The Boston area has seen a lot of hospital merger and acquisition activity in recent years, some of it successful, some not. Now two not-for-profit health plans are merging, chasing the same goal of scaling up and reducing costs through streamlining administrative processes.
Tufts Health Plan and Harvard Pilgrim Health Care, both based in the Boston metropolitan area, announced their merger on August 14. The new organization, which will have a new name, will be one of the largest not-for-profit health services organizations in the Northeast, serving nearly 2.4 million members in Connecticut, Maine, Massachusetts, New Hampshire and Rhode Island.
Tufts Health Plan offers managed care products and services to its 1.16 million members in Massachusetts and Rhode Island.
Harvard Pilgrim and its affiliates provide health benefit plans, programs and services to approximately 1.2 million members and 1.5 million other customers in New England and beyond. It ended merger talks with Boston-based Partners HealthCare in 2018.
This merger comes amid active M&A activity among some Boston’s major health systems, such as the Beth Israel Deaconess Medical Center and Lahey Health merger that was announced in July 2017 and closed in May 2019. Through 2018, Partners HealthCare worked unsuccessfully to acquire Care New England Health System, based in Providence, Rhode Island. The deal was abandoned in June 2019 after Rhode Island Governor Gina Raimondo asked CNE to try to work out an agreement with nearby Lifespan and the medical school at Brown University. CNE decided not to pursue those talks in July 2019.
Both Tufts Health and Harvard Pilgrim held merger talks once before, back in 2011. The Affordable Care Act was enacted in March 2010, and the managed care landscape was changing rapidly. In 2011, Cigna (NYSE: CI) paid $3.8 billion to acquire HealthSpring, Inc. (then NYSE: HS), which had 340,000 members in Medicare Advantage Plans and 800,000 more in allied services in 11 states. UnitedHealth Group (NYSE: UNH) paid $2.0 billion in cash for XLHealth, a Medicare Advantage plan serving 113,000 members in six states, then owned by MatlinPatterson Global Advisors. Aetna ( then NYSE: AET), Cigna and Humana (NYSE: HUM) each announced two deals of the 20 deals recorded that year.
The following year brought even more consolidation, 29 transactions, most of those announced after a June 2012 U.S. Supreme Court decision that upheld the constitutionality of the ACA. Aetna bought Coventry Health Care (then NYSE: CVH) for $7.3 billion. WellPoint, Inc. (NYSE: WLP) paid $4.9 billion for Amerigroup Corporation (then NYSE: AGR) and Humana picked up Metropolitan Health Network from New MainStream Capital for $4.3 billion. Those were the years.