Employers once were passive buyers of health care services, but no more. Today, companies are demanding proof that their premium dollars are being well spent. Across the country, employers have banded together to form purchasing coalitions to increase their clout when negotiating with managed care plans.
The National Business Coalition on Health represents 105 of these employer health coalitions, which in turn represent more than 8,000 employers and more than 35 million employees and dependents. Member coalitions cover from 20,000 to more than a million lives and include national employers such as Federal Express, Boeing, Weyerhauser, GTE and Disney.
Catherine Kunkle has been with NBCH since its formation in 1993, and is now its acting president. Before joining NBCH, she was executive director of the Lehigh Valley Business Conference on Health Care in northeast Pennsylvania. Prior to that, she worked as a registered nurse and taught nursing. Recently, she talked about the coalition and managed care with Senior Contributing Editor Patrick Mullen.
MC: The National Business Coalition on Health requires its member organizations to be primarily employer-sponsored, controlled without major provider participation. Why is that preferable to having all parties represented?
KUNKLE: I have to correct you to the extent that all coalitions are different. The only criterion we have for membership is that it be driven by non-provider employers, which means a majority at the board level. The majority of coalitions do have all stakeholders involved as members and they may sit on the board but they can't drive it. The intent of coalitions, and the mission of most of our membership, is that they support reasonably priced market-driven quality health care. One of the ways we do that is through value-based purchasing. It's like buying anything else; if you're purchasing, you have to understand the product. You might call on providers or health plans to educate you about things that they understand better. But the purchaser who is paying the bill makes the ultimate decision to buy health care services or a benefits package. Sellers and buyers have different interests, and they sit on opposite sides of the table. They have to be separate.
MC: The term "value-based purchasing" has been around for a few years. What are the hallmarks of value-based purchasing, and how would you describe the state of the art?
KUNKLE: Much has happened in the last year or two. We've seen massive consolidation among providers. Employers have much more of an incentive now to organize their own groups to increase their numbers to have more leverage when dealing with larger health plans, systems and insurers with which they are negotiating. Obviously, there is strength in numbers and greater economies of scale to be had. But they've advanced this whole value-purchasing approach over the last year or two. Employers will share what they've learned about holding plans accountable through performance standards, rate guarantees, penalties and rewards. They're focusing a lot on looking at what kinds of incentives result in the best outcomes, not necessarily clinical outcomes but in terms of consumer satisfaction and provider satisfaction. Obviously providers, systems and health plans have to be happy with way things are being handled, so you have to collaborate a lot.
MC: So employers are more willing to share the fruits of their efforts with other employers and other coalitions?
KUNKLE: Right. We will collect information and advise our members. We will talk to people and try to document how they've approached a particular negotiation of a product or a service and then share that with others.
MC: Given the understanding that things are different in different parts of the country and there is no one-size-fits-all solution, what are some trends in demands or requests that employers are making of managed care plans that are producing good results for them?
KUNKLE: Well, I can use St. Louis or the Pacific Business Group on Health in California as examples. They have worked with health plans over time to negotiate a contract that is somewhat uniform across various employers in that market. That reduces the amount of time and administrative hassle that health plans have to go through. The other advantage of doing it as a group is that there's a little more standardization especially when it comes to requests for information. One of the biggest complaints that health plans have right now is that everyone's asking for different kinds of data and it becomes prohibitively expensive. Local employers can organize to negotiate rates, quality control and performance standards, and also agree on the kinds of data they need.
MC: The Pacific Business Group on Health occasionally reports on how much money it saves its members. One expectation that companies have of coalitions is that they want to see something more than anecdotal reports of savings. Is there an effort under way to systematize that, so you can show CEOs on a regular reliable basis what they're spending to be part of a coalition and what they're saving?
KUNKLE: Yes, on an individual local coalition basis, if that is important to the group. There are very simple ways they can do that. They can look at their per-employee per-year cost and adjust that for any change that they've made in their benefit plan or copayments and deductibles. They can also become involved in more long-term data collection systems. Employers are not as driven by price as a lot of people accuse them of being. What they've really committed to at the local coalition level is not investing a lot of time and effort in tracking cost but much more in tracking whether they are getting improved quality. Companies know what they're paying. What they don't always know is necessarily what they're getting for it. I don't think that we would continue to have the buy-in of so many employers at the local level if they didn't see the benefit and value of coalitions. There was pressure on coalitions over the last year or so when health premiums moderated and increases were pretty flat and yet very few employers dropped out of those coalitions. Our membership numbers have been constant, telling me that companies do see value in collective organization at the local level.
MC: Let's talk about changes in the market. Is managed care in danger of plans changing their model so much that they lose the essence of what they're supposed to be able to do in the first place?
KUNKLE: No, I do not think so. I think of managed care as being very broadly defined, not as any one particular model. Managed care is anything that applies any discipline to an open-choice system that is based on fee-for-service financing. The federal programs and the state programs were monitoring utilization through peer review organizations, as far back as they go, and they were monitoring quality through medical care evaluation studies. That was a very rudimentary approach but there was still concern that if you didn't watch, the incentive was to do more and to do what was unnecessary. That was proven to be true. So if you apply any discipline to an open system, attempting to either manage the financing or delivery of care, that's managed care. The HMO health plan model that we now are dealing with has attempted to go the next step, in some cases to restrict the choice of providers and the way that people access specialists. That invokes a change that is taking choice away from people. It takes a certain amount of control away from individuals and people never react positively to that.
MC: Do you think the question has been settled that we are going to always have a for-profit component in health care delivery?
KUNKLE: I really don't know the answer to that question. In my experience, being not-for-profit doesn't necessarily make you accountable and often we've seen in the not-for-profit world a lack of efficiency. People wanted to see the positive side of for-profits. The downside is that then you have stockholders, and people tend to be driven by the bottom line. I've always had a bit of an aversion to for-profits' entry into health care because it really is different from other goods and services. People who understand market economics better than I do say those differences can be dealt with.
MC: I would think members of the coalitions, as business people, would be receptive to the notion of for-profit health care.
KUNKLE: Definitely. It's just that there were some concerns, not so much around the not-for-profit versus for-profit issue, but with a market that's moving forward very rapidly. We still don't have the right level of information to empower consumers to be effective buyers. Short of that, individual buyers have to beware. Employer purchasers play a critical role.
MC: The Patient Access to Responsible Care Act would impose quite a few new regulations on health plans. What's your view of that bill?
KUNKLE: PARCA is of concern to our constituency because we feel it would impair the ability of the large multistate employers, many of whom are involved in coalition activities, to maintain and offer uniform flexible health care benefits to all their employees. That's also been the argument against a lot of very disparate state regulations that they have to contend with. PARCA contains many patient protection provisions. Even though we support patient protection, you have to make a distinction between patient protection and provider protection, and we do. So we feel that a lot of provisions in PARCA can be very devastating to competition. It hinders our ability to use the market to drive provider, employer and plan accountability. For example, PARCA limits purchasers' ability to contract with selective networks, and that's basically any-willing-provider language. It also drives up cost.
MC: There seems to be a large number of Republicans among the more-than 200 co-sponsors. But it seems like the kind of bill that a few years ago Republicans would have jumped all over as socialized medicine and as classic Clinton care. What's changed?
KUNKLE: Well in one sense, nothing has changed, except the source of pressure on lawmakers. Before, pressure came from industry groups or purchasers, but now it's coming from consumers and consumers are very angry. A lot of changes have caused people to become frightened, especially as those changes affect federal programs. Also, it's an election year for a lot of these folks in '98. To say you're against patient protection is like being against motherhood and apple pie. No one is against protecting consumers and patients, but the issue is which specific items are included under that. Is it really patient protection and does it serve the long-term interest of consumers to legislate mandates? You have to look at the cost implied in mandates that result in taking insurance coverage away from people.
MC: Do you sense that physicians are trying to reassert control over health care delivery?
MC: How successful are they?
KUNKLE: Because of the threat of managed care, they have organized and formed group practices in local markets to have more leverage and economies of scale. If they have the administrative supports that they need to be able to be equal players doing business with purchasers, I don't see anything wrong with that, and I think that kind of activity is increasing.
MC: Is it your sense that the doctors doing that now are seriously trying to manage care and manage costs? Some of the doctor-sponsored plans over the last decade were almost admittedly defensive moves, trying to get doctors in a market together so they wouldn't join some other managed care plan.
KUNKLE: Well, I have had my moods when I get a little bit cynical and suspicious, but some of them have their minds in the right place. They recognize that the market is changing and they want to be equal players. If they can't get their acts together, provide a full range of services and negotiate directly with purchasers, then they are going to relegate control to health plans and insurance companies. Many of them have risen to the occasion. There are companies out there that buy practices and represent them in negotiations with health plans and others [see this month's cover story on physician practice management companies, page 19]. We propose that this be an open market. Purchasers have to make sure these entities are solvent, provide the full range of services or have access to those services, and have a track record. Maybe some physicians started out by saying, "We have to protect our interests and we're going to beat them at this game." But the bottom line is when you start doing it, you learn a lot, and the market will not tolerate frauds. If you can't deliver, you are not going to have business.
MC: About a year and a half ago, you said, "We can measure the output of delivery models, different ways to hold providers accountable, aligning financial incentives, measuring output of systems so the consumer is finally the focal point. All of these things will happen over the next year or two. We'll have a continuous quality improvement model for health care." A year and a half later, how is that process going?
KUNKLE: Things are not coming together as rapidly as I thought they would, probably because of the complexity of the system, but there has been a lot of progress. We've seen NCQA and HEDIS start to measure outcomes. We've seen the creation of the Foundation for Accountability, which is focusing on outcomes of care for specific diseases. They're developing measures and they're in the process of implementing them at the local level to iron out the bugs, with the intention of creating another vehicle for employers to use to measure outcomes. The Consumer Assessment of Health Plans Survey — CAHPS — is finished. It was in the works for about two years. It creates a very appropriate but sophisticated vehicle for helping consumers measure health plans.
MC: That is a standardized patient-satisfaction survey too, isn't it?
KUNKLE: Yes, it will be a standardized instrument. It was developed for use by HCFA and Medicaid and has modules for senior citizens and young people as well as adults in different kinds of populations.
MC: A survey of health care executives on the East Coast found that 54 percent said their markets are moving away from the gatekeeper model, which is another one of those tools that has been seen as a linchpin of managed care. Is the gatekeeper model going away?
KUNKLE: I have heard feedback from some of our coalition folks that they're not thrilled with the gatekeeper model because it adds an extra layer of complexity to the system. A lot of it depends on whether the gatekeepers see themselves in that role. You can say a primary care physician is the gatekeeper, but does he or she have the expertise and the incentives to do that job? The problem has been that in a lot of models they don't. They're not being reimbursed for their cognitive services time. They're only being reimbursed to do the minimum or for a brief office visit. The incentives have to be in the right place in order for the gatekeeper model to work. In some instances it's a good idea, because under our old fee-for-service system, people did access specialists often when it was not needed, which drove costs up for inappropriate utilization. On the other hand, I'm very sensitive to the fact that there are people with chronic illnesses that shouldn't have to go through these hoops to get to a specialist. A lot of plans now have gone to models where when you join, you go through a health assessment, and if you have a chronic disease that's on their list, then your primary care physician is your specialist. I would call that a wonderful outgrowth of people's problems with the gatekeeper model.
MC: I've seen some discussion of health coalitions that sees them as a temporary phenomenon, and once the system got straightened out there would not be a need for them. What is your sense of it?
KUNKLE: I think we'll be around for quite a while because obviously all the problems are not solved and I'm not even sure they'll be solved in my lifetime. There's a lot of work to be done to balance the markets for health care. There are still lots of things that coalitions can do to help employers in local markets make the market work. The health care market has not been reformed in every city in America and we do not have groups of active employers in every market in America. If we did, I think the reform of the marketplace would have happened a lot more rapidly. Employers still need to purchase collectively. The data quality initiatives will call for some organized employer activity in the local market. The health-of-the-community issues, where you might do a community health assessment and set goals for the future and measure performance against those goals, so that they have a benchmark — those activities are long term investments. I see them being around for a long time.
MC: Thank you, Ms. Kunkle.