March 10, 2000

On March 2, the state announced a plan to keep Harvard Pilgrim Health Care (HPHC) nonprofit and locally controlled. Announced at a press conference by Massachusetts Attorney General Thomas Reilly, Insurance Commissioner Linda Ruthardt and Governor Paul Cellucci, the plan would release the HMO from state receivership.

The rehabilitation plan needs to be reviewed by the Supreme Judicial Court following a public hearing. If approved by the court, the receivership will end and the current management team will be allowed to implement its turnaround plan.

The Massachusetts Hospital Association commended the attorney general and the state receiver for stabilizing HPHC, but recognized that there was more work to be done.

The plan reassesses HPHC-owned health centers at their current market rate and redefines nearly $200 million in tax-exempt bonds in a way that creates a positive net worth. Also, because the insurance commissioner can defer interest and principal payments to bondholders, HPHC has been able to report the surplus required for being taken out of receivership. Charles Baker, CEO of HPHC, has cited the managed care company's withdrawal from Rhode Island, workforce reductions and rate hikes of approximately 10 to 15 percent as additional reasons for their financial turnaround.

The attorney general and insurance commissioner expressed optimism about the HMO's financial performance in January and February but will stay involved in overseeing the turnaround process.