Harvard Pilgrim Put in Receivership
A judge placed financially strapped Harvard Pilgrim Health Care into receivership Tuesday after the HMO said it underestimated 1999 losses by tens of millions of dollars because of accounting errors.
Attorney General Thomas Reilly sought the order after Harvard Pilgrim said its projected losses for 1999 would total $177 million, above its initial estimate of $100 million, The Boston Globe reported Tuesday on its Web site. Under the order, state insurance commissioner Linda Ruthardt will temporarily oversee the nonprofit, which is the state's largest health maintenance organization.
State regulators have 30 days to come up with a plan to reverse the HMO's financial slide, the Boston Herald reported on its Web site.
Reilly said he sought the court in order to block the HMO's creditors from seeking payment from Harvard through federal bankruptcy. Such a move could force the sale of Harvard's assets and possibly disrupt patient care, Reilly said.
``Our immediate concern and objective was to prevent a disruption of patient services,'' Reilly said. ``Patients can be confident tomorrow that their health care coverage remains in effect.''
The court order was approved Tuesday by the chief justice of the Supreme Judicial Court allows Harvard Pilgrim to continue to operate and provide care for its 1.1 million Massachusetts members, Reilly said.
The request for the court order came after Harvard Pilgrim officials met with the Division of Insurance on Tuesday morning to report the additional losses, said company spokesman Alan Raymond.
Harvard Pilgrim chief executive Charles D. Baker said medical expenses from different parts of the company weren't recorded in the company's general ledger.
The past accounting errors came to light as the company was preparing for a $147 million state bond deal approved by the Massachusetts Health & Educational Facilities Authority, Raymond said. Under terms of the deal, designed to help the insurer regain financial health, Harvard Pilgrim planned to sell eight of its properties to an entity set up by the state and lease back the space.
Robert Ciolek, head of the Health & Educational Facilities Authority, said the state's move halted the bond sale. ``This stops the financing in its tracks,'' Ciolek told the Boston Herald. ``It's a shame. We think this was an important element of their turnaround.''
The bonds had been presold and the transaction was to be completed next week, company officials said.
Baker has insisted the insurer would regain financial stability despite losing $94 million in 1998. The insurer recently closed its Rhode Island operations, leaving about 125,000 people scrambling for new insurance.
SOURCE: Associated Press via NewsEdge Corp.