Merging insurers with the health care delivery system

By Priyanka Dayal McCluskey
The Boston Globe, May 4, 2018

Hospital giant Partners HealthCare, looking to fortify its position in the rapidly changing health care market, is in potential merger negotiations with Harvard Pilgrim Health Care, one of the state’s largest medical insurers.

Executives from Partners, Massachusetts’ largest network of doctors and hospitals, and Harvard Pilgrim have been talking for several months, officials from both companies confirmed Friday in response to inquiries from the Globe. They are discussing a range of options, including an acquisition of Harvard Pilgrim by Partners.

The talks are taking place at a time of heightened deal-making in health care across the country, as hospitals, physician groups, insurers, and other companies pursue new strategies to manage costs and patient care. In Massachusetts, Beth Israel Deaconess Medical Center and Lahey Health are planning a big hospital merger to more aggressively compete with Partners.

Boston-based Partners is the parent company of Massachusetts General, Brigham and Women’s, and several other hospitals. Its expansion plans have been scrutinized in the past because the company is the most dominant health care provider in Massachusetts, and among the most expensive. Partners acquired specialty hospital Massachusetts Eye and Ear this year, and it’s negotiating a takeover of Care New England Health System in Rhode Island.

“Partners HealthCare is constantly exploring new partnerships and relationships with other providers and insurers with the goal of improving the delivery of health care to patients both locally and around the world,” Partners spokesman Rich Copp said. “Harvard Pilgrim is certainly among those organizations.”

“We’re looking at what we could do differently that brings value to our marketplace,” Harvard Pilgrim’s chief executive, Eric H. Schultz, said in an interview.

The US health care industry is in a time of rapid deal-making, with companies trying to cut costs by owning more pieces of the health care pie. CVS Health and the insurer Aetna have been working on a deal, for example.

In recent years, the lines between health care providers and health insurers have blurred.

Among the uncertainties around the combination of Partners and Harvard Pilgrim is what would happen to Partners’ existing insurance business, Neighborhood Health Plan.

Partners acquired Neighborhood in 2012. But instead of boosting Partners’ bottom line, Neighborhood — which traditionally focused on low-income individuals on Medicaid — contributed to historic financial losses at Partners.

Neighborhood shed many of its low-income members and worked aggressively to sell insurance to employers. But with about 142,000 members, it remains a small player compared with the state’s big three insurers: Blue Cross Blue Shield of Massachusetts, Harvard Pilgrim, and Tufts Health Plan.

https://www.bostonglobe.com…

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Comment:

By Don McCanne, M.D.

The potential merger between Partners HealthCare and Harvard Pilgrim Health Care is not just another routine merger and acquisition activity, but it is one occurring at the heart of the U.S. health care system – Massachusetts General Hospital being one of the oldest and most prestigious hospitals in the nation.

It is distressing to see multiple hospitals and physicians merge to gain market advantage, but it is even more disturbing when an integrated health care delivery system is merging with one of the state’s largest insurers. The implication that this is to serve the patients better is belied by the fact that Partners’ previous acquisition of a smaller insurer – Neighborhood – was followed by the shedding of its low-income members as it aggressively marketed itself to the more lucrative employer-sponsored insurance market.

Under a well designed single payer national health program, supposedly we would eliminate the private insurers and switch to a publicly-administered pre-paid health program. But what happens when the private insurers become an integral part of the actual health care delivery system? As is there weren’t enough problems already, obviously that would make implementation of a single payer system that much more difficult.

We’ve spent eight years talking about improving Obamacare by the feeble act of adding a public option, perhaps as a Medicare buy-in, when right under our noses this M&A activity has been taking place. They are building a health care delivery system that will be unassailable by social insurance programs. Are we going to wait until the only solution to bringing health care justice to all will be to nationalize our health care delivery system? How feasible is that?

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