Add business coalitions to the list of groups physicians should put on their radar screen. The reason: Employers that originally aligned with one another to optimize their clout in fighting healthcare cost increases now want to be quality watchdogs as well.
Many doctors "don't even know of the existence of employer coalitions, and if they do, they think of them as just another controlling body" like HMOs or the government, says Gregory Larkin, M.D., medical director of Eli Lilly & Co. in Indianapolis and a board member of the Chicago-based Midwest Business Group on Health.
But the average doctor might do well to pay closer attention. "They really ought to understand what these coalitions are about," says Peter Wald, M.D., medical director of ARCO, a Los Angeles oil company that's a member of the San Francisco-based Pacific Business Group on Health.
The MBGH and the PBGH are among the scores of employer coalitions -- large and small -- that have sprung up across the U.S.
"A lot of these groups are a natural evolution of players feeling isolated in their market," says Karen Hertz, a spokeswoman for the Washington-based National Business Coalition on Health, which comprises more than 100 coalitions that represent 8,000 mid-sized to large employers with 35 million enrollees.
Most coalitions have the single purpose of lowering the healthcare insurance premiums they purchase. In 1990, according to data published last October by theWall Street Journal, the average total health benefit cost for active and retired employees went up nearly 18%. In 1993, it increased 9%, and the following year, it actually decreased 2%. (Since then, it has gone back up but only marginally.)
While no one can say coalitions were solely responsible for the slide, most experts feel they played a key role. The Journal touted the "enormous impact" of the coalitions and called them "a major force . . . on both economic and medical criteria."
"They're very effective," says Jim Waller, a Kaiser Permanente vice president who sits across the bargaining table from the PBGH and the California Public Employees' Retirement System. "You cannot ignore their power and visibility."
Just last summer, CalPERS and Kaiser engaged in a war over the size of the HMO's proposed premium increase. After a tense standoff, Kaiser was forced to reduce its rate hike for CalPERS' 1 million enrollees.
As experts predict a new era of spiraling premiums, costs continue to be a concern of coalitions. The American Management Association, a New York-based network of more than 70,000 managers, last November warned employers of "sharp upward pressure on healthcare costs. The party is over."
Today, however, coalitions are expanding their horizons beyond cost concerns. They're suggesting -- if not insisting -- that health plans and provider groups collect that new coin of the realm, data.
Wald, who chairs the PBGH's data committee, says information is a prerequisite for the things everyone -- doctors, employers, health plans and patients -- wants: outcomes measures, clinical pathways and protocols, performance guarantees and full-blown disease management programs. Such efforts are rudimentary, but they're starting to show promise.
At the MBGH, a task force helps members identify improvement opportunities by teaching them how to collect health data and document variations in hospital care and costs.
The Orlando-based Central Florida Health Care Coalition has saved its member companies some $300 million in recent years through quality improvements, and that's "not just a result of squeezing dollars," says Becky Cherney, the group's president and chief executive officer.
As Kaiser's Waller observes, "When they first started to pull together, (coalitions') spin to member companies was, 'Join us because we can negotiate a better price with the carrier than you can.' " Now, he says, coalitions "also see themselves as the healthcare watchdog."
As coalitions seek the next stage of their evolution, other strategies are emerging. One is to create larger purchasing consortiums and alliances. Some coalitions are locking in multiyear rate guarantees, which they hope will protect them from inflation. Employers are exploring direct contracting with providers.
All these tactics are tentative, and what works for one group may not work for another. Direct contracting may succeed in a compact region, like Minneapolis, where the Buyers Health Care Action Group is achieving renown for its direct contracting process.
"But a multicity employer . . . may find it easier to have a contract with a large HMO, instead of arranging a provider network in every community," says Thomas Bodenheimer, M.D., an internist on the University of California San Francisco Medical School's clinical faculty.
Perhaps the most successful model for purchasing clout arose in January 1990 when Tom Elkin went to work for CalPERS. Premiums had gone up 45% in the previous three years, and no one knew what to do. CalPERS then represented some 850,000 employees of the state, cities, counties and other businesses. But using all those chips to hold health plans' feet to the fire hadn't occurred to anyone.
"So I sent our 22 HMOs a letter," Elkin says. "I asked them to demonstrate
their efficiency and management ability by holding their premium increases to
Elkin says he'll never forget the plans' responses. "Three responded by agreeing to a 0% increase for the coming year. Two others actually proposed a reduction." Negotiations with the remaining 17 plans also resulted in lowered increases, he says.
According to CalPERS, its average rate hike was 17.9% in 1990-91. By 1993-94, rates actually decreased, and they continued to do so for the next three years.
Elkin, who now is vice president of Birch and Davis, a Silver Spring, Md.-based healthcare management company, concedes that couldn't happen in today's environment. Yet he says he came to understand the leverage large purchasing groups could have in influencing the cost of health insurance premiums.
Not surprisingly, some doctors take less kindly to employer coalitions. "We have two chairs in our office -- one for the patient and one for the physician -- and we don't need that third chair," says Percy Wootton, M.D., a clinical cardiologist in Richmond, Va., and American Medical Association immediate past president.
Eli Lilly's Larkin warns, "If there are purchasing groups out there whose sole intention is to whittle down to the least expensive benefit possible, that's not good for anyone, doctors included."
On the other hand, Wayne Burton, M.D., believes most coalitions are balanced. Burton has what he calls "a foot in three camps." He's an internist on the staff of Northwestern Memorial Hospital in Chicago; he's a purchaser through his job as medical director of First Chicago NBD, a financial services holding company that buys $100 million worth of health insurance for 35,000 enrollees; and he's a former MBGH board chairman.
"An enlightened employer," Burton says, will realize the need to boost reimbursement rates enough to invest in things like prevention -- but not so high as to break the bank. He says this is "the one time in the history of medicine when everyone's goals are aligned."
Marilyn Bell, president and CEO of the Southwest Michigan Healthcare Coalition, whose 44 employer members cover 50,000 enrollees, is optimistic about coalitions' future. "In five years, we'll be doing purchasing for large employers, small employers, Medicaid, Medicare and individuals, " she says.
Bell believes forming one large, regional purchasing cooperative is the only way to stop cost-shifting, spread the risk and create true population-based coverage. The concept she anticipates is reminiscent of the purchasing alliances envisioned in the ill-fated Clinton healthcare reform scheme.
Is it a case of what goes around, comes around? "No," replies Bell. "This time, it will be voluntary."
Steven H. Heimoff is an Oakland, Calif.-based writer who specializes in healthcare business topics.