University May Invest in Troubled HMO
The University is among a group of potential investors recruited by the Massachusetts attorney general's office to rescue troubled Harvard Pilgrim Health Care, University spokesperson Joe Wrinn said yesterday.
Wrinn declined to comment on the specifics of any plans, including from where potential funding for any investment might come.
A story in yesterday's Boston Globe reported that Harvard "has told the Massachusetts attorney general it is interested in helping rescue its brainchild by loaning the HMO millions of dollars."
According to the Globe, "Harvard officials and other sources yesterday confirmed the university's interest in a proposal to keep 'the Harvard plan' nonprofit through a money-raising deal involving major Boston teaching hospitals, the data processing company Perot Systems, and other investors... Investors are being asked to lend money in exchange for IOUs called 'surplus notes,' or surplus bonds."
Wrinn emphasized that the University is not a "principal investor."
"Harvard is at the table, but it's a big table with a lot of chairs around it," Wrinn said. "Whatever is involved with Harvard Pilgrim Health Plan, whatever ultimately happens--Harvard will not be the principal investor if it indeed at all chooses to invest in it. The health of Harvard Pilgrim is not directly tied to Harvard University's interest in it."
Wrinn said that although the University did have some involvement with the health plan's beginnings three decades ago, Harvard's relationship with Harvard Pilgrim has never been fiduciary.
"Because of the name, there's an inference that we're responsible for Harvard Pilgrim Health Care, and we are not," Wrinn said.
Harvard Pilgrim is the area's largest Health Maintenance Organization. Early this year, the organization found itself faced with huge losses from 1999--losses that prompted Massachusetts officials to place Harvard Pilgrim into receivership.
Officials are now attempting to avoid Harvard Pilgrim's liquidation by the government.
The Globe reported that Harvard officials--as well as representatives from another possible investor, Perot Systems--met with state-hired investment bankers at a law firm in Boston Saturday.
The plan--as described by the Globe--calls for investors to exchange funding for "surplus notes," which would benefit investors through high interest rates. Investors would be assuming a significant amount of risk--and would not be able to sell their bonds. The plan would have to include the sale of 14 Pilgrim-owned buildings, currently leased to the medical group Harvard Vanguard.
The bankers proposed a plan to salvage Harvard Pilgrim, sources familiar with the talks told the Globe. But the plan's feasibility seems questionable. According to the article, Mass. Attorney General Thomas F. Reilly said the alternatives to the plan are selling Harvard Pilgrim to a for-profit insurance company and liquidation.
Company officials did not return calls for comment yesterday.