Harvard Pilgrim regaining financial health

The question for physicians is, can the insurer still be pleasant to work with as it aggressively cuts costs?

By Julie A. Jacob, amednews staff. Sept. 18, 2000.

In the four months since Brookline, Mass.-based Harvard Pilgrim Health Care was released from state receivership on May 24, it's clear that the insurer's aggressive efforts to nurse itself back to financial health are paying off.

After raising premiums by up to 20% and trimming administrative costs by $7 million, Harvard Pilgrim has whittled down its losses from $227 million last year to a projected $7 million for this year, said Harvard Pilgrim spokesman Alan Raymond.

The question that remains unanswered, however, is whether Harvard Pilgrim can continue to clamp down on its costs, yet still retain its reputation as a physician- and patient-friendly health plan.

On one hand, doctors say they are pleased that their claims are being paid more quickly now that Harvard Pilgrim has fixed the computer system problems the company had been struggling with since Harvard's merger with Pilgrim Health Care in 1996.

Allergist David Miller, MD, Dartmouth, Mass., said he's noticed "better, more timely reimbursement" from Harvard Pilgrim lately.

"They seem to be extending a little bit of an olive branch to physicians," Dr. Miller said. "It sounds good, but we're still skeptical."

"Since the receivership, they have been conducting themselves in a reasonable fashion," said Charles Rosenbaum, MD, an oncologist in Marlborough, and president of the Massachusetts Society of Clinical Oncologists.

Before the company went under state supervision in January, Dr. Rosenbaum said, oncologists had to battle Harvard Pilgrim to receive payment for chemotherapy treatments that Harvard Pilgrim, due to computer errors, had insisted it had paid when, in fact, the company had not.

But even though claims are being paid more quickly, reimbursement rates have remained stagnant or even decreased, despite Harvard Pilgrim's hefty premium increase.

"It's putting a lot of stress on our physician groups," said Francis X. Van Houten, MD, a radiologist in Concord, Mass. "They haven't cut our fees, but they haven't raised them, either. Both hospitals and doctors have 4% to 6% increases in expenses each year, but we have not seen those types of increases for reimbursement."

Psychiatrist Eugene Fierman, MD, said that although he's happy that Harvard Pilgrim is paying its claims more quickly, he's also frustrated that the rates for psychiatrists have dropped now that the plan has contracted with Value Options to manage mental health services.

Rates for therapy visits have dropped from $78 to $70, he said, while rates for medication management visits have decreased from $57 to $36.

Although other managed care companies carve out mental health services to outside companies, "what's significant is that Harvard Pilgrim never used them before," said Dr. Fierman, who plans to drop out of Harvard Pilgrim's network. "It's a cost-cutting measure, and it has clearly affected physicians."

Raymond defended the company's decision to outsource its mental health services.

A local health care consumer group, Health Care For All, is also keeping a close eye on Harvard Pilgrim as it climbs its way back to financial health.

So far, the steep premium increases and new emphasis on fiscal discipline hasn't had much of an impact on patients, thanks to the state's tight labor market, said Michael Miller, Health Care For All's policy director.

"For the most part, employers are absorbing the increase," Miller said.

He added, however, that it would be interesting to watch how Harvard Pilgrim, as well as Tufts Health Plan and Fallon Community Health Plan, which also struggled financially last year, respond to the state's new mental health parity and patient protection laws.

"We hope to see that these new consumer protections will offset any tendencies to skimp on care," Miller said.