Thursday, August 11, 2011

What's the story behind the story?

When you read a story and it doesn't make sense on its face, you have to wonder what's behind it.  Today's example is this one from the Boston Globe:

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.

I am speculating, of course, but there are two ways to look at this.  One is that PHS is trying to lock in a set of relationships and customers for the future; but that doesn't make sense because these patients are poorly reimbursed.  Also, the company has promised that it will not use this new relationship to limit those patients' choice of providers.  So to make that work, it would have to develop new models of care that enable this group of patients to be profitable, notwithstanding Medicaid rates that are acknowledged to be too low.  A worthy, but very hard row to hoe when you operate a high fixed cost network.

The other is that a trade has taken place, related to the fact that the holding company has been facing state and federal antitrust reviews.  It agrees to provide some financial assurance to a financially stressed insurance company and community health centers serving mainly the indigent, in return for being allowed to keep other human resource or geographic assets that might otherwise be subject to a divestiture that would have reduced its market power.

Or maybe they just want to make sure care is accessible to everyone.


Anonymous said...

Sounds interesting. So why didn't the Globe ask them that question?


Anonymous said...

Is it possible that Partners wants to become a full fledged integrated provider (for better or worse), and the insurance company they assimilate today, will not be the same company five years from now (read: get the license from DOI, then market product lines that appeal to commercial payers).

Its their foot in the door, and part of a longer term strategy perhaps? Seems tenable to me.

Paul Levy said...

Deborah Enos, from Neighborhood Health Plan, posted a comment in response to a reprint of portions of this blog post on WBUR's CommonHealth. I reprint her comment here. It is interesting but does not answer the question I raise with regard to a new ownership relationship, nor why it is in the interest of PHS to do this. Nothing she says requires ownership, just a strategic relationship. (Also, I never said NHP was struggling. I said it was financially stressed, something inherent in today's marketplace.) Maybe she'd like to comment here, so others will see her point of view and ask questions.

"The Letter of Intent that was signed between Neighborhood Health Plan and Partners HealthCare is a very exciting and, I believe, important moment for Neighborhood Health Plan and Partners HealthCare. At NHP we are very excited about the prospect of bringing two strong organizations together (we are not struggling financially) to better serve a population that is vulnerable and in need in a more coordinated way, and in a way that has the potential to improve the patient experience and help to bring down costs. NHP is already one of the most affordable of all insurers in the Commonwealth, and Partners HealthCare is part of our network of providers. So there is no reason to think that we won’t continue to offer affordable health coverage and, in fact, work together on efforts to hold down costs. Both organizations are also deeply committed to Community Health Centers and believe that they are a cornerstone of a high quality, cost-effective health care delivery system. This affiliation will enhance our ability to serve the health care needs of low income and vulnerable populations in Massachusetts. We would hope you support our partnership focused on improving access, quality, and health equity in a cost-effective manner for the most needy of our fellow residents."

Jack cogswell said...

Paul, Years ago, NHP was purchased by HCHP to manage their medicaid patients as well. It was a similar deal (money to a fund to provide grants to Health Centers etc). The problem became that Medicaid decided since "big pockets" now owned NHP, they could cut the reimbursement to the same level as everyone else (NHP had negotiated higher rates so as to continue in business). The reduced rates convinced HCHP that the purchase was a bad deal and NHP was spun off and became independant again. Time will tell if history repeats itself fully here. Jack

Anonymous said...


What do you think this will mean for Boston Medical Center? McKinsey did an analysis recently and CEO says "options" for "vibrant" future will be revealed in September.