Harvard Pilgrim, Tufts Health Plan End Merger Talks

John Commins, March 4, 2011

After six weeks of due diligence, Harvard Pilgrim Health Care and Tufts Health Plan jointly announced Friday that they will not merge.

The two nonprofit health plans signed a non-binding memorandum of understanding on Jan. 25 as the first step in a possible merger of the organizations. The MOU authorized a due diligence period for both organizations. During the due diligence period, however, the two plans said it became apparent that the savings and efficiencies they wanted would be more difficult to achieve than initially envisioned and the integration of the two organizations would be more costly and time-consuming than anticipated.

"As a result of this process, we have now determined that we are stronger as individual competitors than one company," said Eric Schultz, president/CEO of Harvard Pilgrim Health Care. "Both organizations will continue their work to keep high quality healthcare accessible and affordable, while at the same time investing in community programs and initiatives."

Harvard Pilgrim Health Care, and Tufts Health Plan are the second- and third-largest health insurers in Massachusetts, respectively, behind Blue Cross Blue Shield of Massachusetts. The combined plan would have had 1.9 million policyholders, with operations in Massachusetts, Maine, New Hampshire, and Rhode Island.

Tufts Health Plan CEO James Roosevelt said the due diligence process gave both plans an opportunity to see if they were compatible. "We made the thoughtful determination that while we are in the same business, our operations are very different and, in many important aspects, not fully compatible without significant changes to existing processes and applications," Roosevelt said.

"Based on the information we have received in the due diligence process, we now believe this decision is in the best interest of those we serve: our members and customers. We walk away from these discussions with great respect for the leadership at Harvard Pilgrim Health Care and remain respectful competitors in the Massachusetts market," he said.

John Commins

John Commins is a senior editor at HealthLeaders Media.

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