Tufts HMO to cut 10% of its staff

Tufts Health Plan will reduce its staff by about 10 percent to keep administrative costs in line with its competitors' as the insurer begins to reverse a long decline in membership.

Tufts' chief executive, James Roosevelt Jr. , said about 100 employees will be laid off, and 75 vacant positions will remain unfilled. He added that there will be no additional job cuts in 2007. "This is our path for the year," Roosevelt said. "There's not going to be another 100 layoffs in April or July."

Membership increased in January, he said, though he did not say by how many. Membership declined from one million in 1998 to about 600,000 at the start of the year.

Overall, Roosevelt said, he is confident Tufts will show significant growth in membership in 2007, its first increase since 2002. "Our success will be determined by sustained growth," he said. "That is why we must change our structure to one that lends itself to more streamlined processes and supports our ability to grow."

January's increase will be partially attributable to the exclusive contract the insurer won to provide managed Medicare services to Harvard Vanguard, the large physicians group that had previously contracted with Harvard Pilgrim Health Care.

Throughout its downturn, Tufts has been protected by a cash cushion of more than $500 million, which enabled it to generate investment income to compensate for losses from its insurance operations. Last year, the company also laid off about 100 employees and eliminated 50 unfilled positions.

Roosevelt yesterday declared Tufts "solidly profitable on an operating basis," excluding investment income, and predicted its next earnings report in March would show "all solid numbers."

Tufts is the third-largest health insurer in Massachusetts. Blue Cross and Blue Shield has about 3 million members, and Harvard Pilgrim has about 1 million. The larger plans are able to spread administrative costs across a broader base, making it easier for them to bid profitably for an employer's insurance business.

"Tufts is clearly making progress in their corporate turnaround," said Steve Tringale , a healthcare consultant who does not work for Tufts. "The decline in membership appears to have bottomed out. I'd expect they'll show some small increases in membership through 2007. Moreover, they've been able to reverse the negative membership trend without losing profitability."

Ellen Lutch Bender of Bender Strategies, a healthcare consultancy, said, "I've heard their membership growth numbers for the first quarter look very good. I'm optimistic that Tufts Health Plan will stabilize. When [Roosevelt] took over in 2005 the plan was in difficult financial straits."

Bender said Tufts is not a client of her firm.

In the third quarter of 2006, Tufts reported operating income of $33.1 million and investment income of $8.3 million on revenue of $466 million.

In October, it was named the second-best health plan in the country by the National Committee for Quality Assurance, a respected nonprofit. The rankings reflect a mix of customer satisfaction and superior clinical outcomes that improve the health of members. Harvard Pilgrim was ranked tops in the nation.

Tufts also is searching for a chief operating officer, a position that has remained open since Roosevelt succeeded Nancy Leaming as chief executive in June 2005.

Jeffrey Krasner can be reached at krasner@globe.com.