Breaking News: Cambridge Health Alliance, Network Health In Partnership Talks With Tufts

WBUR's Martha Bebinger reports:

Network Health is owned by Cambridge Health Alliance (CHA) and has recently been one of the few profitable parts of that network.

The deal would give CHA some much needed cash for Cambridge Hospital and help its health plan expand. The deal would let Tufts expand into the Medicaid market. Tufts CEO James Roosevelt, Jr. says the talks with Network Health are “completely separate from any conversations with (its proposed merger partner) Harvard Pilgrim Health Care.

Here's the letter from Dennis Keefe, CEO, Cambridge Health Alliance, to employees:

TO: CHA Employees
FROM: Dennis Keefe
Date: February 23, 2011
RE: Important Announcement

Months ago, when I confirmed that we were exploring the possibilities of forming partnerships with other institutions I promised that I would try to inform you of developments when I could and asked that you ignore any rumors until you hear something directly from me.

Well, now I have something exciting to report and I think you’ll find it good news.

In addition to discussions about delivery system partners, we have been exploring strategic and financial partnerships for Network Health. We are currently at a stage in discussions with one potential partner, Tufts Health Plan that may result in us reaching a definitive agreement by which Tufts would make a significant ownership investment in Network Health, our managed care plan. While details are still being worked out, Tufts would likely become a majority owner of Network Health while CHA would retain an ongoing ownership interest.

If consummated, this partnership meets the criteria we set months ago to help guide our search for a partner and has many short-term and long-term benefits to both CHA and Network Health. While we have had multiple conversations with potential partners, the Tufts proposal rose to the top and contained the most beneficial elements including alignment of our respective missions, a local history, and commitment to the citizens and state agencies of Massachusetts.

CHA is on a journey to transform its health care system into a high-performing, high-value Accountable Care Organization (ACO) with a Patient Centered Medical Home clinical care model. This relationship will enhance the delivery system’s ability to provide better care to its highly diverse patients and achieve its vision of becoming the premier academic public health care system in the nation. CHA is evaluating a number of potential affiliations and partnerships to meet its current and future needs.

Network Health offers Tufts a growth platform in the public insurance market and will fit quite nicely in its plans to provide a broad continuum of products for consumers in Massachusetts. A financial stake in Network Health will allow Tufts to diversify and expand its business.

Culturally and philosophically, Tufts and Network Health appear compatible, which will facilitate strategic and operational integration efforts. I have known Jim Roosevelt, the Tufts Health Plan CEO, for a number of years and I believe he is both dedicated and committed to improving the health of his members and the Commonwealth.

Currently, Tufts is not organized to serve the Medicaid and Commonwealth Care markets. They do have a significant presence in the Commonwealth Choice program. Tufts leadership has stated their interest in acquiring the expertise of the staff and leadership at Network Health. Network Health has approximately 400 employees, a relatively small staff for the size of its business.

For CHA, the transaction would provide capital to support some deferred and strategic investment needs for the delivery system. The partnership would also create an opportunity for shared learning and support for managing global payments, as well as the ability to share in ongoing future revenue streams and jointly develop new lines of business. A Network Health-Tufts Health Plan partnership would represent an important first step in positioning our delivery system for the future. Our long-term goals, as you know, are geared toward participation in new Accountable Care Organizations and global payment models and they require resources and expertise that Tufts can help supply.

Most important, Network Health members and potential members are likely to respond extremely favorably to the opportunity to be part of a health plan with such broad and positive brand recognition. Tufts is a premier brand that will represent dignity and respect to Network Health’s low- and moderate-income populations, just as it does in its current market segments. It has excellent provider relationships in its own network, and a partnership is likely to gain broad provider acceptance with relative ease.

I’m sure you will have many questions about the proposed transaction as it evolves in the coming weeks, and you can be certain that I will be talking about it a lot in future memos to staff. Personally, I can say that I am tremendously excited about this potential partnership and believe the measurement of its success will be in the satisfaction, security and support it will bring to the people we serve.

Dennis

And here's a statement from Tufts Health Plan CEO, Jim Roosevelt:

As leaders of a nonprofit health plan, I, other members of the senior management group, and our board of directors, believe that it is our responsibility to explore opportunities that expand access to high quality, cost effective health care through government-funded programs.
With that context in mind, I want to inform you that we are currently in conversations with Network Health about the possibility of a relationship. Network Health is a subsidiary of Cambridge Health Alliance, a safety net hospital and provider system caring for vulnerable populations. It offers managed care plans to approximately 170,000 members through a managed Medicaid product and the Commonwealth Care program. We do not currently participate in these market areas. While discussions with Network Health are still in the early stages, we envision a relationship that would allow the team at Network Health to continue to do what they do best while we also bring our best practice experience to bear.

Keep in mind there has not yet been a Tufts Health Plan board vote. To reach an agreement or to identify whether or not this is the right fit for either organization, there must be a due diligence period. Moreover, if an agreement were ultimately reached, we would need to submit all appropriate information to regulators for their review.

I want to be clear about a couple of important points. Our conversations with Cambridge Health Alliance have been ongoing for many months, completely separate from any conversations with Harvard Pilgrim Health Care, as we continue to be competitors until a merger process is complete. Please note that we do not currently participate in Medicaid programs. Likewise, Harvard Pilgrim does not currently participate in Medicaid programs. Certainly, the coincidental timing of these conversations with the signing of our Memorandum of Understanding with Harvard Pilgrim Health Care has created a great deal of activity and news interest. We expect news coverage about our discussions with Network Health online later today and in tomorrow’s papers.

From an operational perspective, there are a few small, highly focused teams involved in pursuing our due diligence with Harvard Pilgrim, and a small number of individuals involved in the conversations with Network Health. This approach ensures that the vast majority of you are continuing your focus on providing the highest levels of service to our current members, which is as it should be.

This is potentially exciting and good news, and I wanted you to hear it from me. Again, this is preliminary and I will keep you updated as there are any developments to report.