Direct contracting experiment plugs along, despite a few stumbles
Direct contracting experiment plugs along, despite a few stumbles
HealthPartners will not renew contract
The Minneapolis-based Choice Plus direct contracting program sponsored by a local employer coalition enters its second year with a strong reception from participating companies, but with a few accompanying administrative glitches. The most notable of these: a parting of the ways, effective in 1999, between the sponsoring employer coalition, Buyers Health Care Action Group (BHCAG), and Minneapolis-based HealthPartners, a managed care organization.
Managed care organizations across the country are watching the BHCAG situation closely, monitoring employer and provider receptivity to the direct contracting concept. National consultants such as the Washington, DC-based Advisory Group have hailed direct contracting between employers and physician groups as the wave of the future.
"We see things happening in this marketplace that we never would have dreamed of several years ago," says Terrence Koves, director of compensation and benefits for Land O'Lakes and chairman of BHCAG's steering committee. He refers to a recent luncheon meeting with, among others, seven care system CEOs, physicians, and hospital administrators, who expressed "great enthusiasm" for BHCAG's competitive care system. The experience with Choice Plus was so positive, says Koves, that several large employer entities, like the Minnesota Teachers' Union and the State of Minnesota, are studying BHCAG's model.
"Choice Plus has a wonderful plan and the companies are very committed to it," says Koves.
However, not everyone is as enthusiastic, as demonstrated by HealthPartners' decision not renew its administrative contract after 1999. According to Jana Johnson, vice president for contracted operations and managed care at HealthPartners, Choice Plus requires a highly complex payment and conversion model that is cumbersome and expensive to administer. While she agrees that competitive pressures and bidding for low-cost services are vital to keep health care costs down, she expressed concern that "BHCAG will break up the system by using too many vendors."
Says Johnson: "Basically, our differences boil down to a difference in philosophy. BHCAG has elected to become a health care plan in their own right. This is not something we expected."
Steve Wetzell, executive director of policy and public affairs of Buyers Health Care Action Group, disputes this claim. "We are very disappointed that HealthPartners has taken this position," he says. Koves agrees, maintaining that HealthPartners feels threatened by BHCAG's success.
Plan uses three-tier cost system
Choice Plus went into effect on Jan. 1, 1997. A self-funded health insurance plan - some refer to it as an "HMO look-alike" - it began with a coalition of 26 employers whose employees were served by 23 provider care systems. The concept is simple: provider competition through direct contracting based on a three-tier cost system. Though not referred to by BHCAG in these terms, it can be described as offering "standard," "intermediate," and "deluxe" models. In each of these, employees may choose their care systems based on their own personal needs and preferences. The clincher is the consumer-determined costs: More expensive systems require higher premiums. Presently, Choice Plus covers more than 130,000 lives.
While no premiums for the "standard" model are available, coverage for "intermediate" care systems require an average of $8.50 monthly per individual and $17 or more per family for 1998. For the "deluxe" systems, coverage for individuals hovers around $19 per month, while a family has to budget $38 or more for monthly coverage. However, "Choice Plus offers standard benefits for all three tiers," Wetzell is quick to point out. To assure that care systems do not compete by avoiding sicker patients, he explains that budgets are periodically adjusted on the basis of the illness burden of the people who enroll in each care system.
"Consumers like Choice Plus," says Wetzell, "since care providers - doctors, clinics, hospitals - set their own prices. This allows them to move from one that's too expensive to one that charges less."
A patient satisfaction survey conducted by BHCAG during its first year in existence resulted in impressive statistics. Of the 23 care providers in the Minneapolis area, three of the four major care systems contracted to participate in Choice Plus received the highest satisfaction rates for clinic service, while two received the highest "overall" satisfaction rate. Satisfaction rates for children's care services were equally high.
But according to some, this success did not come easy. "Based on a conversion factor of only $28 for each office visit, we took a terrible beating the first year," says Peter Maddeaux, executive director and CEO of Minnesota Health Organization, one of the largest groups of primary care providers in Minnesota contracted by BHCAG. Bidding had to be increased the second year, and now Minnesota Health Organization uses a conversion rate of $45 per visit, which, he says, "is about normal."
Providers cite 'inordinate amount' of work
Maddeaux is not so sure that "companies who sponsor the program have really committed themselves to it totally." As he explains, a low premium structure, competitive pressure from providers, and a complicated reimbursement model make Choice Plus difficult to administer.
"Choice Plus represents only 5% of all our products, but we spend approximately 15% of our administrative resources on serving it," says Maddeaux. Because BHCAG recently requested an audit - which, as he adds, no other contractor has as yet demanded - he also has to allot an "inordinate amount of extra time and work" to collect and provide the requested information.
Though Koves admits that the reimbursement model is not easy to understand, he considers it to be "revolutionary" and maintains that pro viders love it. Wetzell, too, rejects the criticism of maintaining a far too complicated reimbursement system, saying "it was in place from the beginning."
Counters Johnson, "Knowing a system and working with it are two different things."
Despite losing HealthPartners as administrator, which Wetzell regrets, he is optimistic about the future of Choice Plus.
"With 95% of all physicians in the Twin Cities participating in our plan and the result of our patient survey, we consider our product a great success. In fact, we are very optimistic for its future and predict growth of 10% to 15% this year," says Wetzell.
Indeed, Choice Plus has expanded to 25 care systems, reaching into western Wisconsin and eastern North and South Dakota. The new contracted systems that will participate in Choice Plus are: CareNorth, serving Duluth and northeastern Minnesota; St. Croix Valley Healthcare, serving Stillwater and the St. Croix Valley; and MeritCare, serving Fargo/Moorhead and the surrounding region.
Though Maddeaux has no intentions of discontinuing Choice Plus, he says BHCAG must simplify its complicated reimbursement model. As he explains, "with 254 primary care doctors, over 1,000 specialists, and 17 hospitals, all of which use different conversion factors and reimbursement formulas, we simply spend too much time on paperwork.
"It is an experiment that allows us direct contracting," he says. "But it is an experiment that is still ongoing."
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