Countering the common view that employers don't look much beyond cost when shopping for employee health plans, major California purchasers are spending time and money to ensure HMOs improve quality of care.
Employers' efforts to improve quality come as HMOs are resisting purchasers' push to lower rates, somewhat of a reversal of the trend for the past several years.
For 1997, premium rates will be flat for the 15 HMOs that serve employers belonging to the Pacific Business Group on Health, compared with average premium reductions of 4.3% in 1995 and 9% in 1994. The PBGH is a not-for-profit coalition of 33 public and private purchasers that spend a total of $3 billion on healthcare annually.
The California Public Employees Retirement System, a large member of the PBGH, won an average rate reduction of only 1.5% for 1997 vs. 5.2% for 1996, a spokeswoman said.
But employers aren't paying for higher quality through higher premiums. Cheryl Damberg, the PBGH's director of research, said the group wasn't able to negotiate lower premiums this year for a number of reasons, but quality-improvement initiatives wasn't one of them. One key factor was the possibility of rising healthcare inflation. The PBGH is "paying the same amount as last year," which is still a coup in healthcare, she said.
Since 1994, the PBGH has been negotiating a financial incentive with HMOs to improve quality. Plans agreed to set aside 2% of annual HMO premiums paid by PBGH employers, which totaled $400 million in 1994, for quality improvement. "For any plan that has significant enrollment, that can be a large sum-enough to grab their attention," Damberg said.
Plans agreed they would keep the set-aside only if they met individualized performance targets that relate to customer service and other quality measures. So far, plans haven't met the targets and have had to return money from the set-aside to the PBGH, Damberg said. She declined to give details.
The PBGH would like to raise the set-aside to more than 2%, but that would have to be negotiated with the plans. "You have to have the financial incentives aligned with your performance objectives. So if we're focusing around quality, we need to make it attractive to do financially," Damberg said. "We want to place more dollar value on quality."
Marianne De Luca, director of benefit planning and actuarial services at Pacific Telesis and co-chair of the PBGH's negotiating alliance, acknowledged the changing emphasis from price to quality. "While we are continuing to keep healthcare costs in check, price-based competition is shifting to competition based on quality of care and customer service," she said.
"In our three-year history of negotiating with health plans, each year a larger part of our discussions center on quality-how we can define it, measure it and ensure that employees, their families and our retirees are getting high-quality care," De Luca said. "We are not merely a cost-focused group."
Recently the PBGH released its first report summarizing more than a dozen projects to measure and improve healthcare quality. The report describes programs that measure quality of health plans, hospitals and other providers; use quality measurements and information in negotiations with health plans and for consumer education; and assist employers with their quality agenda (See chart).
PBGH member companies are funding the quality projects in part through a special quality improvement fund, which now totals more than $1.5 million.
Among the projects are two surveys, the Health Plan Value Check Survey and the Physician Value Check Survey. Since 1989, the health plan survey has been mailed to more than 300,000 employees yearly. The results are given to plans and employers and released in a report-card format to help employees decide which plan to choose.
The physician survey, which is being conducted for the first time this year, evaluates patient satisfaction with providers in 55 participating physician groups.
Another project involving shared healthcare decisionmaking helps consumers weigh treatment options via videotapes developed by the Foundation for Informed Medical Decision Making, a national, not-for-profit organization.
The Coronary Artery Bypass Graft Mortality Reporting Program collects and reports mortality data for all California hospitals that perform the procedure. The PBGH is partnering with California's Office of Statewide Health Planning and Development to develop the program. Data will be reported to providers, purchasers and consumers.
The PBGH's newest project is the launch of a World Wide Web site as part of its Consumer Information Hub program. The site will contain a wealth of information on health plans and providers as well as healthcare tips such as guidelines for preventive care.
"We want to empower consumers, to help them choose on the basis of quality," Damberg said. "Employers have been giving employees limited pieces of information. The Web site will be the first time all of this information has been pulled together."
Available this month for PBGH members, the site will become public in January, she said.
In a separate effort, last month, CalPERS launched two programs with Health Net-the HMO of Woodland Hills, Calif.-based Health Systems International-to improve quality of care. They are the first quality partnerships between CalPERS and an HMO, and the purchasing group hopes they will serve as models for programs with other HMOs.
"In the last four years, CalPERS has worked steadily and progressively to obtain the best value for the least cost" and has obtained cost savings for members each year, said Kurato Shimada, the group's health benefits committee chairman. "We are now putting into action the first of a series of programs with the potential for creating quantum-leap improvements in the quality of care."
In the Cardiovascular Disease Assessment and Intervention Program, Health Net will survey 93,000 adult CalPERS members to estimate the risk of cardiovascular disease. Health Net will develop and implement interventions in partnership with its medical groups to reduce members' cardiac risk.
In the Specialty Referral Project, Health Net is working to improve the process primary-care physicians use to refer patients to specialists.