As the state of Massachusetts ponders the future of Harvard Pilgrim Health Care, physicians throughout New England are wondering whether they will be paid for back claims--and if so, how much.
The state of Massachusetts placed Harvard Pilgrim, the state's largest HMO with 1.1 million subscribers, in temporary receivership Jan. 4. The state took action after HMO officials discovered an accounting error that brought total losses to at least $150 million and perhaps as high as $177 million. Until going into receivership, the Brookline, Mass.-based HMO expected to lose $134 million.
The Massachusetts Hospital Association estimated the first week in January that the HMO owes providers $300 million. No one knows how much physicians are owed, although government regulators and other groups, such as the Massachusetts Medical Society, are scrambling to come up with a dollar figure. And no one has a definitive answer about what went wrong. Theories range from the rapid expansion that marked HMOs in the 1990s to the high cost of providing good healthcare coverage.
About 15,000 doctors in Massachusetts are part of the Harvard Pilgrim network.
The state has four options: finding a buyer for the beleaguered company; giving it time to recover on its own; liquidating the company and letting people find a new insurer; or arranging for a state bailout, something the speaker of the Massachusetts House says won't happen.
The state has hired banking firm Salomon Smith Barney to either find $150 million in cash to resuscitate the HMO or find a buyer for the plan, according to published reports.
The state medical society surveyed members to get an estimate of how much physicians are owed. In a typical Massachusetts practice, between 15% and 50% of patients are covered by Harvard Pilgrim, with most practices averaging between 40% and 50%, a society spokesman says. In one large multispecialty practice, more than 90 percent of patients are covered by Harvard Pilgrim.
Through the third quarter of 1999, Harvard Pilgrim had revenues of $2.3 billion.
Putting the HMO in receivership guarantees physician payment for claims filed after Jan. 4. The receivership protects the HMO from creditors until the state and the HMO devise a plan. There's no guarantee that physicians will see any money for claims filed before Jan. 4, although the HMO says that claims filed for up to 60 days before the receivership will be paid.
Harvard Pilgrim says that it will cooperate with state officials. Its representatives referred all questions to the state Department of Insurance.
In outlining the options it faces, the insurance commissioner's office says that "nothing is off the table. Anything that could potentially save the HMO is up for consideration," says spokesman Christopher Goetcheus, adding that liquidating the HMO isn't at the top of the list. "Our mission is to rehabilitate it."
The insurance commissioner's office has 30 days from the receivership before it must ask for an extension on the temporary receivership or develop a plan to sell, rehabilitate or liquidate the HMO. There was no indication at Modern Physician press time which way the commissioner's office would go.
The silver lining of liquidating the HMO is a 1999 HMO insolvency law that puts subscribers and providers at the head of the line to receive any monies that would result from liquidation.
Putting the HMO in receivership stabilized the situation, says Peter Dreyfus, director of communications for Harvard Vanguard Medical Associates, where 93% of patients are covered by Harvard Pilgrim. Harvard Vanguard has more than 500 physicians, and Dreyfus says Harvard Pilgrim continues to pay the practice.
Harvard Vanguard was part of Harvard Pilgrim until two years ago when the doctors divorced themselves from the HMO, although they continue to provide care to Harvard Pilgrim members.
Physicians at Lahey Clinic in Burlington, Mass., are getting paid by Harvard, says Pamela Bush, a spokeswoman for the 500-physician clinic. "We're concerned," she says. About 20% of Lahey's patients have Harvard Pilgrim insurance. "We're hoping it can all be turned around. . . . For the moment, we're taking it one day at a time."
Dreyfus says the doctors expect the number of Harvard Vanguard's patients covered by Harvard Pilgrim to decrease. Harvard Vanguard recently signed a contract with Tufts Health Plan and is pursuing contracts with other insurers.
He says his group was diversifying long before Harvard Pilgrim ran into financial problems. But Tufts Health Plan has its own problems. The New Hampshire insurance commissioner put Tufts Health Plan of New England, which covers people in Maine, New Hampshire and Rhode Island, in receivership. Tufts New England is a subsidiary of the Massachusetts-based Tufts Health Plan (see story on page 20).
"We're like all providers in Massachusetts. We really want Harvard Pilgrim to succeed," Dreyfus says. "It's in no one's interest for them to fail."
Massachusetts hospitals can't afford to swallow nonpayment by Harvard, says Richard Averbuch, senior director of policy communications for the Massachusetts Hospital Association. "The prospect of a financial bailout is simply an impossibility at this time."
The hospitals, which average about 12.5% of their revenue from Harvard Pilgrim, have a difficult time collecting money from the beleaguered HMO in the best of times, Averbuch says.
If the HMO doesn't pay and doesn't have the money to cover all its debts should it be liquidated, the providers would have to swallow the costs. Providers can't go after patients for the unpaid balances on their bills if patients satisfy their copayment requirement.
The president of the state medical society says that everyone has known there were problems with Harvard Pilgrim. Jack Evjy, M.D., says that the crisis points to a need to re-examine the framework of healthcare.
"It creates an impossible economic situation, especially if the physician is not in a large practice," Evjy says. "It creates a lot of stress and anxiety and a situation that's just not healthy."
He says he "doesn't want to wake up a month from now to find that another health plan" is in similar straits.
Those in the industry point to two plans in Massachusetts--Tufts and Fallon Community Health--that are struggling.
For its Massachusetts-based operations where it has consistently shown a profit since 1987, Tufts estimates a $15 million profit for 1999. The Waltham, Mass.-based plan estimates an overall loss of $45 million in 1999.
Fallon representatives didn't return calls seeking comment.