Blues in North Carolina and Oregon join forces in strategic affiliation

The entity will go by the Cambia Health Solutions name and Blue Cross North Carolina CEO and President Patrick Conway will take over as CEO of Cambia, in addition to his existing role.

Blue Cross Blue Shield of North Carolina and Portland, Oregon-based Cambia Health Solutions – the parent company of Regence Blue Cross Blue Shield of Oregon – are creating a combination as part of an effort to provide better care to the two organizations’ more than 6 million members.

In what the parties are dubbing a “strategic affiliation,” the companies will share management, administrative, operational, and other corporate services. The combined annual revenue of the two organizations is more than $16 billion.

The affiliation will go by the Cambia Health Solutions name and Blue Cross North Carolina CEO and President Patrick Conway will take over as CEO of Cambia, in addition to his existing role.

“We have to do something different to make health care better, simpler, and more affordable for the people we serve,” Conway said in a statement. “By sharing resources, innovations, and best-in-class services we can fundamentally transform the way individuals and families experience the health care system.”

Cambia Health Solutions CEO Mark Ganz will move to the position of executive chair of Cambia’s Board of Directors where he will lead corporate development efforts. The entity’s board of directors will be made up of 10 members from Blue Cross NC’s current Board of Trustees and nine members from Cambia’s current Board of Directors.

The companies are touting improved abilities to invest in new data analytics and health technologies – as well as increased cost savings – as drivers behind the combination.

As part of the deal both organizations will retain their separate, tax-paying, not-for-profit corporate structures and neither organization is purchasing the other. The affiliation will also maintain separate locally-led health plans in five states and each health insurance company will still maintain its own contracts with providers and consumers.

Headquarters will be located in both Durham, North Carolina, and Portland, Oregon.

The new tie-up builds on the companies’ previous collaboration on Echo Health Ventures, an investment firm started by Cambia and a subsidiary of Blue Cross North Carolina.

The deal will be subject to regulatory approval in North Carolina, Oregon, Washington, Idaho, and Utah.

Michael Abrams, managing partner of Numerof & Associates, said the combination will give the two member companies a leg up in the deployment and development of new health-data approaches and consumer tools. Cambia will benefit from the increased scale where technology can be applied and Blue Cross of NC gains access to Cambia’s technology and experience.

Still, he added that a major challenge in making good on that promise is execution, especially when considering the scale and complexity of the two organizations.

“About 70 percent of mergers fail to achieve the returns that served as rationale for the combination. The fact that this is a strategic affiliation doesn’t really change the organizational dynamics that must be addressed,” Abrams said.

“The skill and determination of management, and the degree of alignment between the two cultures will be the limiting factor to the benefits that flow from this rather novel arrangement.”

In an interview at a conference last month in San Francisco, Ganz told me that insurance companies were going to have to rethink their fundamental assumptions and business models in order to survive.

“I personally believe that companies in the business of caring for people – if they’re willing to let go of their time-honored business models and practices – are probably in the best position to disrupt in a good way,” Ganz said. “We’re pivoting beyond health insurance as being the platform.”

Picture: mikdem, Getty Images