Corporations want to negotiate directly with providers on care quality

First question: How’s your bedside manner?

Employers want more than providers’ reports as proof of value when they shop for health benefits these days. And in many markets, the force of their discontent comes to rest on hospitals and physicians as business coalitions go directly to the source to negotiate contracts.

According to the National Business Coalition on Health (NBCH) in Washington, DC, at least 30% of the coalitions deal face to face with pro-viders. Coalition rosters include national and local corporations.

One analysis1 calls the trend a revolution set off by the country’s multibillion-dollar Fortune 500 companies. "They set off the insurrection in the 1980s by inducing or requiring their employees to obtain health insurance from managed-care insurers, especially HMOs," write Thomas Bodenheimer, MD, a primary care physician in San Francisco and Kip Sullivan, a consumer advocate in St. Paul, MN. "Whether employers will allow power to remain in the hands of HMOs remains to be seen," they add.

The shift has not escaped the notice of health care quality managers; in fact, it has resulted in revised job descriptions for some. Rosemary Keeley, MA, MS, director of Performance Consulting for VHA Central Atlantic in Charlotte, NC, observes that while some employers still fixate on cost as their sole objective, their ranks are thinning.

"More companies now want quality and cost," she says. "They’re saying, We don’t want our employees to lose so many days from heart attacks and strokes. And we don’t want to pay so much for workers’ comp claims."

In markets where coalitions represent 10% to 15% of the health coverage purchasers, coalitions wield enormous influence. Gregg Lehman, president and CEO of NBCH says employer groups committed to health care quality "will basically reform a marketplace."

According to Lehman, those groups use these three levers to effect value-based purchasing (quality plus outcomes, divided by cost):

1. Unite to share data collection costs.

2. Agree on what constitutes quality.

3. Use collective buying power to implement value-based purchasing. (See "A look at value-based purchasing in action," p. 41 and "Group fosters cooperation in a competitive market," p. 42.)

For coalitions committed to value-based purchasing, standard health care quality measures fall short. As far as employers are concerned, the National Committee for Quality Assurance’s Health Employer Data and Information Set (HEDIS) guidelines and the Agency for Health Quality and Research’s CAHPS (Consumer Assessment of Health Plans) customer satisfaction survey measures don’t go far enough, Lehman contends.

Recently, the Washington, DC-based Institute of Medicine’s report on medical errors, "To Err is Human: Building a Safer Health System," pointed out the flaws in standard measures. "But employers have talked about them all along," he says. (For information on CAHPS and the Institute of Medicine’s report, see resource box, p. 40.)

Missing from HEDIS and CAHPS are identifiers of overuse and misuse of services as well as underuse, he explains. NBCH has drawn the federal government into its effort to refine quality measures "in order to keep the government from undoing the innovations of employers. We believe that the marketplace should be the source of health care reform, not the government," Lehman adds.

A recent NBCH survey2 of coalitions reveals that most have an infrastructure that could facilitate value-based purchasing. Indeed, more than half of the 74 respondents report extensive involvement in collection or analysis of quality data. And some groups, such as the Dallas-Fort Worth (TX) Business Group on Health (DFWBGH), go much further. DFWBGH’s executive director Marianne Fazen, PhD, explains her organization’s focus. "We never measure health plans; in fact, we hardly ever deal with health plans. We go for the harder stuff; we’re interested in the doctors and hospitals. Patient satisfaction is always important. If they have a lousy bedside manner, it doesn’t matter how good the care is." But for the time being, "how good the care is" occupies the lion’s share of DFWBGH’s attention through its Value Initiative.

Over a four-year period, the DFWBGH has become a familiar presence on quality committees in each of the 39 hospitals, and in physicians’ groups as well, throughout the Dallas-Fort Worth area. "Our challenge is to get buy-in from the whole [group]," Fazen explains.

According to Annette Rowton, vice president of clinical outcomes at Presbyterian Healthcare System in Dallas, involvement with the coalition has strengthened QI activities. At the same time, it has raised concerns about the validity of the measurement methods, she adds.

At the point of identifying and refining quality measures for obstetrical and cardiology care, for example, the physicians were very willing to pitch in, she says.

"Use of the data is another matter, however," adds Rowton. Clinicians are troubled by the age-old concerns about using administrative data to measure clinical quality. Typical measures required by DFWBGH include length of stay and charges for cesareans and mortality rates for cardiology cases. The group also questions the validity of risk adjustments for outcome comparisons among rural and tertiary care centers, for example. She describes physician reaction to using the measures, as "what we would have expected — some complain about it, others welcome it and use it."

There’s another concern, and perhaps, it’s as much a perceptual difference between the business and health care communities as a problem unique to Dallas-Fort Worth. "There are false expectations about how quickly we can clean, adjust, and turn around and use data to make clinical improvements," Rowton observes.

On the other hand, she says, collaboration between DFWBGH and health care providers has generated visions of an interhospital/employer initiative to improve health throughout the Dallas-Fort Worth metropolitan area. Preliminary conversations are under way at this time.

The mission of DFWBGH is twofold:

• to turn employers into value-based purchasers who use a variety of decision-making tools to effect sophisticated buying decisions;

• to promote performance improvement among hospitals and physicians, and to measure that improvement with data.

If the coalition chose to achieve its mission by sheer economic force, it probably could do so. Its members include 50 corporate employers representing 235,000 employees and their families. On the roster are American Airlines, GTE, Frito-Lay Inc., and Exxon Corp. The annual per-employee cost of health benefits is $4,325 — a total of $1.5 billion.

"That’s a big chunk of change floating around in this community," Fazen says. "The health care providers know we don’t want to spend it on poor quality, so they need to compete on value, not on cost. Reputation won’t cut it anymore; we want to see the numbers."


1. Bodenheimer T, Sullivan K. How large employers are shaping the health care marketplace (First of two parts). N Engl J Med 1998; 338:1,084-1,087.

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