Four observations on the Providence-CareOregon deal

Today’s news that CareOregon is joining the Providence community of health care organizations is big news.  It merges two of Oregon’s most important players in health care, and further solidifies the relationship the two organizations have been building for some months.

While this will take some time to fully shake out, there are four observations that are probably self-evident to folks as this news breaks.  Here are a few thoughts on each of them.

 

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1. The leadership of the two CEOs of a merger is always important. It was probably particularly the case in this instance.

It’s extraordinarily difficult to bring two organizations together, particularly of the size of these two organizations.  So, having the personal commitment of the two CEOs is critical.

That said, this kind of a deal might not have been able to happen without the specific leadership of Mike Cotton, CEO of Providence Health Plan, and Eric Hunter, CEO of CareOregon.

Both men have a background in Medicaid and public sector health benefits.  Both have experience in M&A and have seen the benefits and the pitfalls of M&A done well – and done poorly.  And, both see the shifting landscape in Oregon as pushing them towards finding a “dance partner” for the future.

Perhaps more importantly, however, is that neither of them is deeply “of” the Oregon health care world.  Both leaders have committed themselves to Oregon, to be sure, and both are active in the community in various ways.

But, neither built their career in the state.  Both found success in other regions before landing in Oregon.  This probably informed them both about what was possible together, from their experiences outside of Oregon, and brought unique value to their discussions inside Oregon.

And, with two iconic brands like Providence and CareOregon, it may have taken the creative thinking and experience from outside of Oregon to put this together.

 

2.  In non-profit governance, this is an “affiliation.” In practice, this is more like an acquisition. That may not mean what you think.

This is primarily a story about Providence – and specifically the population health side of the Providence St. Joseph’s organization – acquiring CareOregon.  It’s also a story about being able to scale the talent and expertise that CareOregon holds and extend it to other markets in a way CareOregon probably couldn’t quite do itself.

So, it’s not a combination of equals.  But, it’s likely to empower the junior partner, CareOregon, rather than subsume it.

In other words, typical concerns about a junior partner losing its culture or approach to care is not likely to become manifest here.

 

3.  To put a finer point on it, this positions Providence to have greater success in population health across all of its states, not just Oregon. 

Providence has been working on or exploring population health strategies across a number of states including Washington, Alaska, and California.

In Washington, Providence has been in Medicare Advantage for some time, if incrementally.  In Alaska, it’s working to enter the Medicaid space in a strategy centered on primary care.  In California, the next Medi-Cal procurement is generating a host of conversations.

By pulling in CareOregon to the Providence family, Providence Health Plan gets a significant upgrade in terms of knowledge, culture, infrastructure, and talent when it comes to population health.

It gives Providence a significant boost to these strategies, which have otherwise been struggling over the last number of years.

 

4.  This solidifies CareOregon’s position on its home turf 

The market in Portland and, more broadly, across Oregon is shifting.  The PacificSource-Legacy deal was a game-changer, and it forced the remaining market players to respond.  OHSU and Moda came together, in part, as a result, as Kaiser nationally has moved to enter the Medicaid market more significantly.  CareOregon probably started to look around and wonder who it might partner with.

Moreover, Providence Health Plan has been active in building through acquisition.  It’s acquisition of PH Tech is one example of that.  So, CareOregon could assume that Providence was going to find a strategic partnership with someone in the Medicaid payer space, which could have potentially left CareOregon alone and independent in the market.

 

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Here’s the bottom line:  This is a significant deal for Oregon that will likely change the landscape of health care in the state.  It is probably best seen as a continuation of market trends that have been in place for a few years.  It’s probably also a deal that could have only been put together with the specific leadership of these two leaders.