Coalition ties can diffuse power of insurers

Business need not be perceived as enemy

Business coalition. The mere mention of the term makes some providers uneasy because their experience with a coalition of employers has been unpleasant.

But a coalition need not be viewed as a threat to physicians, experts say. It can just as easily represent opportunity. (See related story, p. 5.)

As business has gotten serious about cutting the costs of health care, the popularity of business coalitions has soared. Business coalitions around the country have a very good track record when it comes to lowering the cost of employee health benefits.

For years, that success put them at odds with the health care community. Many physicians still view business coalitions in a distinctly negative light. Word of the coalitions’ hardball negotiating tactics and perceived arrogance still reverberates through some clinics, and relations between the two camps are cold in many places.

Now physicians and their consultants are re-examining business coalitions as potential business partners. The reason: Both parties can benefit when they agree to work together.

"I think it’s crucial right now that the lines of communication [between physicians and coalitions] be opened," says John Simmons, MD, senior partner in the Spartanburg, SC-based health care consultant Millenium Health.

The absence of dialogue between the two parties has allowed insurance companies to take a lot of health care dollars to Wall Street, says Simmons. "Right now, the providers don’t know what the businesses are looking for, and the businesses don’t know what the providers are trying to do through some of their integration strategies," he says. Meanwhile insurers are reaping hefty profits.

"If the physician community and the businesses get together and start understanding each other’s needs better, it diffuses some of the power of the insurers," says Paul Smith, CPBC, senior consultant and vice president of The Health Care Group consulting firm in Greenville, SC.

Rather than ignoring business coalitions, Smith says now is the time for physicians to embrace them. "It can result in some direct contracting opportunities," he says. In instances where the insurers have already shifted much of the risk to the providers, it is not only feasible but potentially very rewarding to cut insurers out of the picture altogether.

When advising a physician network, independent practice association, or physicians’ organization, Smith recommends that the head of the physician entity nurture a relationship with the executive director of the business coalition.

It’s also useful to bring together members of the coalition and the physician entity at a luncheon or similar gathering. Business coalitions are famous for pitting providers against one another at a meeting that they control. A luncheon hosted by the doctors gives them an opportunity to meet coalition members in a nonconfrontational environment.

There is of course one huge stumbling block physicians may encounter at the business coalition in the form of the insurance community. Most insurance companies have wined and dined corporate benefits people for years, and they have developed strong ties of their own.

In some instances, the composition of a business coalition’s executive board gives a clue as to the success a physicians’ organization is likely to have in negotiating with the coalition. If an insurance company chieftain sits on the board, it’s a dead giveaway that you won’t get far with the business coalition, says Simmons.

Even when there are no obvious insurance interests among business coalition members, physician representatives have to consider the possibility of some residual loyalty to insurers on the part of the business community. Employers often have relied solely on information provided to them by insurers to make decisions about the structure of their health benefits programs.

The insurers probably also are responsible for whatever understanding of the costs of health care some company executives have attained. That shouldn’t surprise physicians, says Simmons. "We have never had any information to give them," he says.

That is an issue that physicians have to address to succeed in dealings with a business coalition. If physicians go to the business community with the tired old theme that their per-unit fees realized are too low, they aren’t going to get much sympathy, says Smith.

Cost data are vital

Physicians need to have the cost data that show why their per-unit fees are so low. If there are lab or hospital costs that the doctors can’t control but which impact their fees, the employers need to know.

"You need to explain to them, `We can’t control what those people charge,’" says Smith. However, physicians do need to take accountability for the volume of services they provide, he adds. When that happens, health care costs for businesses can be reduced.

It’s imperative that businesses understand the relationship between unit prices, volume of services rendered, and ancillary service costs. Whoever represents the physicians has to be able to explain the relationship, says Simmons.

Once the cost issues are understood, physicians can legitimately ask that when the coalition members’ costs are lowered they share some of those rewards with the physicians.

"You get a lot more sympathy out of the business community if you sing that kind of song," Smith says.

When a business coalition and a physician entity feel comfortable with one another, they can form a legal entity called a business-physician organization (BPO) with shared equity and shared financial results.

Define BPO objectives

The objectives of the BPO would be to control health care costs and control utilization while assuring patient satisfaction, says Smith.

Physicians are at risk so they are encouraged to control utilization. The business coalition has its business partner pulling in the same direction its moving, so its members will save on the cost of care for their employees.

One enormous pitfall that physicians have to avoid in discussions with business coalitions is running afoul of antitrust laws. "When the doctors start cozying up with business, they have to be awfully careful how they do that," warns Smith. Physicians need to establish an entity, whether it be a physicians organization, an independent practice association, or something else, to conduct all discussions or negotiations on behalf of all the physicians. "The doctors can naively walk into a trap," says Smith.

Ten years ago when OB/GYNs in Savannah, GA, individually discussed fees with a local coalition, they were deemed to have violated the law and many were run out of business, says Smith.

If the doctors are to have any discussions with employers, they need to protect themselves by putting together a legal entity that is empowered to represent them and then adhere to antitrust laws.