One of California's largest buyers of healthcare services says it will take a long look at contracting directly with doctors and hospitals in the future.
Disappointed in its latest contract negotiations with health plans, the Pacific Business Group on Health says it will conduct a feasibility study of direct contracting next year and examine models in use at other organizations.
The business group negotiates health-plan contracts for 32 large employers with three million employees and dependents. As such, its impact on the market is considerable. With $3 billion in annual healthcare expenditures, its members make up about 5% of the overall California healthcare market. Its premiums for 2000 will rise about 10% on average, says PBGH spokeswoman Tama Donaldson.
"We don't expect to be contracting directly with providers in the short-run, but we will explore ways to encourage employees to choose organizations offering high-value healthcare," Donaldson says. "We also will be exploring other ways to ensure premium dollars are useful."
One initiative in the works, known within PBGH as quality-related provider payments, would reward providers for their efforts to improve quality of care, Donaldson says. The organization has been talking with providers about the concept but has yet to work out the details.
Direct contracting -- which allows providers to bypass health plans and negotiate directly with payers -- also has been discussed by the California Public Employees Retirement System. CalPERS negotiates the health coverage of 1 million state employees, retirees and their dependents.
The organization doesn't have immediate plans to pursue the matter but is likely to explore it further, says Edward Fong, public affairs manager.
"Direct contracting with medical providers is a concept our board and staff believe is worthy of serious consideration," Fong says.