State Attorney General Considers Harvard Plan

Massachusetts State Attorney General Thomas F. Reilly is considering a new Harvard proposal to rescue the financially-troubled Harvard Pilgrim Health Care.

In the plan, which University officials said was at the conceptual stage, employers who provide health care through Harvard Pilgrim would invest in the HMO to keep it afloat.

Reilly on Friday said he favored this this new concept, which was put forward by University Vice President for Community Affairs Paul S. Grogan and university management. The Associated Press reported Reilly rejected an alternate plan, in which hospitals would bail out the HMO. Reilly said the plan for hospital-funded aid, which called for taxpayer-backed loan guarantees, did not provide a solution for potential future problems.

The idea of employers who use Harvard Pilgrim to bail out the HMO was hatched after informal consulation with the companies involved, Harvard spokesperson Joe Wrinn said.

"There isn't a plan per se," said Wrinn. "It's a concept to try to expand the circle that had been currently operative in order to include other large industries that would be affected far more than Harvard would."

"Nobody wants to throw money at something that's broken without fixing it," Wrinn said.

Under the concept proposed by Harvard, private investors will provide $175 million, and real estate sales will account for the rest of the money.

Harvard Pilgrim, which lost $197 million in 1999, needs $300 million before it can be considered financially secure enough to resume operations.

While the plan was proposed by the university, Reilly will ultimately decide the details of its adaptation because the state holds the HMO--Massachusetts's fifth largest--in receivership.

Five thousand Harvard employees--and five thousand of the employees' relatives--are covered by the plan.

The university's interest in proposing the plan is two-fold, said Wrinn. Harvard wants to ensure quality medical care for its employees, he said. But the Harvard proposal would also have a broader effect: a strong Harvard Pilgrim would help teaching hospitals, which affects the Harvard Medical School (HMS).

There are 17 Harvard-affiliated teaching hospitals in the Boston area, and hospitals' financial health affects "what the hospital can do and how it relates to Harvard," Wrinn said.

And there is one final tie: three decades ago, a group of HMS affiliates--notably then- Dean Robert H. Ebert--helped create the HMO that would eventually become Harvard Pilgrim. Currently, some HMS students are residents in a program offered jointly by Harvard Pilgrim and an affiliated hospital.