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Another health plan link on table

Tufts, Cambridge group in talks; Alliance focuses on low-income clients

By Erin Ailworth
Globe Staff / February 24, 2011

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Tufts Health Plan is in talks to take control of Cambridge Health Alliance’s managed care plan as a way to expand its reach into the health insurance market for lower-income people. The deal would also provide money the alliance needs to invest in its hospitals and health care delivery system.

The talks have been going on for months, according to e-mails sent to employees from both organizations’ chief executives yesterday.

The alliance, which operates so-called safety net hospitals in Cambridge, Somerville, and Everett, has had to cut jobs over the past two years and has been seeking a buyer or an affiliation with another health care provider.

Safety net hospitals have a high concentration of poor and uninsured patients. The alliance’s managed care plan, Network Health, serves about 170,000 members who use Medicaid, the government insurance plan for the poor, or are uninsured.

“While details are still being worked out, Tufts would likely become a majority owner of Network Health while CHA would retain an ongoing ownership interest,’’ Cambridge Health Alliance’s chief executive, Dennis Keefe, wrote to his employees.

In his e-mail, Tufts Health Plan chief executive James Roosevelt cautioned that while talks have been “ongoing for many months,’’ no decision has been reached. Regulators would have to review any partnership.

“Keep in mind there has not yet been a Tufts Health Plan board vote,’’ Roosevelt wrote. “To reach an agreement or to identify whether or not this is the right fit for either organization, there must be a due diligence period.’’

The potential deal comes after word of a possible merger, announced last month, between Tufts Health Plan and Harvard Pilgrim Health Care. Combining Tufts and Harvard Pilgrim, the state’s second- and third-largest health plans, would create a company with 1.7 million members in Massachusetts, New Hampshire, Maine, and Rhode Island, to compete with the other dominant health insurer, Blue Cross Blue Shield, which has 2.9 million members.

In his e-mail, Roosevelt said Tufts Health Plan’s talks with the alliance are “completely separate’’ from its conversations with Harvard Pilgrim, as the two health plans have not yet merged and are still competitors.

Stuart H. Altman, professor of national health policy at Brandeis University, said both the Harvard Pilgrim merger and the potential partnership with the Cambridge Health Alliance appear to be signs of what is happening nationally in the face of efforts to control rising costs. The pressure to reduce costs is expected to push providers and insurers into partnerships.

“It doesn’t surprise me. In a lot of ways, I think health insurers are going to have to be more involved in the delivery of care,’’ Altman said. “We’re moving toward these highly integrated systems that will be competing against each other.’’

Christina Severin, head of Network Health, said she is enthusiastic about a possible partnership with Tufts Health Plan.

“A Tufts stake in Network Health will strengthen Network Health’s market position,’’ Severin said in a prepared statement, “and allow us to extend our mission of ensuring access to care for vulnerable populations through high-quality, highly integrated care.’’

Erin Ailworth can be reached at eailworth@globe.com.

PLAN MEMBERS

Harvard Pilgrim: 1 million in Massachusetts, New Hampshire, and Maine.

Tufts: 730,000 in Massachusetts and another 10,000 in Rhode Island.

Network Health: 170,000 through MassHealth and Commonwealth Care.