Direct contracting with healthcare providers has been the ambitious but elusive desire of purchasing coalitions in recent years, but three small employer groups in western Michigan have achieved that goal.
The three groups-Healthcare Partners Coalition in Holland, Healthcare 2000 in Grand Rapids and the Muskegon Area Alliance for Quality Healthcare-have merged into a single healthcare purchasing organization representing 95 employers and 120,000 employees.
The new group is called the Regional Employer Alliance Health Coalition, or Real Health.
With $400,000 in start-up money from its employer members, Real Health obtained a health plan license from the state and cobbled together a network of nearly 1,000 physicians and 18 area hospitals to provide care for its membership. Most participants had provided care to the employers in the past and were offered the opportunity to contract directly with them through the coalition.
"We basically created our own network," said Real Health President Paul Brand.
Enrollment began on July 1, and the companies, which range in size from 50 to 8,500 employees, are gradually moving their members into Real Health's health plan over the next several months. Participation is mandatory if the firms want to access Real Health's network and rates.
Previously, the participating companies contracted with more than a dozen health plans, Brand said.
Real Health officials anticipate that offering members healthcare benefits through their own health plan will reduce the costs of providing care by 15% to 20% per employee annually. Those savings would be achieved by cutting out other health plans, which pad their premiums with extra charges to turn a profit and cover expenses of other enrollees, he added.
Real Health's goal is to lower the double-digit annual increases employers in the region have been experiencing for the past couple of years, Brand said.
The merger of the three coalitions to contract directly for all their employees is among the boldest directives taken by such organizations, industry observers say.
Less than a third of coalitions conduct any sort of direct contracting, according to the National Business Coalition on Health, a Washington-based trade lobby that represents about 90 coalitions across the country. Most do so for only a portion of their membership.
Mary Boyd, chief financial officer of Mercy General Health Partners, which operates two Muskegon hospitals in the Real Health network, noted that her system had more curiosity than experience with direct contracting.
"We always want to provide the best service, and we want to try and do this with this product," she said.
Three other participating hospitals weren't immediately available for comment or declined comment.
Meanwhile, Real Health is expected to grow its membership quickly: Brand said some 20 employers that are not part of the coalition have contacted him in the past month about joining.