Transaction Announcement: Partners Healthcare Signs LOI to Acquire Neighborhood Health Plan

Benning Associates is serving as investment banker to Neighborhood Health Plan.

Boston Globe (Aug 11, 2011) - Partners HealthCare System Inc., the state’s largest hospital and physicians network, has signed a letter of intent to acquire Neighborhood Health Plan, a Boston-based nonprofit that insures more than 240,000 mostly low-income residents across Massachusetts.

Under the deal, which would give Partners a foothold in the health insurance business, no money would change hands. But Partners would contribute an unspecified sum to provide grants to more than 50 community health centers affiliated with Neighborhood Health. Partners would also work with the insurer and health centers to provide better medical care more efficiently to the urban poor in Boston and other cities, the parties said.

“We are making a critical long-term commitment to take care of this population,” said Dr. Gary L. Gottlieb, chief executive of Partners, which owns nine hospitals in the Boston area. “As we look at the downward pressures on Medicaid dollars and other subsidized products … we are very concerned and want to make sure there are not barriers to our institutions. We want to make sure care is accessible to everyone.”

Deborah C. Enos, president of Neighborhood Health, said the 25-year-old insurer has been weighing the benefits of an alliance as the health care industry consolidates. It has been talking to potential partners for several months, she said. The majority of Neighborhood Health’s members receive coverage through state programs, such as Medicaid and Commonwealth Care, which provide health insurance for low-income residents.

“This is an opportunity for us to look forward and position Neighborhood Health Plan to be better situated in the future,” Enos said.

It would not be the first time a health care provider and insurer have joined forces. Several hospitals in Massachusetts, including Boston Medical Center, Cambridge Health Alliance, and Baystate Health in Springfield, also have insurance operations. And in Pennsylvania, insurer Highmark Blue Cross Blue Shield plans to affiliate with a local health system.

Enos said Neighborhood Health is working toward negotiating a definitive agreement with Partners by late October. The deal would require approval by state Attorney General Martha Coakley, the state Division of Insurance, and the US Department of Justice.