, CareMore—of taking on health care’s toughest nuts, such as devising a model to care for homeless seniors and taking on loneliness as a health crisis, well before the pandemic.

Jain, who is a long-serving member of the editorial board for The American Journal of Managed Care^® (AJMC^®), said in an interview that this combining of forces will enable the new entity to reach new states and penetrate more deeply into the markets it already serves. The early steps will involve creating a common platform and common shared services. The purpose, Jain said, is to rediscover the origins of not-for-profit health care organizations.

“We're really coming together to fortify and strengthen not-for-profit health care,” he said. “Not-for-profit health care has been a bulwark of American society. And a lot of not-for-profit health care is in crisis on some level, because there's are not-for-profit organizations that have lost their way and operate more like for-profit organizations.”

Jain does not pull punches when describing where health care delivery falls short. In a 2021 talk before the National Association of ACOs, he said of the “leadership vacuum” in health care, “We don't have a ton of leaders; what we have is a lot of administrators, and we've confused being an administrator with being a leader.”

Managed care, in particular, has a reputation for putting profits before people, Jain said in the AJMC^® interivew. “Let’s just call it what it is,” he said. “And I think we have the opportunity to do this differently.”

Beyond SCAN Health Plan’s historic focus on Medicare Advantage and CareOregon’s expertise with Medicaid, Jain said the 2 entities have complementary strengths in different payment models. SCAN, Jain said, works primarily in the delegated model, “where we delegate risk to providers.” CareOregon, meanwhile, works in the direct contracted model.

“As we come together, we want to build a diversified business unit,” Jain said. Different businesses between the 2 entities can serve patients differently. “There's a lot of new companies that are focused on Medicare patients and Medicaid patients. But let's call them what they are, they're all for-profits. And they're all built with cultures that are oriented around meeting the financial needs of venture capitalists and private equity firms.

“I think we have a model here that's going to enable us to deliver even greater returns—to patients—by having a nonprofit orientation,” he said. “We're trying to build a very different kind of company.”

Because states give the green light for plans to operate within their borders—especially to serve Medicaid beneficiaries—does Jain think being a mission-driven entity makes a difference?

“It's a really good question,” he said. “I've asked this question a few times in the course of this transaction: Would a state that’s procuring Medicaid rather buy it from a not-for-profit than from a for-profit? And I would say, any government entity is just going to apply radical common sense: Do we want to pay big margins so that companies can return healthy margins to investors? Or do we want to give those margins to nonprofit organizations, whose mission is to deliver more value to the community?”

Jain continued, “If you're a state government, you're using taxpayer money. So, do taxpayers want their dollars going to fund investor profits? Or would they like those taxpayer dollars paid into the delivery of services?”

With CMS focused on health equity, has the time arrived for such a venture? “Managed Medicare and managed Medicaid are some of the best opportunities we have to improve health equity,” Jain said, “because managed Medicare and managed Medicaid oftentimes disproportionately serve low-income and minority communities.” Thus, it makes sense that innovation in these programs can offer the best chance to move the needle with improving health equity for those historically underserved. That is, he said, if they are administered properly.

Jain would like to see the Center for Medicare and Medicaid Innovation—an agency he helped launch in the Obama administration—pour more energy into Medicare Advantage instead of fee-for-service. The numbers certainly call for it, he said.

“All of the indications that I've seen are that, as of [January 2023], more older adults will seek their Medicare through managed Medicare than through the fee-for-service programs,” Jain said. “I think the innovation should be equally split between both programs.”

He acknowledged that not-for-profit groups have not always been the best steward of public funds, because they don’t have a for-profit operating discipline. “Part of the vision here is for us to at least have really good operating and negotiating discipline so that as a company we aren't leaving any value on the table that could potentially accrue to our members or the patients that we serve.”

SCAN Health Plan’s excellent track record—6 straight years of 4.5 stars (of 5) on CMS’ Medicare Advantage Star Ratings—speaks to the fact that the plan puts money back into member benefits. “Last year, we had the highest member satisfaction score of any health plan in the state of California,” Jain said. The only health plan that consistently performs as well on Star ratings is Kaiser Permanente in Southern California. Success stories include investing in better benefit designs for people with diabetes and covering their insulin costs before it became an issue in front of Congressional committees. “It’s the right thing to do,” he said.

How does Jain see the strengths of the 2 groups playing out? The homeless initiative pioneered in Southern California could make its way to Oregon, and things that both groups do well in California and Oregon—such as geriatric primary care—could find their way to Arizona, Nevada, and Texas. Some of CareOregon’s dental benefit management and behavioral health ideas could be transported to other states. “There’s lots to do,” he said.