Facts on health care purchasing coalitions

Many corporate buyers of health care coverage are turning from bargain hunters into value seekers. The strength of this shift is underscored by the membership figures of the National Business Coalition on Health (NBCH) in Washington, DC:

• NBCH membership consists of 96 coalitions.

• The coalitions represent more than 8,000 employers and about 34 million employees and their dependents.

• NBCH members are mostly mid- to large-sized employers in the public and private sectors.

• NBCH’s membership represents an estimated 90% of all the business coalitions in the country.

A 1998 NBCH survey1 reflects the extent to which the value orientation has taken hold. Findings are based on a 78% response rate:

• Most coalitions have mechanisms in place that could be deployed to advance a combination of quality, service, and cost objectives.

• More than half collect data on quality of care, write financial incentives for performance into purchasing contracts, and collaborate with health plans or providers on continuous quality improvement (CQI) initiatives.

• 90% collect and analyze quality data; nearly 66% of that group describe their involvement as extensive.

• 52% use the National Committee for Quality Assurance’s Health Employer Data and Informa-tion Set (HEDIS) guidelines as an information source. For those who do not use HEDIS, the report says, "one explanation may be a perceived mismatch in some markets between what HEDIS provides and what the coalitions seek to know. For example, HEDIS aggregates data at the health plan level, masking what several of our interviewees flagged as important details about the quality of care at the provider level."

• 51% conduct consumer satisfaction surveys.

• Some use provider-level information: UB-2 hospital discharge data for Medicare recipients, 39%; Health Care Financing Administration 1500 physician data, 23%; and medical charts, 16%.

• 81% group purchase one or more health benefits for their members. In some cases, those benefits represent segments of an overall health care package such as pharmacy, vision, or psychiatric benefits. But 35% of coalitions bypass third-party carriers to negotiate the whole package of health care directly with providers in preferred provider organizations and integrated delivery systems.

• 59% report that group-purchasing contracts incorporate financial incentives for performance, namely bonuses, payment withholds, or premium rebates.

One group, Buyers Health Care Action Group (BHCAG) of Minneapolis, awards cash bonuses totaling $250,000 annually to care systems that excel in patient satisfaction, disease prevention, and improved outcomes. (See QI/TQM, Novem-ber 1999, Quality Talk, p. 132, for a column featuring Patricia Drury, senior consultant for BHCAG.)

• 84% report involvement in CQI activities; approximately 40% of that group rate their involvement as extensive.

• Some coalitions "vote with their feet" to promote quality improvement. For example, when local physicians refused to participate in QI activities, members of the Southeast Missouri Business Group on Health, in Cape Girardeau, sent employees needing certain surgical procedures 100 miles away to St. Louis hospitals.

Two remaining questions

Two questions remain for future study, according to the researchers:

• To what extent do coalitions exercise their market clout — to improve quality, to temper premium increases, or both?

• Of the strategies that coalitions use to promote quality, which hold the most promise and under what circumstances?

Also, if health care costs continue to rise, how will coalitions and their members leverage their market power to promote quality while containing costs? Will they revert to bargain hunting and shelve value-based purchasing? Either way, health care providers will feel it.


1. Fraser I, McNamara P, Lehman GO, et al. The pursuit of quality by business coalitions: A national survey. Health Aff 1999; 18:158-165.