The state Department of Business Regulation is now overseeing the operations of Harvard Pilgrim Health Care of New England’s Rhode Island operations. The technical term is “administration supervision.”
What it means, according to Thomas Schumpert, director of the Department of Business Regulation, is that while Harvard Pilgrim’s management remains in place, the state – for at least the next 60 days – will “have oversight over the decisions that management makes.” Harvard Pilgrim, according to the DBR order, “is not in compliance with the minimum capital requirements of Rhode Island General Laws.”
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DBR now has staff on site at Harvard Pilgrim offices here in Rhode Island.
Schumpert explained at a press conference last Wednesday afternoon that DBR routinely examines all of its license holders. During the past year, it has been in close contact with Harvard Pilgrim, he said.
Any concern about Harvard Pilgrim’s financial status was expedited in recent weeks as its Massachusetts parent disclosed $54 million in losses in 1998 – many occurring in Rhode Island.
The losses are continuing in 1999. As a result, the parent will discontinue all financial ties to its Rhode Island plan by the end of the year. As a result of that news, DBR called in a Dallas-based consultant, The Pace Group, to further examine the situation.
Schumpert made it clear that Harvard Pilgrim policyholders should experience “business as usual.” They should see the same doctors, he said, and their bills will be paid. As for the long-term, Schumpert said he hoped that a positive outcome would be reached.
“The best outcome is a sale to a buyer who would continue, and in fact, enhance the programs,” said Schumpert.
Patricia Nolan, director of the Rhode Island Department of Health, said her department would be watching the situation closely and would respond to any consumer complaints.
There is always a concern that people who are entitled to benefitsthat they are able to obtain them,” she said. “We will monitor that.”
Schumpert said the 60-day term on the “administrative supervision” could be extended if necessary. He also said that Harvard Pilgrim management had voluntarily accepted the terms and conditions of DBR’s order. Just some of the terms of that order include:
During the period of supervision, the commissioner or his or her designated supervisors shall serve as the administrative supervisor;
Harvard Pilgrim shall continue to cooperate with DBR in connection with the ongoing examination.
During the period of the supervision, Harvard Pilgrim shall not do any of the following without the commissioner’s written approval: dispose of, convey, or encumber any of its assets or its business in force; withdraw any of its bank accounts; lend any of its funds; invest any of its funds; transfer any of its property; incur any debt, obligation or liability; merge or consolidate with another company; approve new premiums or renew any policies.
Harvard Pilgrim shall cease enrollment of new commercial members and Medicaid recipients without the prior consent of the commissioner.
All documents and records in the possession of Harvard Pilgrim, its agents or representatives shall not be removed, transferred, altered or disposed of
“This action is necessary and appropriate in order to protect Harvard Pilgrim members,” Schumpert said.
Schumpert said that this is the first time such an action has been taken against an HMO doing business in Rhode Island. When pressed as to why Harvard Pilgrim’s problems had gotten to the point where DBR had to step in, Schumpert chose his words carefully.
“It is difficult to provide top quality service and be profitable,” he said.
Harvard Pilgrim released a prepared statement following the DBR press conference.
It read, in part; “We believe this is an appropriate move, all things considered, and was done with HPHC-NE’s consent. It follows a series of discussions we have had with Rhode Island regulators about HPHC-NE’s operations and financial condition over the past two months. There will be no change in our members’ care or coverage as a result of this order.”
