Partners HealthCare said Friday that it lost $22 million from operations (PDF) in its most recent fiscal year, but the Boston-based health system would have recorded a surplus if it weren't for its struggling health insurance arm.
Neighborhood Health Plan, which Partners bought in 2012, lost $110 million in the year ended Sept. 30 and had to book another $92 million in reserves for next year. Executives said the steep losses resulted from higher-than-expected medical claims, high costs related to hepatitis C drug Sovaldi and troubles with Massachusetts' insurance exchange.
The health plan has more than 330,000 members. Most are on Medicaid, and most require costly treatments. The medical-loss ratio for Neighborhood Health Plan Medicaid members in 2014 was 120%, meaning for every $1 Partners collected in premiums, it had to pay out $1.20 to cover medical procedures.
Partners has argued that the state Medicaid program has routinely underpaid for services. Sovaldi, the blockbuster drug manufactured by Gilead Sciences, has been part of that problem. The drug costs $84,000 for a 12-week treatment, and Partners said there's been a discrepancy in how the state pays for it.
“The state did not adjust its 2014 rates for Medicaid managed-care organizations, including NHP, for this recent new drug even though this specialty drug was being reimbursed by the state under the Medicaid fee-for-service program,” executives wrote in a news release.
There's been some speculation that Partners may sell Neighborhood Health Plan because of its financial issues. But Partners CEO Dr. Gary Gottlieb recently told Modern Healthcare that the system had no qualms about acquiring the insurer.
“I think that was the right strategy,” said Gottlieb, who is leaving the system in July. “The real interest was that Neighborhood Health Plan is a Medicaid managed-care plan. It's deeply part of our mission to take care of all patients. We've been able to learn from the insurance side how one redesigns services to manage the care of high-risk patients.”
The provider-side of Partners, which includes Massachusetts General Hospital and Brigham and Women's Hospital, was much more profitable in 2014, generating an operating surplus of $180 million. Partners' investments also did well, resulting in an overall surplus of $120 million.
Systemwide revenue totaled $10.9 billion in 2014, up 5% from last year.
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Correction: An earlier version of this story stated that Neighborhood Health Plan lost $202 million. It actually lost $110 million and had to set aside $92 million in reserves for next year due to state accounting provisions.