Two hospital organizations in central Massachusetts have agreed to sell their shares in a provider-sponsored HMO to a third hospital partner to consolidate a fractured governance structure and improve the HMO's competitiveness.
Baystate Health Systems of Springfield, which owns 38% of 67,000-enrollee Health New England, would become the majority owner and assume control of the HMO's moves to bolster its position against proliferating competition, said Anthony Mott, Baystate executive vice president for corporate services.
Springfield-based Health New England was created 12 years ago by Baystate and its physicians, and it attracted participation by two other hospitals and their physician staffs with the aim of broadening provider-network coverage, Mott said.
Those shareholder hospitals are Holyoke (Mass.) Hospital, through its parent company Holyoke-Chicopee Area Health Resources, and Noble Hospital in Westfield.
The HMO has remained profitable, earning $1.5 million in 1995 on revenues of $91 million, according to MODERN HEALTHCARE's 1996 survey of HMOs and PPOs (See story, p. 77).
But the number of managed-care plans serving the area has doubled during the decade, to 14 from seven, and more HMOs are poised to enter, said Geri Rhoades, spokeswoman for Health New England.
At a time when the HMO needs increased decisiveness, the voting interests of the three hospital organizations-combined with strategic say-so from about 250 physician shareholders-have diffused decisionmaking on capital investment and market moves, Mott said.
In a preliminary agreement announced last week, Baystate said it would acquire all the shares held by Holyoke, Noble and their physicians, at a price yet to be negotiated, and restructure governance to put voting rights in the hands of Baystate and its physicians, Mott said.
The challenge of a Baystate-owned HMO will be to keep its longstanding provider partners happy enough to remain part of the network. Mott said the HMO has worked well enough as a provider network that its member institutions and physicians would find it in their best interests to stay on.
The provider network has expanded to include eight area hospitals with more than 1,200 participating physicians.
Provider commitments were a sticking point in a proposal last year to sell the HMO to Healthsource, an HMO company based in Hooksett, N.H., for $59 million in Healthsource stock (May 29, 1995, p. 18).
The closing was subject to Healthsource reaching long-term commitments with Health New England's shareholder groups, but negotiations with a key Springfield-based physician-hospital organization reached an impasse.
The sale was intended to increase the HMO's stability and provide a capital infusion. After it fell through, Baystate suggested that rather than go outside for help, it could buy out its partners, Mott said.