Wall Street Journal - November 19, 1997
Carol Gentry

Yet New England's largest health plan has decided to take in Mr. Tierney and hundreds of others like him -- and to pay for the privilege.

On Tuesday, Harvard Pilgrim Health Care signed an agreement of affiliation with Neighborhood Health Plan, a small Boston HMO that specializes in serving the poor and severely disabled who are enrolled in the state Medicaid program.

The deal may sound odd, given the reluctance among most HMOs these days to take on people with health problems. Indeed, many health plans have steered clear of programs for the poor because state Medicaid funding fluctuates and illness rates in this group tend to be higher than they are for the general population. Only about 100,000 of Massachusetts' 700,000 Medicaid clients are currently enrolled in an HMO.

But Harvard Pilgrim sees opportunity in linking up with Neighborhood and its novel approach to handling Medicaid patients. By working with community health centers in low-income neighborhoods and treating the severely disabled in their homes, the plan has been showing better health results than plans that treat comparable patients in a traditional setting.

Patrick H. Mattingly, senior vice president and medical director of Harvard Pilgrim, says that the affiliation meshes with the larger nonprofit HMO's goal of improving health for all members of the community. Right now, Harvard Pilgrim has 974,000 Massachusetts members, of which only 28,000 are in Medicaid. That number will more than double after the acquisition. At the same time, Dr. Mattingly says, Harvard Pilgrim stands to learn from Neighborhood's methods and can eventually apply them to other members, especially elderly Medicare enrollees. All told, the affiliation will give Harvard Pilgrim:

-- Almost 48,000 new members, approximately two-thirds of them in the Boston market, where Harvard Pilgrim's health centers have high fixed costs and a critical need for volume.

-- A health plan that has become expert in serving low-income people on Medicaid at a time when that program is expanding to cover more of the uninsured, transforming them into prospective HMO customers. Of Neighborhood's 48,000 members, 36,600 are enrolled through Medicaid.

-- A metrowide network of 46 health centers that have strong ties to community groups and diverse staffs that speak more than a dozen languages.

-- The Community Medical Alliance, an innovative mini-HMO for patients with expensive medical conditions, and its creator, Robert J. Master. He became chief medical officer of Neighborhood last year when it acquired his plan.

The Community Medical Alliance, which Dr. Master founded in 1989 after serving as medical director for Massachusetts Medicaid, has shown that patients with severe disabilities and late-stage AIDS can be treated at lower cost, and with better results, if they receive intensive services at home. Recently, Dr. Master began testing the approach on enrollees with mental illness and retardation, and wants to try it with disabled children.

Studies have shown that while HMOs do a pretty good job of taking care of most people, they haven't figured out how to care for two groups: the elderly and chronically ill, and those who lead such a tenuous existence that they never think about health care until an emergency arises. Most people in the first group are covered by Medicare, a federal program, and many of those in the latter group qualify for Medicaid, a joint federal and state program.

Tufts Health Plan, Waltham, Mass., is an HMO that's learned how to cover the costs of treating the Medicare population, says Jon Kingsdale, senior vice president for planning and development. But he says Tufts lost money on its 10,000 Medicaid patients over the past three years. "Not a lot of plans break even, let alone make money, on Medicaid," he says.

Neighborhood, however, has done just that, managing to deliver health care to the poor and disabled without incurring big losses. While the state was cutting Medicaid HMO reimbursements by 11% in 1995 and an additional 9% in 1996, Neighborhood had a profit of about $750,000 on revenue of $88 million in each of those years. (Massachusetts Medicaid payments have begun to edge up again this year.)

As its name implies, Neighborhood Health Plan makes care accessible to low-income people through health centers and other sites near their homes. For the majority of its members -- mostly low-income women and children -- Neighborhood receives a prepaid fixed rate per patient from Medicaid. The plan keeps part of the money to pay for hospital care and extras like laboratory tests and turns the rest over to those who provide primary care, including the health centers.

The centers hire and train people from the local area who know the languages and customs of Boston's many immigrant communities. The centers' outreach workers find people who need immunizations, health screenings or prenatal care and see that they get it. The centers also forge relationships with small businesses, making insurance coverage available to many that can't find it elsewhere.

Seth Evans, president of Cooperative Home Care, a worker-owned home-health agency, says Neighborhood sold his agency group insurance coverage with only four people to start. And because many of his employees are in transition from welfare to work, the plan allows them to continue their coverage as their hours and eligibility fluctuate. Neighborhood has "been a godsend," says Mr. Evans. Evelyn Schickling, Cooperative Home Care's financial manager, says that while Neighborhood's rate of $188 a month per worker isn't cheap, other HMOs wouldn't do business with such a small group at all.

Last year, even though it was signing up 500 new members a month, Neighborhood felt financially vulnerable. Treasurer Mel Benson worried that with a net worth of only $19 million, the plan couldn't survive if it were to experience a cluster of particularly high-cost cases. Officials also had to have a more sophisticated information system to meet Medicaid requirements, so the board initiated talks with Harvard Pilgrim, based in Brookline, Mass., which consistently ranks high in national HMO quality-of-care surveys.

Under the agreement, Neighborhood will become an affiliate of Harvard Pilgrim and retain a separate board and responsibility for the community health centers. Harvard Pilgrim will provide $15 million over three years for expansion and computer systems in the health centers.

In addition, it will give Neighborhood $9 million to expand into outlying low-income areas of Massachusetts, including Springfield, Worcester, Lawrence, and Lowell. Over the next two years, all Medicaid administrative work will be consolidated under Neighborhood, though Medicaid patients can choose to receive their medical care at Harvard Pilgrim centers.

Also as a result of the affiliation, Harvard Pilgrim will become responsible for 300 additional late-stage AIDS patients. Most were infected through drug abuse, and it is considered risky to attempt to treat them with the new regimen that requires taking two to four dozen pills a day at precise intervals.

Nonetheless, under Dr. Master's Community Medical Alliance, deaths dropped to 12 per 100 AIDS patients in the first half of this year from 60 per 100 in 1994. And hospital use for such patients since 1995 has been cut to an average of five days from 15.

Likewise, in an article published in Managed Care Quarterly last year, Dr. Master showed that results for his severely disabled patients were better than those for a comparable population of traditionally treated Medicaid recipients in Ohio. Patients in the Boston program averaged 5.4 hospital days a year, compared with 9.9 days for those in Ohio.

Under a novel arrangement with the state Medicaid program, the Community Medical Alliance receives a fixed monthly rate from the state for each physically disabled enrollee. The Alliance gambles that it can cover the cost of care for the amount the state pays, and so far has been able to do so. Until a few months ago, the plan also assumed financial risk for the care of AIDS patients. But AIDS care has been changing so fast that the state has agreed to share any profits or losses until costs stabilize.

When the set-rate system began in 1992, the state gave the Alliance 95% of what it had been spending for the care of the patients. But the Alliance saved so much money through its new home-treatment system that the cost fell by $400 to $500 a month per person, leading the state to cut its payment rate. Last year, Medicaid paid the Alliance $1,681 per month for each disabled patient, far below its $2,300 average monthly expense for similar patients who were not in the HMO. AIDS patients cost more to care for, but the rate of savings is about the same, Dr. Master says.

Medicaid officials and patients give the plan high scores. Mr. Tierney, deputy director of Boston Center for Independent Living, says his spinal-cord injury has led to several serious illnesses since he's been enrolled in the plan. "Whenever I needed attention there was immediate response, day or night," he says.

But he says that when he heard that Harvard Pilgrim was swallowing his HMO, his reaction was, "Oh, no. " He worries that he will lose the personal attention he has now and will begin encountering delays in access to care and supplies.

But Dr. Mattingly of Harvard Pilgrim says there's no need to worry: "We won't walk away from the hard cases," he says.
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