‘Model HMO’ Contract Lets St. Louis Employers Compare

At a glance

Gateway Purchasing Association
St. Louis, Mo.

Founded: 1995
Members: 26 large employers
Covered lives: 250,000
First-year accomplishments:

  • HMO enrollment up from 27 percent to 36 percent
  • Aggregate HMO premium expenses 19 percent lower in 1996 than they would have been by 1995 rates

Planned for Fall 1996: Consumer report cards with member-satisfaction and HEDIS data

Managed care may define the future health care marketplace, but not before employers define managed care. Take the case of St. Louis. Upset that HMOs were charging rates that often surpassed the cost of their own self-insured health plans, in 1995 locally based employers such as McDonnell Douglas Corp. and Ralston Purina Co. banded together to shake what they thought was some much-needed sense into the local health care economy. They formed the Gateway Purchasing Association to attack the “high costs and irrational pricing” of local managed care organizations.

GPA has already had an impact, cutting aggregate managed care premiums for members by one-fifth. Beyond that, the employer coalition has established a long-term strategy of what it calls “value-based purchasing,” which provides employers with a yardstick for comparing health plans and making prudent health care purchasing decisions.

“Everything looked the same. There was a lot of duplication,” recalls GPA Executive Director Louise Probst of the managed care plans in St. Louis before the association was born. To get the best prices, employers changed HMOs on a yearly basis. “You had to move your business if you wanted to get the lowest price,” she says. Costs were high and there was no loyalty on the part of HMOs to employers who stayed with a managed care organization. Employers got a great rate the first year but incurred big increases thereafter.

“There was low accountability for value. It was hard to differentiate product by quality, service or price,” says Probst. Two other factors spurred GPA’s founding: consolidation of the local provider market and federal and state efforts at health care reform.

Individual corporations lacked the clout to influence the market, so they formed GPA, whose 26 current members have at least 500 employees each. The coalition contracts with seven HMOs and covers about 250,000 lives, nearly 10 percent of the region’s population. GPA does all the negotiating with managed care organizations as well as performance and data reporting. It also publishes a single RFP (request for proposal). Individual employers retain control of their own health plan designs and select the HMOs they want based on the benefits they choose to offer their employees.

A key element in the employer group’s effort to make HMOs accountable is GPA’s “Model HMO,” for which the seven local HMOs provide bids. The Model HMO makes possible comparability among plans so employers aren’t confused by myriad overlapping offerings.

Comparability is also a goal of GPA’s performance-reporting effort, in which HMOs have agreed to fund a member-satisfaction survey of themselves. Coopers & Lybrand will conduct the survey using the latest Healthplan Employer Data and Information Set (HEDIS) measures from the National Committee on Quality Assurance. The data should be ready this fall and incorporated as part of the NCQA’s “consumer report card” initiative, for which GPA is a test site.

HMOs also agree to undergo a common auditing process using HEDIS measures to assess quality and access in randomly selected clinical categories each year. The four areas to be evaluated this year: C-section rates, cervical cancer screening rates, diabetic retinal exam rates and medical loss ratios.

MANAGED CARE July 1996. ©1996 Stezzi Communications