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Why Providers Favor Health-care Coalitions

September 1, 1993
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Related Topics: Benefit Design and Communication, Health and Wellness, Featured Article
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It used to be that providers and purchasers of health care sat at opposite ends of the table, if they sat at the same table at all. Today, the changes underway in the U.S. health-care system have made providers more willing than ever to work with organized purchasing groups such as employer-led health-care coalitions.

"The entire health-care system is too fragmented, and if it weren't for employer coalitions taking the strong stand that they have, we wouldn't be seeing providers working so hard to reduce randomness and variation in health-care delivery," says Kirby Erickson, executive vice president and chief operating officer of HealthPartners Inc. in Minneapolis. "With health-care coalitions, what we're responding to is the voice of the buyer, and we're an advocate of that."

What? Is this a provider speaking?

"We're definitely seeing a change in provider attitudes," says Catherine Kunkle, vice president of operations and information services for the National Business Coalition Forum on Health in Washington, D.C. "Before, providers didn't want to interface with coalitions. They listened, but they weren't responsive in terms of what they were willing to do. Now, because they've received such bad press, they're more willing to listen with open minds and to work more cooperatively with the purchasing community. They see that as much more palatable than having to deal with a mandated system."

Thanks to this change in attitude, providers are now uniting and forming organized or integrated delivery systems in which they're willing to offer a continuum of health-care services to a defined population for an agreed-upon price. If treatment costs exceed the contracted amount, providers don't get any more money. This may sound like a radical shift on the part of providers—and it is—but it's what purchasers are demanding.

"With an integrated system," Kunkle says, "when the purchaser/employer is looking for someone to deliver health services for their employees, providers can come to the table and say: 'We're a fully integrated system. We offer primary care, specialty care, and the hospital, ambulatory and outpatient components. Furthermore, we can provide you with the data you require, and we're willing to do this for capitated pricing—in other words, so much money per head.'"

In Minneapolis, for example, largely in response to the Business Health Care Action Group's demands, two HMOs and a 360-member physician practice merged and developed a referral relationship with the Mayo Clinic. An entity called HealthPartners was formed to oversee the care activities of the new organization.

"The purchasers wanted something that wasn't like an old HMO or indemnity program," explains Erickson. "They were asking for an accountable and integrated delivery model where they could be involved with the delivery network directly. Our response was to put together an organization that could provide this."

Would the newly integrated organization have been developed if it weren't for Business Health Care Action Group? "Yes," Erickson says. "But the pace was accelerated because of them."

In addition to providing an integrated system of care, HealthPartners has an agreement with the business coalition to develop care protocols and outcome measurements over the next three years.

The risks to providers in an integrated system that relies on capitated pricing have given rise to three other trends in the provider community, according to David Anderson, partner, KPMG Peat Marwick in Chicago. First, hospitals are recognizing that to compete for large blocks of business and to accept clinical and financial risk for that business, they need much-stronger linkages with physicians to measure and manage that risk. "For this reason, hospitals and physicians are working together much more closely," Anderson says. This is evidenced in the HealthPartners' model in Minneapolis.

Second, such organizations as insurance plans are recruiting primary-care physicians, hiring them as staff members. "It's the classic make-versus-buy approach," Anderson explains. "Organizations like Blue Cross are interested in putting primary-care doctors on the payroll, believing that they'll be able to get better control of that component of their costs."

The third megatrend is that organized provider systems composed of hospitals and physicians are merging together with health-insurance plans. Why? Because the health plans need to control their costs and the providers need access to enrollees to stay in business.

Employer-led health-care coalitions can't take all the credit for the new responsiveness on the part of providers, but they're a contributing factor. "Purchaser coalitions are a symptom of a larger issue, which is that health-care cost and quality are coming under increasing focus," Anderson says. To survive the inevitable shakeout, providers have to respond creatively, and the signs are there that they will.

"I think buyer coalitions are going to be a major movement around the country, and I think it's highly appropriate," Erickson says.

Personnel Journal, September 1993, Vol. 72, No.9, p. 116.

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