THIS STORY HAS BEEN FORMATTED FOR EASY PRINTING

Partners enters pact to acquire nonprofit insurer

Deal requires state, US approvals

By Robert Weisman and Liz Kowalczyk
Globe Staff / August 11, 2011

E-mail this article

Invalid E-mail address
Invalid E-mail address

Sending your article

Your article has been sent.

Text size +

Partners HealthCare System Inc., the state’s largest hospital and physicians network, has signed a letter of intent to acquire Neighborhood Health Plan, a Boston-based nonprofit that insures more than 240,000 mostly low-income residents across Massachusetts.

Under the deal, which would give Partners a foothold in the health insurance business, no money would change hands. But Partners would contribute an unspecified sum to provide grants to more than 50 community health centers affiliated with Neighborhood Health. Partners would also work with the insurer and health centers to provide better medical care more efficiently to the urban poor in Boston and other cities, the parties said.

“We are making a critical long-term commitment to take care of this population,” said Dr. Gary L. Gottlieb, chief executive of Partners, which owns nine hospitals in the Boston area. “As we look at the downward pressures on Medicaid dollars and other subsidized products ... we are very concerned and want to make sure there are not barriers to our institutions. We want to make sure care is accessible to everyone.”

Deborah C. Enos, president of Neighborhood Health, said the 25-year-old insurer has been weighing the benefits of an alliance as the health care industry consolidates. It has been talking to potential partners for several months, she said. The majority of Neighborhood Health’s members receive coverage through state programs, such as Medicaid and Commonwealth Care, which provide health insurance for low-income residents.

“This is an opportunity for us to look forward and position Neighborhood Health Plan to be better situated in the future,” Enos said.

It would not be the first time a health care provider and insurer have joined forces. Several hospitals in Massachusetts, including Boston Medical Center, Cambridge Health Alliance, and Baystate Health in Springfield, also have insurance operations. And in Pennsylvania, insurer Highmark Blue Cross Blue Shield plans to affiliate with a local health system.

Enos said Neighborhood Health is working toward negotiating a definitive agreement with Partners by late October. The deal would require approval by state Attorney General Martha Coakley, the state Division of Insurance, and the US Department of Justice.

Regulators would be certain to take a hard look at the deal because Partners’ teaching hospitals, including the Harvard-affiliated Massachusetts General and Brigham and Women’s in Boston, have been cited by Coakley for using their market power to command higher prices for medical care than smaller hospitals.

An affiliation with Neighborhood Health raises the possibility that Partners could expand its role into the private insurance market, competing with other large insurers and offering employers a limited network of Partners hospitals and doctors.

“Competition’s healthy,” said Jay McQuaide, senior vice president at Blue Cross Blue Shield of Massachusetts, the state’s largest health insurance company. “We have strong competition today, and we’ll have strong competition tomorrow.”

McQuaide said the key question surrounding the affiliation is whether it will lower costs. “Does it improve the affordability of health care for and in the community?” he asked rhetorically. “To the extent that it does, that’s a good thing.”

Gottlieb said that he did not want to speculate on future moves, but that Partners’ intention was not to compete with large insurers in the private market. Neighborhood Health, he said, “does very small commercial business.”

Gottlieb noted that many patients insured by Neighborhood Health currently go to Boston Medical Center and Cambridge Health Alliance, so-called safety net hospitals that serve a large population of low-income residents. “We don’t want to change the pathway of patients,” he said. “We want patients to get the care where they want to get it.”

The Partners alliance with Neighborhood Health is being driven by their recognition that health care providers and insurers will have to find ways to deliver health care more cheaply and efficiently as state governments cut back on Medicaid funding, said Steven J. Tringale, managing director of Hinckley Allen & Tringale, a Boston health care consulting firm.

“Both are big players in the Medicaid system,” Tringale said, “and there are stresses on both sides of the table because of the pressure on states to reduce costs. This allows them to coordinate their response in a unified way given the budgetary realities.”

Enos said that Neighborhood Health is financially stable now but sought an affiliation to strengthen its business in the future. And while Partners has yet to commit a specific amount of money to making improvements at the health centers, Enos said, “We envision that it will be a meaningful investment.”

Gottlieb, for his part, said, “We can bring greater stability. They are going to face ups and downs as they take risk. We can help with investments and capital.”

Asked whether Neighborhood Health would give Partners hospitals higher payments than other hospitals for treating its patients, Gottlieb said he hasn’t done internal negotiations before but would not want to do anything to undermine the insurer’s financial stability.

“I don’t want to ruin all the great good that NHP does,” he said.

Robert Weisman can be reached at weisman@globe.com; Liz Kowalczyk at kowalczyk@globe.com.

Related

Mergers, acquisitions

Mergers, acquisitions

Recent notable deals involving Massachusetts companies.