Harvard Pilgrim Health Care continued its financial turnaround in 2018 as Massachusetts’ second-largest health plan looked to maintain a competitive edge in a rapidly consolidating market. The Wellesley, Mass.-based plan, with nearly 1.2 million enrollees in Connecticut, Maine, Massachusetts and New Hampshire, restructured and built a more sustainable model, which included losing 50,000 to 75,000 covered members, said CEO Michael Carson, who took over for Eric Schultz last year. Harvard Pilgrim and Partners HealthCare tabled their merger talks late last year in part because the timing wasn’t right. The insurer is still looking for other M&A opportunities, particularly in the Medicare Advantage space. Modern Healthcare reporter Alex Kacik sat down with Carson to talk about the company’s next steps. The following is an edited transcript.
MH: How has consolidation affected Harvard Pilgrim’s operations in Massachusetts?
Carson: It’s still too early to tell, but I’m a glass-half-full kind of guy, so I see opportunity in all these deals and consolidations. We have a deep contractual relationship with Beth Israel Lahey Health (Beth Israel Deaconess Medical Center and Lahey Health completed their merger in early March).
So by them coming together, we’ll have to be on our best in terms of contracting and negotiation skills, but at the same time I know that they are also building an adaptive population health strategy and focusing on how to optimize the providers within their system.
I’m looking forward to being a continued partner and to drive payer-provider integration in those models. And consolidation, again from a Beth Israel Lahey perspective, or any other groups, presents opportunity for us to partner even deeper.
MH: 2018 marked a turnaround year for Harvard Pilgrim. What strategies worked?
Carson: Harvard Pilgrim had significant financial struggles since 2014 and then in 2018 we really knocked it out of the park. In 2016 we had a nearly $90 million net loss and in 2018 we are reporting net income of $80.1 million, so it’s a significant turnaround.
It allows us to put money in the bank and makes us stronger as we move forward. It also allows us to invest in growth strategies. We’re improving our value proposition and repositioning ourselves in the marketplace as a transformer and as an aggregator within the healthcare system. So we’ve come 180 degrees from where we’ve been.
I attribute that to a few very direct and intentional factors. Harvard Pilgrim suffered a bit under the introduction of the Affordable Care Act and the various risk adjustments. Health managers had to become familiar with how to manage through the risk-adjustment process, and some of that is normalized.
But we also really focused on a few key elements. One, sustainable benchmarks—based on pricing, based on ability to impact and engage members and control cost. We underwent a significant assessment of which products were earning to which level and what the pricing strategy had been.
And in some cases, we reduced our membership a bit. Harvard Pilgrim was maybe 50,000-75,000 members lower than we were coming into 2017, but that made a difference, helping to make sure we have a sustainable business going forward. We needed to back off of some other lines of business because we also introduced an industry-leading medical cost-management process that enabled us to be much better-positioned to take on any membership, any population.
The things that made us successful in the past 50 years aren’t necessarily the things that are going to make us successful for the next 50 years.
MH: Can you describe the 3Derm program?
Carson: It’s an integrated model with UMass physicians that allows for the plan member and the primary-care physician to coordinate dermatology care needs in the primary-care physician’s office. They can be evaluated without an additional referral, unless it’s really necessary.
The results from our nine-month pilot are that the wait time for dermatologist review is averaging 12 hours versus a three- to six-months. Ninety-two percent of dermatology notes enable treatment to begin at the primary-care setting.
Through collaboration, we were able to do our referral processes in a better way, and then 40% of the members in this particular pilot no longer needed an in-person visit with the dermatologist at all because the assessment and review could be done through the process and the treatment plan could be executed through the PCP’s office. (While it is still in the pilot program, Harvard Pilgrim is using 3Derm contracted providers.)
MH: What does your growth strategy look like at this point?
Carson: I believe health plans have to play a critical role in aggregating very disparate components of the healthcare system to provide for a better member experience and a better healthcare cost-management situation.
That is a value proposition play that we’re taking very seriously and going to market with.
In terms of where it’s targeted, we operate from a fully insured standpoint in Massachusetts, Maine, New Hampshire and Connecticut.
All four markets we target for growth and then we have our national third-party administrator movement, and we also have a Medicare Advantage program in Massachusetts, Maine and New Hampshire.
In Connecticut, we’re still relatively new but we’re looking to drive market share there—to a large-group as well as small-group strategy. And we’ve already seen some initial results out there.
In New Hampshire, we are very much targeting all segments with a particular focus on small group and particular regional aspects of New Hampshire where we have an opportunity to gain market share.
In Maine, we’ve been on a roll in terms of serving the individual ACA community as well as small, medium and large groups.
We seem to be firing almost on all cylinders in the state, so I’m looking for a growth strategy overall there. In particular, with some key provider groups that we have working relationships with, that should drive growth even further.
We will rebuild our Massachusetts-based market business. We will continue to grow our small-group business as well as focus on our large group.
We also have a lot of self-insured business in Massachusetts. We’re a bit of an expert in serving hospital systems and higher-education institutions.
We understand the dynamics that are in play for those types of customers. We’re in biotech companies, so we’re very much playing in that mixed field.
From an acquisitions perspective, I’m interested in growing my Medicare Advantage business, not just organically, so I am looking at opportunities for us to accelerate our Medicare Advantage book of business through acquisitions or deeper provider relationships.
MH: What can Massachusetts do to change some of the higher-cost dynamic in the state?
Carson: The governor has a strong focus on pharmacy pricing, so if at the state level we can solve something there, that would be pretty big. The other one that stands out is the collaboration to drive lower-acuity care into the community.
I’m a big proponent of good relationships with primary-care physicians, preferably if they’re not attached to a hospital system, so then we can collaborate on how to keep people as healthy as possible and how to keep them out of high-cost beds and facilities, avoid those unnecessary ER visits, unnecessary admissions and unnecessary readmissions.
I believe that’s where a big opportunity is for us. So this year, the Beth Israel Lahey opportunity comes into play. They certainly have a profit incentive to fill beds, but I’m also optimistic that their leadership will partner to ensure that lower-acuity care is going to the right place. There are opportunities for us to work in the marketplace, and it would make a big difference.
MH: Why didn’t the Harvard Pilgrim and Partners deal work out?
Carson: For me, a payer-provider system allows for better insight into member and patient behavior and their care needs and allows us to have a more proactive way of engaging with them and managing them through the whole journey of healthcare, not just when they walk through the doctor’s office.
That creates a better experience for them and reduces cost … getting care delivered at the right time in the right setting.
Partners obviously is a great organization. As with all of our organizations, we have to decide whether we’re going to take action now or in three years or so. So we’re evaluating Partners’ current environment and we’ll decide how it moves forward. That’s where we are now.
