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Partners posts $34m operating loss in 3rd quarter

Hit by a surge of more than 60,000 patients with higher than projected medical claims into its health insurance plan, Partners HealthCare posted a $34 million operating loss -- its largest quarterly operating deficit in years -- for the three months ending June 30.

But the state's largest hospital and doctors network, capitalizing on gains from investments and other non-operating income, still registered overall third-quarter net income of $47 million. That was down from $69 million in the corresponding period a year earlier.

While facing a tougher environment in both its health care and insurance businesses, executives at Boston-based Partners said the biggest financial drag on their operations in the April-to-June period was an $89 million operating loss at Neighborhood Health Plan, a Medicaid managed care insurance subsidiary that Partners acquired in October 2012. That loss included a $26 million accounting charge for a reserve to cover expected additional losses in the current quarter.

Peter K. Markell, the Partners chief financial officer and treasurer, said Neighborhood Health Plan has received an influx of 60,600 members from MassHealth, the state's Medicaid program, since Jan. 1.


The insurer is being reimbursed at rates set last fall by state actuaries, based on the health experience of MassHealth members previously enrolled in Neighborhood Health Plan. But Markell said actual medical claims from the new members have been much higher.

Neighborhood Health — along with Network Health and Boston Medical Center's Health Net Inc., two other Medicaid plans that have also seen an influx of higher-cost MassHealth members — has been negotiating with state officials over ways to ease financial burdens. Beside the higher than anticipated costs from new MassHealth members, those burdens also includes unexpected expenses from a new hepatitis C drug and problems with the state's health insurance website.

"We would like them to mitigate some of the losses we've incurred in 2014 and correct the situation going forward," Markell said.


A spokeswoman for MassHealth said state officials weren't immediately available to discuss the situation.

Neighborhood Health Plan president Deborah C. Enos said her organization had expected to add a smaller number of new members as MassHealth recategorized members under provisions of the federal Affordable Care Act, switching many from state insurance programs to plans administered by the Medicaid managed care organizations.

"We clearly didn't expect as many as we got, and what we certainly didn't expect was the (health care) utilization and cost patterns," Enos said. "We got fixed rates that did not anticipate the actual costs being incurred by the new MassHealth members."

Robert Weisman can be reached at robert.weisman@globe.com. Follow him on Twitter @GlobeRobW.