Save Harvard Pilgrim

Harvard Pilgrim Health Care (HPHC), Massachusetts' largest health management organization (HMO), has been in desperate straits since last month when the state placed it under receivership for its huge losses in the fiscal year 1999. Now HPHC is waiting to hear whether the necessary investors can be cajoled into bailing out the non-profit HMO. One of those investors is Harvard University.

Although the University has not yet declared that it would invest in the ailing HMO, it has spent the last few days attempting to persuade investors to help save the company that Harvard helped create in 1969. Following a common sense business strategy, Harvard is playing it safe by requesting that other investors come forward before fully committing to any bail-out plan.

HPHC is one of three major HMOs in the state. If HPHC is dissolved, its 1.1 million subscribers--which include many Harvard employees--will be turned over to other health-care providers. This reduced competition could result in higher premiums and poorer care. It would also mean the loss of what once was a premier non-profit HMO in the country, a valuable counter-balance to the powerful for-profit HMOs that dominate the health-care industry. Massachusetts Attorney General Thomas F. Reilly has rightly expressed a preference to keep the HMO a non-profit organization, so that premiums can be returned to doctors and hospitals.

Harvard's current proposal calls for investment from major employers in the state and looks to be a viable answer for the time being, especially now that the state has rejected a proposal in which hospitals to whom HPHC is deeply in debt would invest in the HMO. The state has refused to guarantee loans the hospitals would take out in order to fund their investment.

While the state is correct in refusing to put taxpayers' money at risk in guaranteeing these loans, we hope that the state will work hard to make Harvard's proposal happen. Of course, we know any bail-out plan must be accompanied by administrative reform if HPHC has any chance of becoming financially stable. The University should make clear that any investment on its part is contingent upon a reorganization of the HPHC's administrative structure.

It is unclear whether HPHC, from a business perspective, is a sound investment. Other for-profit health management organizations have displayed a lack of interest in the financially shaky HMO. But HPHC is in debt to Harvard's teaching hospitals, as it is to health care providers across the state, and it is most likely in Harvard's interests to keep the HMO afloat.

Harvard has had the foresight to invest in good causes in the past, recently loaning money for affordable housing in the Boston area. From a business perspective HPHC, with its high risk and low short-term returns, might not be the most attractive investment. But Harvard, as a responsible and interested member of the community, should look further into the future. So long as there are sufficient guarantees of eventual turn-around in HPHC's financial outlook, Harvard should continue to financially and publicly support the HMO.